Tags: Moody’s | US | Debt | Triple | A | Rating

Moody’s: US Must Cut Debt Burden to Keep Triple-A Rating

By    |   Thursday, 05 Aug 2010 08:27 AM

The United States must trim its humongous budget deficit and debt burden to avoid losing its triple-A debt rating, according to Moody’s Investors Service.

“Having a clear plan certainly increases confidence, and the U.S. doesn’t have that yet,” Steven Hess, senior credit officer at Moody’s, told Bloomberg.

The budget deficit totaled almost 10 percent of GDP last year, and the federal government’s debt burden will reach 62 percent of GDP next month, the Congressional Budget Office forecasts.

President Barack Obama created a bipartisan commission to figure out how to slash the debt. It’s slated to issue its recommendations Dec. 1, after the congressional elections.

“The question is will the politics allow these recommendations to be adopted and implemented?” Hess said.

“This is what we’re going to be watching over the next couple of years, because the debt trajectory as it is now is something that might potentially cause us to consider whether the U.S. is triple-A at some point in the future.”

To be sure, the United States is in a bit of a pickle, because it needs stronger economic growth to reduce the debt. “So it can be counter-productive not to stimulate,” Hess said.

He’s certainly not the only one worried about the red ink. Harvard economic historian Niall Ferguson says it may cost us our empire.

“The U.S. is on a completely unsustainable fiscal course,” he writes in The Australian newspaper. “Imperial falls are associated with fiscal crises.”

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The United States must trim its humongous budget deficit and debt burden to avoid losing its triple-A debt rating, according to Moody s Investors Service. Having a clear plan certainly increases confidence, and the U.S. doesn t have that yet, Steven Hess, senior credit...
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Thursday, 05 Aug 2010 08:27 AM
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