This is not a repeat from April’s warning. It’s a reaction to the chaotic debt talks in Washington this week, and it’s making our Chinese creditors nervous.
Standard & Poor’s has warned U.S. lawmakers privately that it would downgrade the country’s debt if the Treasury Department is forced to prioritize payments because Congress does not raise the debt limit, a congressional aide said Thursday.
That warning came on the heels of an announcement from Moody’s on Wednesday that it too would slash the U.S. credit rating in the next few weeks if lawmakers fail to reach a deal. …
China, the U.S.’ largest creditor, also expressed grave concern that the U.S. would default on its debt, even briefly. “We hope that the U.S. government adopts responsible policies and measures to guarantee the interests of investors,” foreign ministry spokesman Hong Lei said at a regular news briefing in Beijing, when asked about the Moody’s report. He did not elaborate.
This is day 806 since we last had a budget. The Democrats were in control of DC from one end to the other for much of that time but couldn’t trouble themselves to do their most basic duty. Obama’s drama queen act notwithstanding, they own this crisis.
And as for the Democrats’ insistence on including tax hikes in any debt ceiling deal, the majority of the American people are not with him on that.
Since the dems now regulate the ratings agencies, (Frank-Dodd) how do we know that they are not the new lackeys for Obama and his cronies??? How is it that they are now inserting themselves? Why don’t they insist on the dems passing a budget?? How is it they have gotten away with no budget??? This is a Keystone cops routine, I think (no insult to the cops!!).
I gotta agree this thing from S&P, out of the blue, about prioritizing payments has the stink of politics all over it. The markets didn’t bat an eye when S&P provided this warning. Corporate bond issuers prioritize payments whenever cash flow is short; it doesn’t result in a downgrade unless it reflects a serious downturn in the corporation’s solvency. Same goes for state & local governments; you have to look for chronic structural deficits, like California or Illinois to find actual downgrades. The warning seems a wild over-reaction to a foreseen, but unlikely and purely contingent risk.
Treasury analysis and the Federal Reserve have most of the influence. The fact of the congress being completely disfunctional and non responsive only adds frosting to the decision.
The U.S. credit should have been downgraded some time ago.
By the way, the statement “China, the U.S.’ largest creditor,” is in error! The American people are the largest holder of the debt and China is the largest [foreign] holder of U.S. debt. In fact, China accounts for about 1/4th of the approximate total of $4.3 trillion debt owed to foreign countries. Public Debt is $9.7 trillion and intragovernmental holdings is $4.6 trillion….probably more right now.