Dr. Boozman's Check-up
Jul 14 2011
One day after Moody's Investors Service said it will begin a review of our government's credit rating, a senior Vice President at the global credit rating powerhouse said that if the U.S. government misses a debt payment, our sovereign rating “could be cut the next day.”
From the Wall Street Journal (Subscription required):
One such scenario Mr. Hess envisions--if the U.S. misses a debt payment--would be downgrading the country by one notch the day after a payment was missed and keeping the rating on review for an additional potential downgrade.
That review would give Moody's Investors Service time to look at the potential long-term effects on U.S. Treasury debt. Long-term questions include the speed at which the initial missed payments were made up; the effect a missed payment has on future borrowing costs; and any regulatory changes implemented to avoid future defaults.
I added the emphasis to the end to highlight the fact that Moody’s—and the other big international credit rating agencies—are looking for the U.S. to not only raise the debt ceiling, but enact long-term solutions to our financial problem. This is why I continue to work toward an agreement that includes significant cuts and a spending cap mechanism (such as a balanced budget amendment) to prevent us from having to raise the limit once again.
We got into this mess by spending money; we can’t fix the problem unless we cut spending. Let’s get to work reining in the reckless spending and putting our nation back on a fiscally responsible path.