America Could Face Another Credit Downgrade If Deficit Reduction Isn’t Passed


This is what our fiscally unserious political leadership has led us to:

Moody’s Investors Service, in the latest reminder of the tense fiscal negotiations looming for Congress and the White House, said it could downgrade the U.S. government’s credit rating next year if steps aren’t taken to tackle the rising debt.

Specifically, it said if Congress repeals looming spending cuts and tax increases that begin next year and doesn’t replace these measures with large-scale deficit-reduction measures, the government would lose its top-notch rating.

The warning comes as Washington has become consumed with the November elections and talks of a bipartisan deal to reduce the deficit have mostly stalled. But after the elections on Nov. 6, policy makers have to deal with numerous fiscal issues before Jan. 1, 2013, when the large spending cuts are set to begin and tax rates will rise for more than 100 million Americans.

Moody’s states no preference for deficit reduction through spending cuts or tax hikes, which seems foolish.  Any revenue gains to be made through tax hikes are likely to be offset by declining tax revenues from the economic activity those hikes depress, not to mention the tax avoidance they will inspire.

The problem with America’s budget isn’t that the government isn’t collecting enough in taxes.  It’s that America has more government than it can afford.

Rob Port

Rob Port is the editor of In 2011 he was a finalist for the Watch Dog of the Year from the Sam Adams Alliance and winner of the Americans For Prosperity Award for Online Excellence. In 2013 the Washington Post named SAB one of the nation's top state-based political blogs, and named Rob one of the state's best political reporters.

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