Fixating on spending cuts may not ease credit rating concerns
Slate’s David Weigel points to an explanation of why measures that would prioritize spending to keep America from missing payments on its debt (such as one proposed by Central Florida Rep.
Jul 31, 202099.1K Shares2.2M Views
Slate’s David Weigel points toan explanation of why measures that would prioritize spending to keep America from missing payments on its debt (such as one proposed by Central Florida Rep. Dan Webster) may not be enough to alleviate short-term concerns about the country’s credit rating. #
In this video, Standard & Poor’s sovereign ratings committee chair John Chambers notes that ratings agencies have already been down on America’s credit rating since April, due to a “diminished expectation” that the country will stabilize its debt to GDP ratio — that is, get the nation’s economy growing faster than the national debt. #
Chambers says it seems unlikely the government will default, but that the debate over whether to raise the debt ceiling “has gone on longer than we thought, and it’s been more intractable than we thought.” #
A measure like Webster’s might stave off an outright default if the debate drags past the deadline, but Chambers warns that “a sudden and unplanned fiscal contraction” (e.g. a massive drop in federal spending because the government has been limited to incoming revenue) could “probably engender some severe dislocations in the market” and may “make us rethink our economic forecast.” In other words, the U.S. credit outlook could still darken, even as it manages to make payments on its debt. #
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