Fitch, which cut the US to AA+ in 2023, said structurally large deficits and weak fiscal policymaking could raise government, household and business borrowing costs.
It forecasts a 7.9% deficit this year and in 2027, while Moody's also downgraded the US last year amid concerns over rising debt, interest costs and tax-cut impacts.
As U.S. debt hits a historic high, is the dollar's global dominance facing its greatest threat yet?
With interest payments on the debt soaring, which essential public services will be crowded out first?
As investors seek safety from U.S. debt, could gold reclaim its role as the world's primary financial anchor?
Breaking the 100% GDP Debt Barrier: The U.S. Fiscal Crisis, Credit Downgrade, and Path to Sustainability
Overview
Between May 2025 and March 2026, the U.S. faced a major fiscal crisis as its national debt surpassed 100% of GDP, triggering Moody's to downgrade its credit rating. This downgrade led to higher borrowing costs, with Treasury yields and mortgage rates rising sharply. The crisis was driven by structural factors: an aging population increasing Social Security and Medicare costs, rapidly growing healthcare expenses, and rising interest payments on the debt. Compounding the problem, recent tax cuts added trillions to the debt, worsening deficits. These pressures crowd out funding for defense and social programs, increase reliance on foreign lenders, and empower global competitors, highlighting the urgent need for balanced reforms in spending and revenue policies.