Over the weekend, Senate Minority Leader Mitch McConnell (R-Ky.) said of the debt-reduction talks, “We need to put something together that will actually pass and make a difference, impress Standard & Poor’s and Moody’s and the rating agencies that are about to downgrade the U.S. credit rating for the first time in our history.”
Even for McConnell, it was a bizarre thing to say. The rating agencies are increasingly worried because of McConnell’s own tactics. Our national credit rating is in jeopardy because McConnell and his cohorts are choosing to deliberately put our credit rating in jeopardy.
Indeed, whether the confused GOP leader understands this or not, if he wants to “impress Standard & Poor’s and Moody’s and the rating agencies,” McConnell can pay more attention to their warnings.
Standard & Poor’s will drop the U.S.’s credit rating from its current triple-A to a D if the government misses its debt payment on August 4, Reuters’ Walter Brandimarte reports. S&P’s managing director John Chambers explained, “If the U.S. government misses a payment, it goes to D. … That would happen right after August 4, when the bills mature, because they don’t have a grace period.” The company would downgrade Treasury bills unaffected by the blown deadline, but not as much.
The Treasury Department says that the federal debt ceiling must be raised by August 2. Two days later, the department must pay $30 billion in short-term debt. But negotiations between the White House and Congressional Republicans have broken down to the extent that some Democrats are debating whether to just declare the debt limit unconstitutional and ignore it.
Moody’s has said it, too, would downgrade the U.S. if it defaults, though less severely.
There are many congressional Republicans, including Paul Ryan, who’ve said, as if they know what they’re talking about, that the United States need not worry about missing a few payments. S&P, one of the agencies Mitch McConnell is so eager to impress, is making clear these Republicans couldn’t be more wrong.
Avoiding “selective default” couldn’t be any easier: all Congress has to do is raise the debt ceiling, as they’ve done repeatedly for years. It doesn’t cost anything; it doesn’t require hearings or investigations; it doesn’t even take a long time. The whole process could be wrapped up in five minutes.
But Republicans don’t want to. In fact, there’s a certain beauty to the GOP’s clinical insanity: they’re eager to impress rating agencies, so they’re pursuing a strategy that would aggravate rating agencies.
Also keep in mind, Moody’s Investors Service — another one of the agencies McConnell wants to impress — has said the nation’s AAA U.S. credit rating is at risk of being downgraded by mid-July, long before the deadline, if it looks like failure is even a possibility. In other words, the United States would suffer if it looks like the country might miss a payment on its debt obligations, and since Republicans refuse to even consider reducing the debt with a penny of additional revenue, it’s getting increasingly difficult to see how this game of chicken ends anytime soon.
And this point is just a couple of weeks away. The heat isn’t just on, we’re starting to feel a little singed.