Even the threat of default is dangerous

A couple of weeks ago, Senate Minority Leader Mitch McConnell (R-Ky.) said he’s looking for a debt-reduction plan that makes credit rating agencies happy. The irony, of course, is that the rating agencies Republicans are so eager to impress are not at all fond of Republicans’ approach to the debt ceiling.

Two of the biggest ratings agencies, including Standard & Poor’s, recently said they would downgrade the United States’ credit if the government missed even one debt-service payment. Today, a third rating agency said the country’s rating would be at risk if Republicans push this game of chicken just a little more.

Moody’s Investors Service said Thursday there is a very small but rising risk of a short-lived default by the United States if the country’s debt limit is not increased in coming weeks.

In a statement, Moody’s said it would put the AAA U.S. credit rating on review for a possible downgrade if lawmakers in Washington do not make substantive progress in budget talks by the middle of July.

“Since the risk of continuing stalemate has grown, if progress in negotiations is not evident by the middle of July, such a rating action is likely,” Moody’s said.

It’s worth appreciating exactly what Moody’s is saying here. The message isn’t that the United States would suffer after it missed a payment on its debt obligations; the message is that the United States would suffer well before this if it looks like the country might miss a payment on its debt obligations.

There’s a certain beauty to the Republicans’ clinical insanity: they’re eager to impress rating agencies, so they’re pursuing a strategy that would aggravate rating agencies. If you’re reading this and thinking, “Wait, how could anyone in a position of power be that dumb?” then you and I are on the same page.

Also note, there’s a growing number of congressional Republicans who are “under the spell of an unorthodox group of financial experts who dispute the views of their peers and say that the U.S. could default briefly on debt payments without major, lasting consequences to the U.S. economy and international markets.”

Literally all of the “Big Three” ratings agencies are now flashing a bright red light in the GOP’s direction, hoping cooler heads prevail.

House Speaker John Boehner (R-Ohio), oddly enough, seems to understand this, and told the White House yesterday he wants to work out a deal by the end of June, precisely to avoid making the markets nervous.

One right-wing lawmaker, Rep. Devin Nunes (R-Calif.), recently said, “By defaulting on the debt, in the short and long term, it could benefit us.” Not even Boehner believes such rampant stupidity.

As for the rating agencies, in April, when S&P issued a weak warning, Republicans freaked out and said it’s incumbent upon all federal officials to take these warnings seriously. Well, now all of the rating agencies are pleading with Washington not to default. Will the GOP listen?