S&P Global Ratings has warned it may cut the United States’ credit rating further from its current AA+ level, citing unsustainable debt growth and persistent political dysfunction. In a report dated April 14, S&P said the outcome of upcoming budget negotiations will be a key factor in assessing U.S. creditworthiness.
The United States has previously faced rating actions: S&P first downgraded the nation in 2011 amid a debt ceiling standoff, when federal debt stood near $15 trillion, roughly 66% of GDP. Since then the debt has risen sharply to about $36 trillion, and public debt is now close to 100% of GDP. That worsening fiscal trajectory contributed to Fitch downgrading the U.S. in 2023 and prompted Moody’s to shift its outlook from stable to negative.
S&P singled out specific policy risks. It flagged a Republican budgeting approach known as the “current policy baseline,” which can understate the long-term fiscal impact of proposed tax cuts by assuming temporary measures or incomplete costings. The agency also warned that tariff policies advocated by President Trump could slow economic growth, raise unemployment, and increase the risk of recession—all factors that would further strain the federal budget and raise the probability of additional rating pressure.
Against this backdrop, S&P’s notice underscores that both fiscal choices and political stability matter for sovereign credit ratings. Credit rating agencies monitor trends in debt levels, deficit trajectories, and the credibility of policymaking institutions. When debt rises faster than the economy and policymakers rely on temporary fixes or accounting methods that mask liabilities, agencies may view the country’s capacity and willingness to service obligations as less reliable.
The coming budget talks will be closely watched by markets and policymakers. Analysts will look for credible plans to stabilize debt growth, transparent accounting of fiscal measures, and bipartisan approaches that reduce the risk of repeated brinkmanship. Without such signals, rating agencies could interpret continued fiscal deterioration and political dysfunction as justification for further action.
In short, S&P’s warning reflects a combination of higher debt, contested fiscal policy choices, and political uncertainty. The agency’s assessment serves as a reminder that long-term fiscal sustainability and stable governance are central to maintaining sovereign credit ratings—and that failure to address these issues may carry consequences for borrowing costs and economic confidence.