U.S. Government Should Eliminate Debt Ceiling Altogether: Moody's

NEW YORK (Walter Brandimarte) - Ratings agency Moody's on Monday suggested the United States should eliminate its statutory limit on government debt to reduce uncertainty among bond holders.

The United States is one of the few countries where Congress sets a ceiling on government debt, which creates "periodic uncertainty" over the government's ability to meet its obligations, Moody's said in a report.

"We would reduce our assessment of event risk if the government changed its framework for managing government debt to lessen or eliminate that uncertainty," Moody's analyst Steven Hess wrote in the report.

The agency last week warned it would cut the United States' AAA credit rating if the government misses debt payments, increasing pressure on Republicans and the White House to come up with a budget agreement.

Moody's said it had always considered the risk of a U.S. debt default very low because Congress has regularly raised the debt ceiling during many decades, usually without controversy.

However, the current wide divisions between the House of Representatives and the Obama administration over the debt limit creates a high level of uncertainty and causes us to raise our assessment of event risk," Hess said.

Stepping further into the heated political debate about U.S. debt problems, Moody's suggested the government could look at other ways to limit debt.

It cited Chile, widely praised as Latin America's most fiscally-sound country, as an example.

"Elsewhere, the level of deficits is constrained by a 'fiscal rule,' which means the rise in debt is constrained though not technically limited," Moody's said, adding that such rule has been effective in Chile.

It also cited the example of the Maastricht criteria in Europe, which determines that the ratio of government debt to GDP should not exceed 60 percent. It noted, however, that such a rule is often breached by the governments.

In the United States, Moody's said the debt limit had not effectively curbed the rise in government debt because lawmakers regularly raise it and because that limit is not related to the level of expenditures approved by Congress.

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[nobody special]

12:46 PM on 07/19/2011

Moody's, like all CRAs, serves their bankers first, not us. Of course they think there should be no debt ceiling. They want to keep the country enslaved in debt forever. They lower the U.S. credit rating, raising the interest rates on future loans, putting us in even greater debt. It's an inescapable downward spiral.

I guarantee there are trillions of dollars in hedge funds and speculation derivatives riding on this.

And the Federal Reserve is in on all of it.

The U.S. is going to be the next Greece.

[MrOctober]

04:16 PM on 07/19/2011

Right on the money.

Americans have some sort of 'we're so great, we can overcome anything' idea, but it's just a fairy tale. The bankers don't care if they cripple Greece, Ireland or the USA - it's all more money for them. In fact, I'd venture to guess they would rather pillage the US, there's more money to be made than in Greece.

[joebhed]

09:38 AM on 07/20/2011

Yeah, well, the solution is not to hold the debt-ceiling and tax the people for the government's shortfall caused by the banker-induced financial crisis.
The solution is to eliminate government debt in the first place.
There is no reason for the government, as a monopoly issuer of the currency in a monetarily-sovereign state, to issue debt.
Only the fractional-reserve banking system, requiring the holding of GUV securities AS RESERVES for the system, requires the debt-issuance.
End fractional reserve banking.
End debt-issuance by the government.
Abolish the private Fed.
Begin debt-free money issuance by the government.

It's all in the Kucinich Full-Employment Bill

http://www.monetary.org/hr6550bill.pdf

Moodys is history.
And we own the money system.
Thanks.

[John Prewett]

03:37 AM on 07/19/2011

I agree. Borrow till lenders stop lending. Borrow like there is no tomorrow. Borrow till she leaves the rails. I wish I could borrow a million $ right now !

[plaidsportcoat]

02:28 AM on 07/19/2011

MOODY'S = PAID LIARS
Why are they even still in business?
See "Inside Story" for the sordid details.

[sergal stew]

04:11 AM on 07/19/2011

I also recommend CNBC "House of Cards" , BBC "The Love of Money", Dispatches - Crash "How the Banks went Bust" , BBC - "Last Days of Lehman brothers", PBS Frontline 'Inside the Meltdown" and CBC "Meltdown: The Secret History of the Global Financial Collapse" (4 parts) .

[joebhed]

09:44 AM on 07/20/2011

Say, ss
Good stuff there.
If you really care to understand the historical roots of this crisis, then PLEASE have a listen to Dr. Bernd Senf on "The Deeper Roots of the World Financial Crisis".
http://blip.tv/quorum/bernd-senf-deeper-roots-of-world-financial-crisis-part-1-of-3-4130447

It's not Lehman and it's not Wall street.
They, like us, are the players on two sides of the debt fulcrum.
It's the debt-money system.

Please have a listen.
Thanks.

[MrOctober]

04:18 PM on 07/19/2011

They are still in business because Wall Street needs them to be in business.

[MuchMadness]

08:20 PM on 07/18/2011

Big business is sending a message to the GOP: rein in the Teapublicans or we'll give all of our support to the Democrats.

[Conservative666]

09:49 PM on 07/18/2011

They already support the Dems. Look at Obama's Top 15 donor list. It is small business that Reps fight for, not big business.

[MuchMadness]

10:30 PM on 07/18/2011

LOL

[gravescanada]

10:24 AM on 07/19/2011

I guess you deduced that from the fact the Republicans are fighting to keep the tax cuts on the wealthies 2% or our country?

[WASanford]

05:51 PM on 07/21/2011

Do us all a favor and turn your constitution to Article 1, SECTION 7. I was not wrong!

