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Downgrade Threat: Will President Obama and the Rest of Washington Ignore the Latest Warning Shot?


Location: Washington, DC

On Tuesday, Moody's announced that it is likely to downgrade the United States' AAA credit rating should Washington fail to reduce the nation's debt-to-GDP ratio. The warning from Moody's comes 13 months after Standard and Poor's downgraded the U.S.'s long-term credit rating and comes one week after the U.S. surpassed the $16 trillion debt mark.

As early as April 2011, Congressman Tim Huelskamp of Kansas demanded that Washington focus on the threat of downgrade. The warnings of credit ratings agencies and Huelskamp were ignored, and instead, Washington passed the Budget Control Act (BCA). As a result of the terms of the BCA, the debt limit was raised, but no serious structural reforms were enacted. S&P cited the lack of structural reforms when it announced its downgrade just days after the BCA was reached.

"Here we go again," Congressman Huelskamp said. "S&P's April 2011 downgrade should have been the wake-up call Washington heeded, but it went unattended, and America's sterling credit rating was downgraded four months later. Was the actual downgrade a wake-up call? Nope. Now more than a year after S&P downgraded us, Obama is still running trillion-dollar deficits and still growing debt at an unsustainable pace. Will this latest warning shot from Moody's be the one that finally gets Washington's attention?"

"The end of 2012 presents several dangers to the nation's economy, chief among the fiscal cliff and the exhaustion of current borrowing authority -- potentially without a seeing a single cut manifest from the last debt limit extension. The time is over for Washington's typical games of 'Kick the Can' to the next generation and 'Hot Potato' of passing the buck from player to player. We need leadership from the White House to provide a solution that provides tax certainty and actually balances the budget."

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