Moody's to Washington: Strike a Deal or get Struck

[Mr. Big Dog 10,747]

There goes Mitch's plan. And there goes the GOP's insistence that revenues are not on the table. Maintaining that stance, the GOP will face the burden of being responsible for a downgraded outlook for US treasuries if reveneue enhancements aren't part of the deal.

Debt Ceiling Debate: Moody's Puts U.S. on Review for Downgrade

It has happened. Moody's said it would put the United States on review for downgrade if there is not substantial progress on a debt deal by mid-July. They did just that this afternoon.

"Moody's considers the probability of a default on interest payments to be low but no longer to be de minimis," reads the a press release from the credit rating agency. "An actual default, regardless of duration, would fundamentally alter Moody's assessment of the timeliness of future payments, and a AAA rating would likely no longer be appropriate."

Of great interest here – Moody’s says that even if the debt ceiling is raised, the agency will likely downgrade the outlook for U.S. ratings to negative unless a “substantial and credible” deal is struck to put than nation’s future borrowing and spending ways on a more sustainable path.

Financial markets are already reacting to this news even as negotiators in Washington seek a deal behind closed-doors.

Some highlights from the Moody’s release:

“If the debt limit is raised again and a default avoided, the Aaa rating would likely be confirmed. However, the outlook assigned at that time to the government bond rating would very likely be changed to negative at the conclusion of the review unless substantial and credible agreement is achieved on a budget that includes long-term deficit reduction.”

“To retain a stable outlook, such an agreement should include a deficit trajectory that leads to stabilization and then decline in the ratios of federal government debt to GDP and debt to revenue beginning within the next few years.”

The U.S. Treasury Department quickly reacted with its own statement.

“Moody’s assessment is a timely reminder of the need for Congress to move quickly to avoid defaulting on the country's obligations and agree upon a substantial deficit reduction package," said Under Secretary for Domestic Finance Jeffrey A. Goldstein.

[Obama 2012 1,714]

I'm still loving the moronic idea that we'd actually default to begin with.

The only way we 'default' is if congress says 'hey, stop paying the interest on the debt.'

[ready4ONE 5,400]

I'm still loving the moronic idea that we'd actually default to begin with.

The only way we 'default' is if congress says 'hey, stop paying the interest on the debt.'

The probability of a default is all it takes to watch the moneymen go into action. The Republican Party is playing politics in a high stakes bid to preserve tax breaks for the wealthy. Nothing funny about any of this.

[Mr. Big Dog 10,747]

The only way we 'default' is if congress says 'hey, stop paying the interest on the debt.'

That's an overly simplistic view which I am not surprised is presented by you. If we were to pay P&I on the debt but fail to pay the bills that Congress has already incurred, that's going to hurt our credit rating as well. I think they folks over at Moody's and the treasury have a bit more authority on the issue than you do.

[Obama 2012 1,714]

That's an overly simplistic view which I am not surprised is presented by you. If we were to pay P&I on the debt but fail to pay the bills that Congress has already incurred, that's going to hurt our credit rating as well. I think they folks over at Moody's and the treasury have a bit more authority on the issue than you do.

Dude, if you'd get your head out your butt for 2 minutes, you'd see that Geitner is a criminal in action and that #2 'defaulting' isn't as simple as they make it out to be.

It's all politics. It's not about anything but control. That's all it has ever been about.

The probability of a default is all it takes to watch the moneymen go into action. The Republican Party is playing politics in a high stakes bid to preserve tax breaks for the wealthy. Nothing funny about any of this.

You, of all people, are smarter than this statement you just made.

[Mr. Big Dog 10,747]

Dude, if you'd get your head out your butt for 2 minutes,

Dude, if you'd get your head out of your butt for just the few seconds it takes to read Moody's statement you'd recognize that you're wrong. It's quite simple - they rate our creditworthiness, you do not. Hence, what they say matters, what you say doesn't. Pull that head out for a second and give it a try if you feel that you can handle it.

[Obama 2012 1,714]

Dude, if you'd get your head out of your butt for just the few seconds it takes to read Moody's statement you'd recognize that you're wrong. It's quite simple - they rate our creditworthiness, you do not. Hence, what they say matters, what you say doesn't. Pull that head out for a second and give it a try if you feel that you can handle it.

So glad you're pathetically brainwashed by the system.

[Mr. Big Dog 10,747]

So glad you're pathetically brainwashed by the system.

Brainwashed? Because I state the simple fact that you do not get to rate the country's creditworthiness? Yeah, whatever. You're so full of shite!

[SMR 368]

There goes Mitch's plan. And there goes the GOP's insistence that revenues are not on the table. Maintaining that stance, the GOP will face the burden of being responsible for a downgraded outlook for US treasuries if reveneue enhancements aren't part of the deal.

You're implying things that are not in the original Moody statement (namely that not increasing revenue will cause Moody to downgrade the US credit rating). The article simply states that raising the debt ceiling is not enough because it wouldn't change the fact that the US is facing huge budget deficits. It states that the US must take action to cause the debt to revenue and debt to GDP ratios to decrease. Essentially that means Moody is drawing a line in the sand and saying that the US should no longer be allowed to run on deficits without suffering consequences in its credit rating.

