Credit rating agency Moody’s alarmed markets Friday with a downgrade of U.S. sovereign debt from a perfect “AAA” score “AA1.” The change will increase borrowing costs for the country’s $36 trillion in debt, set to grow further under current budget proposals being debated by the House and Senate. Other ratings agencies made similar ratings downgrades in 2011 and 2023.

House Speaker Mike Johnson (R - LA) is pushing for passage of the so-called “Big Beautiful Bill” by Memorial Day, or Monday, May 26th. Current Senate proposals call for a $5 Trillion increase in the debt ceiling, with the House calling for $4 Trillion. Ultimately, Senate proposals are likely to prevail as President Trump will demand resolution to bring some certainty amidst the backdrop of the chaotic rollout of tariffs, bringing increased volatility to markets.

Democrats have argued that Republicans have been inconsistent in their rhetoric calling for decreased spending while simultaneously insisting on preserving tax cuts seen as primarily benefiting the wealthiest Americans.

The Moody’s downgrade comes while the treasury is already engaged in “extraordinary measures” to stretch government funds, having reached the statutory debt limit in January. However, the company did not cite default concerns in explaining the ratings change, focusing instead on the level of debt itself.