Counties In Eric Cantor's District May Lose AAA Credit Rating Because Of Debt Ceiling Stalemate
WASHINGTON -- Moody's Investors Service is warning 162 local governments that they risk a downgrade of their AAA credit rating because of the federal government's inability to come to an agreement on a plan to raise the debt ceiling.
The affected local governments are most heavily concentrated in Virginia and Massachusetts. One of the counties, Hanover, falls squarely in House Majority Leader Eric Cantor's (R-Va.) district. Parts of two more counties, Chesterfield and Henrico, are in his district as well.
"The ratings of these local governments, particularly those with a high economic dependence on federal activity, would be vulnerable to a downgrade of the U.S. government," said Moody's Senior Vice President Matt Jones.
Cantor's office said that the warning was a further indication of the need for substantial budget cuts.
"Moody's announcement further demonstrates why it is so important to take serious steps to cut spending and get our fiscal house in order," said Cantor spokesperson Laena Fallon. "House Republicans have said all along that we want to achieve spending cuts that exceed the debt limit increase and put in place binding budget reforms to change the way Washington spends taxpayer dollars. No one wants to default on our debt, and with so many people still out of work we have to focus on getting the economy going again."
Last week, Moody's said that five states -- Maryland, New Mexico, South Carolina, Tennessee and Virginia -- risked downgrades in their credit ratings if Congress and the president were unable to work out a debt ceiling deal. The states were put at risk because of their high percentages of federal employment and levels of state expenditures devoted to Medicaid.
The federal government has also been put on notice by Moody's, "given the rising possibility that the statutory debt limit will not be raised on a timely basis, leading to a default on US Treasury debt obligations."
Virginia Gov. Bob McDonnell (R-Va.) recently sent a letter to President Obama and the state's congressional delegation, imploring them reach a compromise and raise the debt limit, giving an indication of the wrath that federal lawmakers may face from the public back home if Aug. 2 comes and goes without an agreement.
Another county at risk is New Castle County in Delaware, where Sen. Chris Coons (D-Del.) previously served as county executive.
In a statement, he placed the blame for the stalemate on "Tea Party Republicans."
"It's disheartening to think that years of extremely difficult work at New Castle County maintaining our AAA bond rating could be tossed aside by weeks of reckless stubbornness by Tea Party Republicans. While we have record annual deficits and a dangerous national debt that need to be urgently addressed, defaulting on America's mortgage is not the way to do it," he said.
"The announcement from Moody's today affects municipalities in 31 states, including those of the very Tea Party Republicans who are insisting on steering our nation's economy off this cliff. I hope that this sobering news will instead help steer them instead to a responsible compromise."