The critical thing here is that not only the revenue to debt ratio is being looked at but also the GDP to debt ratio. Thus, revenues don't have to be on the table. Spending cuts are sufficient to 'put the US on a track that will decrease the debt to GDP and debt to revenue ratios. All that needs to be done to put us on such a path is to eliminate the deficit in the current budget. That can be done through increasing revenue or decreasing spending.

Note, I'm not trying to state that increasing revenue can't be an option. But your implication that Moody has stated that it will decrease the US credit rating if revenue is not increased is simply false. That isn't being stated at all.

On a separate note, why would increasing revenue be "eliminating tax breaks for the wealthy?" The poor already don't pay any income tax. That means the wealthy are paying a higher percentage of income in taxes than the poor. Thus, how can you argue that the wealthy are getting "tax breaks." I understand there are things like private jet tax breaks and such, but everyone has tax deductions. If person A is paying taxes and person B isn't, it's misleading to justify taxing person A more because he is getting "tax breaks."

I like the suggestion made for eliminating the deficit that a law should simply be passed wherein no member of congress can be reelected if during his or her term of office a budget with a deficit was passed. The problem is, congress doesn't want to make hard decisions because it will hurt the chances of reelection. If a deficit means congress can't be reelected, they will be forced to make the hard decisions or not be reelected anyways.

[Mr. Big Dog 10,747]

You're implying things that are not in the original Moody statement (namely that not increasing revenue will cause Moody to downgrade the US credit rating). The article simply states that raising the debt ceiling is not enough because it wouldn't change the fact that the US is facing huge budget deficits. It states that the US must take action to cause the debt to revenue and debt to GDP ratios to decrease. Essentially that means Moody is drawing a line in the sand and saying that the US should no longer be allowed to run on deficits without suffering consequences in its credit rating.

The critical thing here is that not only the revenue to debt ratio is being looked at but also the GDP to debt ratio. Thus, revenues don't have to be on the table. Spending cuts are sufficient to 'put the US on a track that will decrease the debt to GDP and debt to revenue ratios. All that needs to be done to put us on such a path is to eliminate the deficit in the current budget. That can be done through increasing revenue or decreasing spending.

Note, I'm not trying to state that increasing revenue can't be an option. But your implication that Moody has stated that it will decrease the US credit rating if revenue is not increased is simply false. That isn't being stated at all.

It's not stated directly but if you take a close look at what it says and then look at what's realisitically possible with cuts alone, then you are left with the necessity to enhance revenues in order to get to any decline in the debt to revenue ratio beginning in 5 years. The debt is going to grow over the next five years no matter what. The deficit isn't going to be eliminated over the next decade or two. Even the Paul Ryan blueprint doesn't eliminate the deficit over the next four decades despite working on assumptions such as 5% sustained economic growth (not gonna happen) and unemployment rates some 1.5% less than full employment (not gonna happen). So, even in the best of circumstances economically and even with the quasi elimination of Medicare, you don't get to a balanced budget in less than 40 years under the Ryan blueprint. It may be hard to swallow but the reality is that in the real world there is no balanced budget to be had without enhancing revenues. As long as we incur deficits, the debt is going to grow. Growing debt requires revenue growth at a faster clip than debt growth in order for the debt ro revenue ratio to decline.

[Mr. Big Dog 10,747]

On a separate note, why would increasing revenue be "eliminating tax breaks for the wealthy?"

I'm not advocating that. I'm saying take a look at the >$1TN/year tax spending and identify tax loopholes that can be closed. Or close them all. There are many things in the tax code that I am not a fan of that benefit the not-so-wealthy. EITC comes to mind. I think that is a poor idea. All it does is encourage lower wages which benefits employers more than anyone else. I don't like this Bush/Obama tax cut expiration discussion limited to incomes above a certain threshold. I said last year and I say again, let this ####### sunset altogether. All of it. Period.

[^_^ 5,021]

Brainwashed? Because I state the simple fact that you do not get to rate the country's creditworthiness? Yeah, whatever. You're so full of shite!

Any of us can rate anything we want. The question is, who else cares?

I hereby rate you Mr. Big Dog, a B+ (yes i am making up my own scale too. i have the right to do that even though no one else cares).

Edited July 14, 2011 by \

[^_^ 5,021]

I'm not advocating that. I'm saying take a look at the >$1TN/year tax spending and identify tax loopholes that can be closed. Or close them all. There are many things in the tax code that I am not a fan of that benefit the not-so-wealthy. EITC comes to mind. I think that is a poor idea. All it does is encourage lower wages which benefits employers more than anyone else. I don't like this Bush/Obama tax cut expiration discussion limited to incomes above a certain threshold. I said last year and I say again, let this ####### sunset altogether. All of it. Period.

EITC pisses me off. End it. End the mortgage interest and property taxes deduction too and watch the property prices in places like NYC and LA metro areas become affordable to regular people again.

eta: ending those deductions will hurt me bad.

Edited July 14, 2011 by \

[Mr. Big Dog 10,747]

EITC pisses me off. End it. End the mortgage interest and property taxes deduction too and watch the property prices in places like NYC and LA metro areas become affordable to regular people again.

eta: ending those deductions will hurt me bad.

Ending EITC will hurt you?

[^_^ 5,021]

Ending EITC will hurt you?

No, the other thing.