Wintery Knight

…integrating Christian faith and knowledge in the public square

Moody’s anticipates U.S. credit downgrade following fiscal cliff deal

Here’s the latest from the Moody’s web site.

Excerpt:

Moody’s Investors Service said that the fiscal package passed by both houses of Congress yesterday is a further step in clarifying the medium-term deficit and debt trajectory of the federal government. It does not, however, provide a basis for a meaningful improvement in the government’s debt ratios over the medium term. The rating agency expects that further fiscal measures are likely to be taken in coming months that would result in lower future budget deficits, which are necessary if the negative outlook on the government’s bond rating is to be returned to stable. On the other hand, lack of further deficit reduction measures could affect the rating negatively. Notably, yesterday’s package does not address the federal government’s statutory debt limit, which was reached on December 31. The need to raise the debt limit may affect the outcome of future budget negotiations.

[...]The Congressional Budget Office (CBO) estimates that the net increase in budget deficits from the fiscal package when compared to its baseline scenario (which assumes taxes on all income levels would increase) is about $4 trillion over the coming decade, excluding higher interest costs on the resultant higher debt. Based on that estimate, a preliminary calculation by Moody’s shows that the ratio of government debt to GDP would peak at about 80% in 2014 and then remain in the upper 70 percent range for the remaining years of the coming decade. Stabilization at this level would leave the government less able to deal with future pressures from entitlement spending or from unforeseen shocks. Thus, further measures that bring about a downward debt trajectory over the medium term are likely to be needed to support the Aaa rating.

This will not be our first credit rating downgrade, we had one before from Standard and Poor’s in August 2011 and a second one from Egan Jones in April 2012. So this will be the third one in a row during Obama’s borrowing and spending spree.

Would you like to see some graphs showing the impact that the fiscal cliff deal has on our long-term debt? There is a pretty good article on National Review by Yuval Levin that has the charts. The truth is that entitlements are driving our debt, and the fiscal cliff deal does nothing about it.

All Obama seems to be able to do as President is borrow from future generations in order to spend now. When I consider his drug-using years with his “Choom Gang” friends, I’m not sure that he is really qualified to do anything other than borrow and waste money. So far, he’s spent a lot more time using drugs than running businesses in the private sector, it seems to me. Maybe he has an addiction issue with borrowing and spending?

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