Moody's warns again on U.S. debt

[Andy823]

http://money.cnn.com/2011/07/18/news/eco...?iid=HP_LN

NEW YORK (CNNMoney) --

Credit rating agency Moody's dinged a key backup plan to raise the debt ceiling Monday, and said the United States would be better off if the ceiling was eliminated entirely.

Lawmakers appeared to make little or no progress on the debt ceiling over the weekend, and the deadline to raise the country's legal borrowing limit is now just over two weeks away.

On Monday, Moody's threw some cold water on a backup plan that is gaining momentum among lawmakers as the chances of a compromise deal fade.
The plan, crafted by Sens. Mitch McConnell and Harry Reid, would allow the debt ceiling to be increased, while shifting the political blame for that action from Congress to the White House

The measure would allow for three short-term increases of the debt ceiling while at the same time letting lawmakers register their disapproval. The first increase would boost the debt limit by $700 billion and the next two by $900 billion each.
Moody's said that part of the plan would reduce pressure.

"Any proposal that reduced the risk of payment disruptions would be a positive step in the short term," the report said.

But Moody's warned the measure should include substantial spending cuts as well.
"Without more substantial deficit reductions being included in such a plan, it would be negative for the long-term outlook," the report said.

The details of the plan have yet to be ironed out, and it's possible that the final bill will include spending cuts. McConnell and Reid are reportedly considering adding a basket of spending cuts to the package, but nothing has been finalized.
In addition, Moody's suggested the U.S. would be better off if the debt ceiling were eliminated entirely.

The limit has not effectively restrained spending, Moody's notes, and the legislative process "creates periodic uncertainty over the government's ability to meet its obligations."

More at the link above.

[jaxx]

Maybe this has something to do with that warning:

29 Companies Had More Cash Than The U.S. Treasury As Of July 13

As of July 13, 29 public companies had more cash on hand than the U.S. Treasury Department, according to the site Zero Hedge based on numbers from Capital IQ. It’s a stark reminder that if Congress refuses to raise the debt ceiling, the government won’t have nearly enough money to continue funding essential services and programs.

In the first half of July alone, Treasury cash balances were depleted from from $130 billion to just $39 billion. That means the most powerful nation on earth currently is tied with Google for the amount of cash that it has, and is less flush than Bank of America, JP Morgan Stanley, and Goldman Sachs, among others.



http://thinkprogress.org/economy/2011/07...-treasury/

We hit the debt ceiling in May and have been moving money around since then to pay the bills. The end of the money is insight.

[Proud Liberal Dem]

Good point. Why DO we have to have a debt ceiling anyway?