Over the weekend, Senate Minority Leader Mitch McConnell (R-Ky.) said he’s looking for a debt-reduction plan that makes credit rating agencies happy. “Standard & Poor’s would be a good indicator,” he said. “If they are impressed with what we’ve done, then that will mean the markets think the Americans are going to get their act together.”
The comments came about a month after an S&P “warning” about the United States’ AAA-bond rating being in some sort of jeopardy, which sent Republicans into quite a tizzy.
It’s ironic, then, that the rating agencies Republicans are so eager to impress are not at all fond of Republicans’ approach to the debt ceiling.
Republicans are now openly flirting with the theory that allowing the United States to default briefly on its payment obligations won’t be such a bad thing — and may even be necessary to extract concessions on entitlement spending in exchange for raising the debt limit.
But two of the biggest ratings agencies say they could downgrade the United States’ triple-A credit if the government misses even a single debt-service payment.
“A sovereign’s failure to service its debt as payments come due is a default according to S&P’s sovereign rating criteria,” writes John Piecuch, spokesman for Standard & Poor’s, one of the “Big Three” credit ratings agencies, in an email to me. “In that case, the rating would be lowered to “SD” (Selective Default).”
A U.S. analyst for Moody’s — another Big Three ratings agency — was not available for an interview. But a spokesman referred me to a February report in which they downplay the likelihood that they’ll have to reduce the country’s credit rating. But it could happen as the result of a major political failure.
There’s an eerie-but-consistent insanity to the entire GOP approach.
Republicans want to impress rating agencies, so they’re pursuing a strategy that would aggravate rating agencies.
Republicans want to eliminate economic uncertainty, so they’re pursuing a strategy that creates economic uncertainty.
Republicans want to avoid higher interest rates, so they’re pursuing a strategy that would lead to higher interest rates.
Is there something in the water in D.C. that causing widespread madness?