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Moody’s Won’t Accept McConnell’s ‘Plan B’

From a joyous Reuters:

Exclusive: U.S. backup debt plan doesn’t support rating: Moody’s

By Walter Brandimarte Tue Jul 19, 2011

NEW YORK (Reuters) – A backup plan to raise the U.S. debt ceiling and avoid default could still lead to a negative outlook on the country’s ratings, Moody’s said on Tuesday, highlighting the plan’s failure to substantially reduce the deficit.

The back-up plan offered by Senator Mitch McConnell would avoid any immediate downgrade of the coveted U.S. triple-A rating, Moody’s analyst Steven Hess told Reuters in an interview, bringing relief to investors who fear an imminent downgrade of the coveted U.S. triple-A rating.

"But the numbers that are being discussed in terms of any possible deficit reduction coming out of this plan don’t seem to be very large," Hess said. "Therefore, this plan might result in a negative outlook on the rating."

A negative outlook is a sign the rating may be downgraded in 12 to 18 months.

McConnell’s plan, which is being negotiated with Senate Majority Leader Harry Reid, would include about $1.5 trillion in deficit-reduction measures.

Hess said a "much larger amount" of deficit-reduction measures would be necessary for Moody’s to affirm U.S. ratings with a stable outlook.

In the most recent development in Washington on Tuesday, President Barack Obama supported efforts by a bipartisan group of U.S. senators with a more ambitious budget plan that includes $3.75 trillion in savings over 10 years.

Asked about the ideal size of the deficit-reduction measures, Hess said $4 trillion "could lead us to affirm the rating at Aaa with a stable outlook, if those measures were actually adopted."

Gee, what a coincidence. That is nearly what the Gang Of Six is promising. What are the odds?

"I’d rather not opine on the numbers in between," he said, also noting that Moody’s does not have a view on whether that deficit reduction should be achieved via revenue increase or spending cuts…

How big of them. But of course they know as well as we do that spending cuts (apart from in defense) never happen.

This article was posted by Steve on Wednesday, July 20th, 2011. Comments are currently closed.

One Response to “Moody’s Won’t Accept McConnell’s ‘Plan B’”

  1. Chinnubie says:

    Wouldn’t it be great if we could all run our family households the same way the Federal Government does? If we could have printing presses in our basements to just crank out hundred dollar bills whenever we needed them. What happens when there is no more United States of America and we all fall back into the middle ages. Are the members of the media going to pat themselves on the back when they no longer have employment or better yet “Freedom of the Press”. Who will they complain to then? The way I see this deficit thing, if the media would just evenly tell both sides of the story this thing would be a no-brainer but I’m obviously living in a fantasy world at the same time the vast majority of the population are all for a balanced budget but, this is where the media gets in the way. When are they going to go out of business, none of them can be making any kind of a profit to operate.

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