Moody’s warning is simple: “Budget negotiations during the 2013 Congressional legislative session will likely determine the direction of the US government’s Aaa rating,” the agency said in a statement. “If those negotiations lead to specific policies that produce a stabilization and then downward trend in the ratio of federal debt to GDP over the medium term,” then the U.S. will keep its Aaa credit rating. If those negotiations fail, it will probably be knocked down by one notch.
And why shouldn’t it be? How many times should the American political system be permitted to fail to accomplish its stated aims before we begin concluding that there’s something structurally wrong in American politics that needs to be priced into our predictions of how well Washington will manage its budget going forward? How many times should one party in Congress be permitted to threaten that it will force the country to default on debts that it could pay before investors begin wondering whether the United States is as responsible a borrower as they believed it was prior to this kind of continuous brinksmanship?
Wednesday, September 12, 2012
Moody's Might Downgrade the US. And Why Shouldn't It?