Within the Maryland State House it has for a half-century been a point of pride that state government held the highest possible credit rating. Whenever political opponents accused state officeholders, particularly Democrats, of fiscal mismanagement, the accused would happily point to the Aaa (or “triple-A”) credit rating as evidence to the contrary. So it’s completely unsurprising that when Moody’s, one of the top-three rating agencies, downgraded Maryland to the second-highest rating, Aa1, on Wednesday, that partisan fingers would quickly be pointed. Democrats blamed President Donald Trump and his administration’s dramatic downsizing of federal spending for the decision while Republicans said it was entirely the fault of Democrats including Gov. Wes Moore.

The reality? Both are correct but both explanations also fall short. The reality is a bit more complicated and the impact perhaps easily overstated, at least in the short term. That was a point underscored when, one day later, Fitch Ratings issued Maryland its highest rating of “AAA” and Moody’s downgraded the U.S. credit rating to Aa1, citing increased federal debt. In many ways, the political damage of Moody’s is potentially more severe than the economic fallout. Let’s review.

First, some context. Moody’s is just one of the three major bond rating houses. Fitch is just as important. And soon there will be a rating from S&P Global so it’s entirely possible that Moody’s Maryland downgrade will have little impact on the next sale of state general obligation (or GO) bonds on June 11. This was a modest change in risk assessment. What impact could it have on the expected auction of $900 million in GO bonds to cover state capital projects like school construction, new state buildings or parks? The worst-case scenario for taxpayers next year? A slightly higher interest rate that experts say in the first year might amount to $1 million or so — with much more to come in future years, of course, if S&P joins Moody’s and a lower rating holds.

What’s $1 million in the context of an annual budget topping $67 billion? Peanuts. Thus, assigning blame has become the bigger investment of time in Annapolis. For the record, Trump’s actions are clearly the catalyst. Moody’s had already recognized Maryland was at greater economic risk from federal downsizing than any other state. But Republicans have a point, too. In balancing the budget this year, Democrats failed to fully address potential multibillion-dollar shortfalls in future years. Why not? Because that would have required raising more taxes or cutting more spending, particularly the Blueprint for Maryland’s Future school initiatives. That’s not a good way to ingratiate yourself to voters.

Let’s be clear. That beloved AAA rating isn’t a measure of fiscal austerity so much as an acknowledgement that the state remains capable of balancing its budget even if the economy hits a snag. So a willingness to raise taxes can get you on a rating house’s good side as easily as a willingness to cut spending, perhaps even more so. Across the country, there are red states with high ratings and blue states with high ratings. This is just a measure of a state’s ability to pay its bills — period.

It’s pretty easy to second-guess all involved but here goes. Lawmakers probably should have further delayed Blueprint reforms during the last legislative session, particularly to address deficits that start popping up in Fiscal 2028 and beyond. And they also might have adopted some modest but widespread taxes on services to reflect how the economy has shifted away from goods without singling out specific industries like technology. And to really second-guess, what if they’d held onto one-time pandemic-related federal grants to cover real long-term needs instead of short-term wants? That would have been helpful, too.

Here’s a best-case scenario. First, Moody’s decision has no real impact on the auction. Second, how about a special legislative session later this year to address federal cutbacks including to costly programs like Medicaid under the “big beautiful bill” now pending before Congress? That would give Moore and the Democrats in the General Assembly a chance to embrace some harsher, longer-lasting fiscal remedies. That’s a combination that might allow the state to demonstrate greater financial discipline (and probably get kudos from Moody’s).

As for speculation in the national media that this casts doubts on Moore’s potential presidential ambitions in 2028, all we can say is, “Oh, please.” The governor is expected to run for reelection next year and that’s when the issue of state finances will get the scrutiny from voters it deserves. This is hardly a crisis but it might just pose an opportunity to set state government on a more sustainable path. As for elected officials in Washington, as of Friday the federal government no longer has a AAA rating for its bonds so who is going to throw stones at Annapolis now?