- The Washington Times - Wednesday, November 23, 2011

Moody’s Investors Service said Wednesday that the congressional supercommittee’s failure to come up with a deficit-reduction plan won’t trigger a downgrade of its AAA rating of U.S. credit.

But the rating agency said in a statement that its current “negative outlook” on the U.S. rating will continue “given the need over time for further deficit reduction to reverse the country’s upward debt trajectory.”

Moody’s announcement came after another major credit rating agency, Standard & Poor’s, said Monday that inaction by the deficit panel wouldn’t affect its AA+ rating.

S&P said it based its decision not to downgrade because of $1.2 trillion in automatic spending cuts to defense and domestic programs scheduled to begin in January 2013 — cuts to be triggered because of the supercommittee’s failure.

Many Capitol Hill lawmakers — particularly Republicans who worry the automatic “sequester” cuts to the Pentagon will compromise national security — have vowed to alter or undo the cuts.

“As every military and civilian defense official has stated, these cuts represent a threat to the national security interests of the United States and cannot be allowed to occur,” Republican Sens. John McCain of Arizona and Lindsey Graham of South Carolina said in a joint statement Monday.

The pair said they are working on a plan to “minimize the impact” of the sequester on the Pentagon.

“The first responsibility of any government is to provide for the common defense; we will pursue all options to make certain that we continue to fulfill that solemn commitment,” the two senators said.

The movement to undo the sequester hasn’t gained traction with party leaders in the House and Senate.

“While I am disappointed, the House will forge ahead with the commitments we have made to reducing government spending,” House Speaker John A. Boehner, Ohio Republican, said Monday. “Doing otherwise is not an option.”

President Obama also has vowed to veto any bill that turns off the automatic cuts unless lawmakers find at least that much in other tax increases or different spending cuts.

Moody’s said that while a change in the composition of the automatic cuts wouldn’t be a major rating consideration, a reduction in the $1.2 trillion total amount would increase the federal debt and “could have negative rating implications.”

Standard & Poor’s also said that if the dollar amount of the automatic cuts is lowered, “downward pressure on the ratings could build.”

Standard & Poor’s in August dropped the U.S. credit rating from AAA to AA+, questioning the ability of leaders in Washington to seriously deal with the nation’s debt crisis.



Click to Read More

Click to Hide