Why has the US lost its AAA credit rating, and why does it matter?

Moody’s dropped the U.S. government’s credit rating from Aaa to Aa1 due to rising debt and interest costs, signaling concerns about its fiscal health as investors brace for potential market instability. With Fitch already downgrading earlier this year, the U.S. faces heightened uncertainty amid struggles like large annual deficits, tax cuts reducing revenues, and record debt levels—now at nearly $1 trillion, with borrowing costs alarmingly high as taxes no longer fully cover interest payments.