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Moody’s Rejects McConnell’s ‘Pontius Pilate Act’

By: Erick Erickson (Diary)  |  July 13th, 2011 at 06:45 PM  | 

RESIZE: AAA

Moody’s Investor Services is sending out a pretty clear rejection of Mitch McConnell‘s “Pontius Pilate Pass the Buck Act of 2011.”

Republicans and Democrats who are spinning it in favor of folding like a cheap suit and just raising the debt ceiling should pay attention.

According to Moody’s,

“the outlook assigned at that time to the government bond rating would very likely be changed to negative at the conclusion of the review unless substantial and credible agreement is achieved on a budget that includes long-term deficit reduction. To retain a stable outlook, such an agreement should include a deficit trajectory that leads to stabilization and then decline in the ratios of federal government debt to GDP and debt to revenue beginning within the next few years.”

That is directly opposite of the McConnell plan, which would let President Obama raise the debt ceiling by $2 trillion automatically over the next year.

It does, however, make a strong case for a Balanced Budget Amendment, something both Mitch McConnell and Barack Obama are rejecting. A Balanced Budget Amendment, particularly the Lee-Cornyn-Hatch BBA proposal, would require expenditures equal revenue within five years of passage.

It also, incidentally, makes the case for Paul Ryan‘s plan, which would present a clear path to a balanced budget over time, though longer than I’d like.

Oh, Mister Speaker, if you are paying attention, Cut, Cap, and Balance would meet Moody’s test too.

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COMMENTS

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  • YnotNOW

    not the debt cap. Moody’s understands that no matter what happens with the debt limit, the country must reign in the spending, and particularly the growth of entitlements, or the inability to finance will cause tax/depression/inflation etc. problems.

  • swami7774

    FWIW.

  • carolina

    He’s not going to reduce spending on his watch. He just wants to get more revenues.
    FOX just reported (as I typed this) that BO is “betting his presidency” on this. He will not ‘bend’ on the tax hikes.

  • anjinconsulting

    The country would not default if the debt ceiling were not raised unless the president refused to pay the instruments of debt.

    Even if the date of doom arrived and passed, republicans who hold a majority in the house can produce spending bills that restrict expenditures to specific programs and organizations. Let them do that and threaten to veto the bill if any pork or superfluous riders are attached and then let the democrats fight over it.

    In fact they should start by authorizing expenditures for Social Security payments just to watch Captain Zero flail like the petulant, narccissistic man-child that he is and the neophyte tyrant that he so desires to be.

    The debt limit increase vs. default argument is simply an end game to increase spending in order to at least maintain the current size of government and its projected expansion under Obamacare.

    It frustrates me to no end to hear ‘conservatives’ even argue the point instead of throwing the BS flag every time its raised.

  • mikeevergreen

    California requires a balanced budget, and it hasn’t seemed to make a difference. There are ways to get around it. Plus, it will take forever, if ever, to pass. By then, the country could be in default. It’s pie in the sky and will never happen. Be realistic!

  • Menlo

    If none of the three branches of government follow the Constitution as it is now, what on earth makes people think they would follow it if formally amended?

  • kleerstreem

    Since when do we allow a credit rating service to tell us what to do or what is acceptable?

    Second, how come Moody’s did not tell Obama his stimulus plans and ObamaCare would ruin America, especially, since they seem to think they know so much?

  • jiminga

    as Moody’s had earlier threatened to lower US bond ratings is the debt ceiling was not increased. In other words, less debt = lower rating and more debt = better rating.

    Let’s remember Moody’s is one of the rating agencies that gave all those garbage MBS’s a AAA rating, and then suffered no damage for their sloppy (or biased) work on behalf of the TBTF banks.

    Moody’s, S&P, etc. as rating agencies have proven to be irrelevant as tools of Wall Street.

  • 4suramcan

    he just want the tax hikes so businesses will not grow. No growth, no jobs. No jobs no economy. No economy, no country. His real agenda.

  • realskinny

    This is the second purely political statement released by Moody’s about the debt ceiling. They seem to be coordinating them with BO.

  • bobtx

    He was in disagreement with Coulter last night.

  • BA Cyclone

    This amendment proposal has a hard cap on spending as a percentage of GDP. It’s not just “balance the budget”.

    I am not familiar with the CA language, but the point is to include a hard cap with no exceptions (maybe only for expenses of War) and let it be.

    If they want to spend more money, they have to grow the GDP.

  • cwfoster

    In Coulter! That was NOT what I would have expected! If we allow his Nibs to jack up the debt again with no appreciable meaningful cuts, the Repulican Presidential candidates should all quit. (Who wants to be the President whose notable achievement was ticking names off of the passenger list as they got into the lifeboats?) It may have already gone too far to be saved, but if this goes through there will likely be no economy left to recover in 2012!

  • mine

    The reported comments from Moodys makes them look like misty-eyed lovers of Obama trying to put preasure of the Republicans to increase the cap. They sound utterly clueless. No comment from them on QE1, QE2, or proposed QE3. No comment on the deficit. No comment on the waste. No comment on government buyout of corporate America. Just warnings to increase the cap. Who is running Moodys these days – some simpleton, some Obama stooge, who?

  • YnotNOW

    The MSM keeps saying that Moody’s and S&P are warning of future rating downgrades “because of doubt on the debt limit negotiations.”

    This is not truly because they think the debt limit might not be raised – that was never the underlying fear. The fear is that the “grand bargain” might give up on real spending cuts as part of the agreement to raise the debt limit, therefore propelling US Debt to unsustainable levels over the next couple years. That is the warning of potential downgrades.

    If the McConnell plan, or similar capitulation, raises the debt limit without spending cuts to lower the 2012 deficit, then Moody’s and S&P will continue to warn of rating downgrades. Because it wasn’t the limit, it was the debt load.

    (note: Moody’s and S&P are perfectly fine with lowering the deficit thru tax hikes, as this reduces borrowing and risk of default by the government. The fact that these would downgrade the rest of the economy is not their problem)