All of the reports coming out of Washington are about how talks at the White House are not going well. That’s probably an understatement. Cantor says that Obama walked out. Peolsi says that Cantor exaggerates. The quotes suggest that both are right.
Obama: "don't call my bluff; I am going to the American people." "Enough is enough, I'll see you tomorrow."
This is getting ridiculous. The debt ceiling has been raised over 70 times in my lifetime. It was raised seven times under George W. Bush. The Republicans didn’t mutter a peep about raising the debt ceiling when Bush was president.
This is about the Tea Party sending people to Washington who have no understanding that the debt ceiling is related to appropriations. Both houses passed a budget. Implementing that budget requires that the government borrow money. The time to decide how much money to spend was before the budget was passed and signed by the President, not after.
I keep writing about how the impact of not raising the debt ceiling will have consequences. Nobody knows for sure what those consequences will be, but they will all play out in the financial markets, where U.S. Treasuries are traded and are the benchmark for lots of other interest rates—like rates on commercial loans and consumer loans and credit cards, and borrowing by cities, counties, and states. Moody’s announced yesterday that they are considering downgrading the credit rating of the U.S. Government. Standard and Poors announced back in April that they were considering a downgrade. The Chinese are considering downgrading their rating of U.S. debt.
Surely you realize that, as a consumer, if your credit score is high you get a lower interest rate on your mortgage than you do if your credit score is low. The same is true for government borrowings. To have the credit score of the U.S. downgraded is a really, really big deal. The U.S. Government has never had its credit questioned in the history of the United States. (Okay, I exaggerate: Markets were jittery in 1995. But it is rare that anybody questions the credit of the U.S.) If Moody’s downgrades the credit score of the U.S. every interest rate in the world will be questioned, including rates on municipal bonds. This isn’t just about the U.S. This could plunge the entire world into a new downturn, from which recovery will be long and tedious.
Homework
Moodys Worried About US Credit Rating
Obama: "don't call my bluff; I am going to the American people." "Enough is enough, I'll see you tomorrow."
This is getting ridiculous. The debt ceiling has been raised over 70 times in my lifetime. It was raised seven times under George W. Bush. The Republicans didn’t mutter a peep about raising the debt ceiling when Bush was president.
This is about the Tea Party sending people to Washington who have no understanding that the debt ceiling is related to appropriations. Both houses passed a budget. Implementing that budget requires that the government borrow money. The time to decide how much money to spend was before the budget was passed and signed by the President, not after.
I keep writing about how the impact of not raising the debt ceiling will have consequences. Nobody knows for sure what those consequences will be, but they will all play out in the financial markets, where U.S. Treasuries are traded and are the benchmark for lots of other interest rates—like rates on commercial loans and consumer loans and credit cards, and borrowing by cities, counties, and states. Moody’s announced yesterday that they are considering downgrading the credit rating of the U.S. Government. Standard and Poors announced back in April that they were considering a downgrade. The Chinese are considering downgrading their rating of U.S. debt.
Surely you realize that, as a consumer, if your credit score is high you get a lower interest rate on your mortgage than you do if your credit score is low. The same is true for government borrowings. To have the credit score of the U.S. downgraded is a really, really big deal. The U.S. Government has never had its credit questioned in the history of the United States. (Okay, I exaggerate: Markets were jittery in 1995. But it is rare that anybody questions the credit of the U.S.) If Moody’s downgrades the credit score of the U.S. every interest rate in the world will be questioned, including rates on municipal bonds. This isn’t just about the U.S. This could plunge the entire world into a new downturn, from which recovery will be long and tedious.
Homework
Moodys Worried About US Credit Rating
RSS Feed