Originally Posted by Taco John
Moody's credit rating agency raining on Obama's scare parade:
Moody's offers different view on debt limit
One of the nation’s top credit-rating agencies says that the U.S. Treasury Department is likely to continue paying interest on the government’s debt even if Congress fails to lift the limit on borrowing next week, preserving the nation’s sterling AAA credit rating.
In a memo being circulated on Capitol Hill Wednesday, Moody’s Investors Service offers “answers to frequently asked questions” about the government shutdown, now in its second week, and the federal debt limit. President Obama has said that, unless Congress acts to raise the $16.7 trillion limit by next Thursday, the nation will be at risk of default.
Not so, Moody’s says in the memo dated Oct. 7.
” We believe the government would continue to pay interest and principal on its debt even in the event that the debt limit is not raised, leaving its creditworthiness intact,” the memo says. “The debt limit restricts government expenditures to the amount of its incoming revenues; it does not prohibit the government from servicing its debt. There is no direct connection between the debt limit (actually the exhaustion of the Treasury’s extraordinary measures to raise funds) and a default.
The memo offers a starkly different view of the consequences of congressional inaction on the debt limit than is held by the White House, many policymakers and other financial analysts. During a press conference at the White House Tuesday, Obama said missing the Oct. 17 deadline would invite “economic chaos.”
The Moody’s memo goes on to argue that the situation is actually much less serious than in 2011, when the nation last faced a pitched battle over the debt limit.
“The budget deficit was considerably larger in 2011 than it is currently, so the magnitude of the necessary spending cuts needed after 17 October is lower now than it was then,” the memo says.
Treasury Department officials did not immediately respond to requests for comment.
Math people, basic math:
The current deficit is what, 900 billion? Where do you suggest we instantly cut 900 billion dollars in spending?
The total discretionary spending currently is 1.5T
~1T of that is defense spending (DoD, VA, DoE, DHS, NASA, etc.)
Interest is 246 billion of that 1.5T
That leaves ~250bn in other discretionary spending (DOI, DoEd, DoJ, etc.) from which you can cut.
So what are you going to cut? All non defense, non-interest spending is only going to get you 1/4 of the deficit. To make up that other 3/4 you are going to have to do some combination of the following
a.) gut defense related spending (DoD+ VA,DHS,etc.)
b.) stop servicing current debt (i.e. DEFAULT)
That assumes you've already completely scrapped
the rest of the government dumping perhaps 10s of millions of public and private (contractor) workers into the unemployment lines (with a corresponding ballooning of social spending there) along the way.
Saying we can just instantly balance the budget is pure lunacy.
If you want to do it with non-discretionary spending (the biggies being SS medicare, and military pensions/va), then you are both going to have to pass legislation that will stop those programs and in the process effectively steal (again!) all the money that has been collected to fund those programs. Oh, and if you DO pass the legislation to stop those programs, you also reduce the total revenues by about 1T, meaning you still have to cut discretionary spending just like I noted above!