In August 2011, after Republicans brought the country to the brink of default on the national debt, the ratings agency S&P downgraded U.S. credit from AAA to AA+, where it has remained ever since.

Congress, in the agency’s view, had proved itself too dysfunctional to budget responsibly, and (though it didn’t single out Republicans) the GOP’s innovation of holding the statutory debt limit hostage had introduced a level of procedural irregularity and political instability incompatible with AAA credit.

“The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed,” S&P wrote, before lapsing into the passive voice. “The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy.”

My, but who could have done such a thing?

In any case, it was a huge story at the time. Markets spasmed, interest rates climbed. It destroyed yet more demand in an economy that was already depressed by the Great Recession and the debt-limit standoff itself. President Obama was at a low ebb of popularity, and the S&P decision pushed him to his nadir.

Obama bore the political brunt, but S&P didn’t name him or Democrats either—it presented the decision as an assessment of fundamentals. The U.S. isn’t behaving like a wealthy, functioning democracy capable of managing it own affairs in an orderly, rule-bound way, and its credit rating should reflect that.

Over a decade later, the two other big agencies (Fitch and Moody’s) came to similar conclusions. In August 2023, after Republicans held the debt limit hostage for ransoms from the Biden administration, Fitch’s matched S&P with its own downgrade, citing “a steady deterioration in standards of governance over the last 20 years.” Five months later, without lowering its rating, Moody’s announced it had changed the outlook on U.S. creditworthiness from “stable” to “negative,” citing among other factors, “an inability to govern such as the struggle of House Republicans to elect a speaker, threats of a partial government shutdown, and the political impasse around the debt ceiling debate in June.”

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DOWNGRADING ON A CURVE

Prior to this year, economists had been at pains to explain the purpose the ratings agencies serve, at least when they assess the creditworthiness of the world’s oldest democracy on the basis of readily available public information. What do they know that investors and other analysts don’t?

But that is the niche they occupy, and will continue to occupy so long as people with money respond to their pronouncements. Institutional investors will adjust their decision making if S&P tells them certain rock-solid investments are actually shakier than they appear. They’ll demand higher interest rates, or put their money elsewhere.

That brings us to the present—the Trump administration’s claim of unchecked power to honor or disregard its payment obligations, its lawless and opaque meddling with the payment system the Treasury Department uses to honor American spending commitments, and the swift erosion of the rule of law.

If ratings agencies were able to detect political instability by watching contentious or irresponsible legislative fights play out, you’d think they’d be able to draw some conclusions based on the fiat transformation of the U.S. system of government from a democratic republic into whatever this is.

In that light, I asked spokespeople for S&P, Fitch, and Moodys for comment on their view of the U.S. credit risk under these circumstances—are they re-evaluating once again in light of recent developments, and if not, why not? Fitch declined to comment. S&P and Moody’s did not respond at all.

I didn’t anticipate that they would—these aren’t the kinds of things they deliberate with the press. But I’d argue that if their sovereign ratings of U.S. debt serve any non-political purpose—that is, if they aren’t playing partisan games under Democratic presidents, or aren’t simply cowed by Trump and his constant threats of retaliation—another downgrade should be imminent.

Allow me to explain why...