[Tiger70]

06:50 PM on 07/18/2011

Having a Debt Ceiling forces us to recognize that there is a deficit problem. To be honest, I think that the Debt Ceiling will be raised, but only after substantial cuts in entitlements, decreased tax deductions, and increased taxes. We all need to compromise. The last time that we had a surplus was under President Clinton. The federal government cannot borrow over 40 cents of every dollar that it spends. Several ideas.. (1) raise the age for Medicare eligibility to 67, (2) raise the age for Social Security eligibility to 70, (3) eliminate the ethanol subsidy, (4) eliminate the Bush tax cuts for everyone, (5) eliminate corporate deductions for items such as corporate jets, (6) invest in education so as to make our country more competitive, (7) raise the salary level for Social Security taxes to $180,000, (8) eliminate the tax deductions for interest on mortgages (phased in), there are other ideas also. However, we all need to compromise and help solve this deficit problem.

[plaidsportcoat]

02:29 AM on 07/19/2011

We all need to compromise??
Some of us have been compromising on the down side for forty years. That's how long wages have stagnated in the USA middle classes. No, we don't all need to compromise.

[Patriot86]

11:53 AM on 07/19/2011

The debt ceiling needs to go...it has the potential to blow up the economy when irresponsible politicians are in office as the Republicans are now...get rid of it.

[counterpart76]

05:55 PM on 07/18/2011

This is the same agency who gave triple A rating to Enron ad Goldman Sachs right before they collapsed, they do not have a good track record of being right.

[plaidsportcoat]

02:30 AM on 07/19/2011

They have a great track record of being wrong.

[IE Steven]

05:10 PM on 07/18/2011

This is a question, not a statement of fact....When you hear claims from Republicans that the President exceeded Bush's spending several times over, does that include the fact that the wars were off budget until Obama added them back in 2009?

[Hopeforu]

09:06 PM on 07/18/2011

No, Bush nor any of his predecessors included wars. The repubs keep saying that without explanation just for the heck of it to make him look bad. Bush is still to blame for entering into these without a plan and he's made this administration continue to spend on these fronts!

[Bonnie Parmenter]

05:06 PM on 07/18/2011

To increase Debt Ceiling is insanity. Our govnernment can't have an unlimited Credit Card. Look what happend to the private sector of American living on credit cards. Americans in government and the private sector need to live on a budget. America has already lost its credit rating as far as the world is concerned. Making rational decisions like a balanced budget will increase world confidence in America.

[brievolz84]

11:40 PM on 07/18/2011

Yet, Republicans refuse to raise taxes to generate money to pay off these debts. Here are a few more ideas, get out of the two wars we're still in, cut funding for MIC (Military Industrial Complex), raise taxes for all people, get ride of the tax loopholes, stop allowing tax credits to companies that make multimillion dollar profits...,etc!

Both parties are at fault but we need to raise the ceiling for the time being so we can keep our Government functioning.

[plaidsportcoat]

02:31 AM on 07/19/2011

a country's credit is nothing like an individuals credit. it makes it easier to understand if you look at it that way - only, it's completely wrong and not comparable at all.

[econ1]

04:54 PM on 07/18/2011

The debt ceiling is great political theatre. It has at least pointed out that we are borrowing a lot to support the spending binge. But, trying to work out a rational approach to the problem in a couple months is very unlikely to produce anything positive, so I agree...we have never not raised the ceiling, and we will raise it again... just eliminate it.

[TEPK]

04:14 PM on 07/18/2011

Definitely! ELIMINATE the "debt ceiling"! And ... I don't give a damn about the bondholders! One less issue for the hypocritical GOP to act like middle-schoolers on would be an improvement!

In my opinion, the disrespect for our government and the presidency that supposed GOP "leaders" have evidenced in this debt-ceiling debacle is anti-American and seditious!

[nopilikia]

04:13 PM on 07/18/2011

Should be eliminated....as to raising current ceiling.......one page...one sentence....way it's been done in the past.

[Jaya Santhan]

04:12 PM on 07/18/2011

Eliminating the debt ceiling altogether might pose a higher risk in reckless spending without checks and balances. The debt ceiling can be raised in a controlled manner if there is a possibility of the U.S economy benefiting in a positive way. However, it has to be done with proper monitoring of the positive growth of our economy. A certain amount of debt is good for the economy because it encourages the government to invest in boosting the economy and in helping our nation becoming more self-sufficent.

[joebhed]

09:47 AM on 07/20/2011

No other monetarily-sovereign country in the world has a debt ceiling.
Why should we?
It is supra-politicization of the budgeting process.
Unnecessary.
Any fiscal repairs needed should result from compromise, not assassination.

[Lloyd Cata]

03:49 PM on 07/18/2011

http://www.huffingtonpost.com/social/Lloyd_Cata/obama-encourages-europe-aid-greece_n_873003_91872950.html

LMAO - finally the "credit-rating" morons got the memo. THIS IS THE USA; and we're "exceptional"!

[randyman99]

03:40 PM on 07/18/2011

The issue before Congress is not about whether the debt ceiling should be raised... it is about the Republicans holding the raising of the debt ceiling as a hostage to get what they want in other areas of financial law. Why didn't they make the same arguments back when the budget was being debated in February and March? because they didn't have anything to hold hostage then, and knew they couldn't get their radical programs passed without one.

The debt ceiling should be eliminated, just so Congress doesn't have that hostage to play with. Appropriations should be set as a percentage of the total budget, with that amount set by the Federal Reserve to responsibly manage fiscal policy for the country.

[KenKo]

03:34 PM on 07/18/2011

Moody's is right. The original point of the debt ceiling was to encourage and foster discussions within Congress and the White House to manage expenditures but if this is not happening in any productive manner, its existence is more damaging than not. Why bother having a debt ceiling? Nothing substantive has changed in terms of the political dynamics, if anything, it's even more polarized and more damaging than not having one. No one bothered asking if the US could afford the wars it has in Iraq and Afghanistan before undertaking them, rather we have the unsightly spectacle of politicians assuming Iraqi oil would pay these back. Politicans are bad financial managers.