Moody’s cut the U.S. one rung to Aa1 from AAA, after it sounded the alarm on the deteriorating fiscal situation in March. In November 2023, Moody’s lowered its outlook on U.S. debt to negative, which is often a precursor to an eventual downgrade.

“This one-notch downgrade on our 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns,” the agency said in a statement.

“Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs. We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration,” it added.

The downgrade comes as the Republican-controlled Congress tries to extend tax cuts from President Donald Trump’s first term and add new ones like ending taxes on tips, overtime, and Social Security income.

While lawmakers are also looking for spending cuts, the total impact of fiscal proposals overall would add trillions to the budget deficit in the coming years.

That’s as the budget deficit has already topped $1 trillion so far this fiscal year and hit $2 trillion in prior fiscal years. Debt interest payments alone are now one of the biggest spending items, exceeding the Pentagon’s budget.

Moody’s expects deficits to widen to nearly 9% of GDP by 2035 from 6.4% in 2024, as interest payments on debt and entitlement spending rise while revenue stays relatively low. As a result, U.S. debt will rise to 134% of GDP by 2035 from 98% in 2024. Interest payments will likely to take up 30% of revenue by 2035, up from about 18% in 2024.

“Over the next decade, we expect larger deficits as entitlement spending rises while government revenue remains broadly flat,” Moody’s said Friday. “In turn, persistent, large fiscal deficits will drive the government’s debt and interest burden higher. The US’ fiscal performance is likely to deteriorate relative to its own past and compared to other highly-rated sovereigns.”

At the lower rating, Moody’s put the U.S. outlook at stable, noting its strong economy and the role of the dollar as a reserve currency. But that “exorbitant privilege” can no longer make up for the soaring pile of debt.

“While we recognize the US’ significant economic and financial strengths, we believe these no longer fully counterbalance the decline in fiscal metrics,” Moody’s added.

In a statement to Fortune, White House spokesman Kush Desai pointed to trillions of dollars in spending, debt and inflation-fueled Fed rate hikes under the Biden administration and a Democratic-controlled Congress.

“The Trump administration and Republicans are focused on fixing Biden’s mess by slashing the waste, fraud, and abuse in government and passing The One, Big, Beautiful Bill to get our house back in order,” he added. “If Moody’s had any credibility, they would not have stayed silent as the fiscal disaster of the past four years unfolded.”

Moody’s was the last of the major rating agencies that gave U.S. debt a top mark. Fitch cut the U.S. by one notch in 2023, citing fiscal deterioration and repeated debt-ceiling brinkmanship. That followed a similar downgrade from Standard & Poor’s in 2011 after an earlier debt-ceiling crisis.

Despite the downgrade on Friday, Moody’s was also hopeful on America’s institutions—even as they are tested—as well as its monetary and macroeconomic policymaking.

“In particular, we assume that the long-standing checks and balances between the three branches of government and respect for the rule of law will remain broadly unchanged,” it explained. “In addition, we assess that the US has capacity to adjust its fiscal trajectory, even as policy decision-making evolves from one administration to the next.”