Moody's Places US Debt on 'Negative Outlook'

Moody’s Investors Service and Fitch Ratings affirmed their AAA credit ratings for the U.S. while warning that the ratings could be downgraded if lawmakers fail to enact debt reduction measures and the economy weakens.

The rating outlook is now negative, Moody’s said in a statement yesterday after President Barack Obama signed into law a plan to lift the nation’s borrowing limit and cut spending.

The debt-limit compromise “is a positive step toward reducing the future path of the deficit and the debt levels,” Steven Hess, senior credit officer at Moody’s in New York, said in a telephone interview yesterday. “We do think more needs to be done to ensure a reduction in the debt to GDP ratio, for example, going forward.”

A ratings cut would raise the specter that the wrangling between Obama and Republican lawmakers over spending cuts and taxes will harm American prestige and the global financial system. JPMorgan Chase & Co. estimated that a downgrade would raise the nation’s borrowing costs by $100 billion a year. It could also hurt the rest of the U.S. economy by increasing the cost of mortgages, auto loans and other types of lending tied to the interest rates paid on Treasuries.

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9 comments on “Moody's Places US Debt on 'Negative Outlook'
  1. dingbat36 says:

    Well, of course they are………..there was never any chance of default (only prioritization in paying our bills), the credit agencies don't care about raising debt ceilings before some drop dead date. The credit monitoring agencies DO NOT like it when the government keep busting the limit on their "credit card". It's the spending, stupid……that's what a downgrade would be based on!!

  2. AdrianVance says:

    Here we go! Get ready for the kind of inflation we've seen in Brazil and other such countries. This will do more to sink the Democrats than anything as they will not be able to blame it on George W. Bush.

    For sharp political analysis, science and humor see The Two Minute Conservative, Now on Kindle.
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  3. SEAN MURRY says:

    it is obummers fault that we are in this mess.

  4. George says:

    Ponzi Scheme

    American Heritage Dictionary definition of Ponzi Scheme:
    A fraud disguised as an investment opportunity, in which initial investors and the perpetrators of the fraud are paid out of funds raised from later investors, and the later investors lose all funds invested.

    Our Social Security system setup fits the definition exactly and is a classic example of a Ponzi scheme.

    In the case of our national debt, having to take on additional debt just to service existing debt, essentially makes it a Ponzi scheme. If anything, the credit rating should have been lowered a long time ago. What is surprising is that we, the voters, are allowing our leaders, both Republicans and Democrats, to continue this massive fraud. Wake up!

  5. Not Impressed says:

    The US Treasury is in DEEP trouble. Just read between the lines. NOTHING has changed. The compromise is meaningless. Moodys has told the truth for a change. Read the comment again to make sure you don't miss the point.

  6. Melissab says:

    The fact that we are here today to debate raising America's
    debt limit is a sign of leadership failure. It is a sign that the U.S.
    Government can not pay its own bills. It is a sign that we now
    depend on ongoing financial assistance from foreign countries
    to finance our Government's reckless fiscal policies. Increasing
    America's debt weakens us domestically and internationally.

    Leadership means that the buck stops here. Instead, Washington
    is shifting the burden of bad choices today onto the backs of our
    children and grandchildren. America has a debt problem and a
    failure of leadership. Americans deserve better.

    Senator Barack H. Obama, March 2006

    "OH" P.S. I just went to re-finance my home and in this week the interest went up 1/2 point.. Thanks Washington.. That's another 62.00 a month more then I have money for.. Again, thanks..

  7. Steven says:

    They actually downgraded the credit rating of the US government quite a while ago. Simply acknowledging that there was a rating for government debt was a downgrade.

  8. ricbee says:

    The mere public knowledge that the debt may not be paid in the future should cause the interest rate to rise,perhaps setting off a Carter-like round of inflation.