S&P Warns of Potential US Credit Downgrade as Debt Reaches 100% of GDP
S&P Global Ratings has issued a warning that it may further downgrade the United States’ credit rating from its current AA+ status, citing unsustainable debt levels and ongoing political dysfunction. In an April 14 report, S&P indicated that upcoming budget negotiations will be crucial in determining US creditworthiness.
The US has already experienced credit downgrades, with S&P first reducing the rating in 2011 during a debt ceiling crisis when national debt was $15 trillion (66% of GDP). Today, that debt has ballooned to $36 trillion, with public debt now representing approximately 100% of GDP. This deteriorating fiscal outlook prompted Fitch to downgrade the US in 2023 and led Moody’s to change its outlook from stable to negative.
S&P specifically highlighted concerns about Republican policies, including a budgeting method called “current policy baseline” accounting that could understate the impact of proposed tax cuts on the national debt. Additionally, S&P warned that President Trump’s tariff policies could slow economic growth, increase unemployment, and potentially trigger a recession, which would further worsen the federal budget situation.
