July 26th, 2011, Fairfax, VA—Americans for Limited Government President Bill Wilson today warned that neither the House nor Senate plans raising the $14.294 trillion debt ceiling would avert a credit downgrade by rating agencies:
“Conspicuously missing from both the House and Senate plans to raise the debt ceiling is any assurance that merely cutting $3 trillion in spending will avert a credit downgrade now threatened by rating agencies. Without that assurance, leaders are risking our creditworthiness in order to deliver a political solution to a math problem. Moody’s, S&P, and Fitch have said fiscal consolidation needs to at a minimum cut borrowing by $4 trillion, and neither proposal meets that threshold.
“Washington is getting caught up in meeting Obama’s arbitrary August 2nd deadline for increasing the debt ceiling, and is therefore not focused on putting a proposal on the table that would actually preserve the nation’s Triple-A credit rating. Now, the metric being used is whether a proposal can pass, not whether it is sufficient to set the nation on a fiscally sustainable path.
“A downgrade will crash markets, weaken the dollar, and result in higher interest rates for federal, state, and municipal debt. This in turn will make even greater cuts necessary down the road than are being contemplated now, and make a national default more likely. Higher rates will also hurt the housing market and result in lower home values. With all that can go wrong, one might expect both houses of Congress to be putting proposals forward that most certainly would prevent a downgrade.
“Now it is up to the leadership of both houses to allow amendments to these flawed proposals so that they can be fixed prior to becoming law. We should not wait for a downgrade or worse to begin getting our fiscal house in order.”
“$3 Trillion is Not $4 Trillion,” By ALG Senior Editor Robert Romano, July 26th, 2011 at http://blog.getliberty.org/default.asp?Display=3529 .
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