U.S. on "credit watch"

[Towntalk]

Update

If forced to choose, the government would almost certainly prioritize debt payments above other obligations, because welching on bonds considered the world's safest would sink financial markets everywhere and make American the world's biggest deadbeat. And the Treasury Dept. would still have adequate cash flow to cover debt payments and remain in good standing with borrowers.

S&P said Thursday that even if lawmakers and the White House reached a short-term deal to raise the debt ceiling, it could still downgrade long-term U.S. debt if it felt "future adjustments to the debt ceiling are likely to be the subject of political maneuvering."
For China, which has the world's largest pile of foreign exchange at $3 trillion—an estimated two-thirds of it in dollars—the inability to resolve the debt-ceiling dispute, and the longer-term deficit problem, is especially worrisome.
China has long talked of diversifying, and officials have said in the past year that Beijing has bought more European debt.
"We hope the U.S. government adopts responsible policies to protect the interests of investors," said Chinese Foreign Ministry spokesman Hong Lei, whose government held at least $1.152 trillion in Treasury securities as of April, and is the U.S. government's largest creditor.

Who to Blame for the Debt Fiasco
Economics isn't the problem. Politics is. Republicans and Democrats seem unable to compromise on a mix of spending cuts and tax increases that will reduce Washington's need to borrow and get the federal budget under control. They can't even agree to raise the government's borrowing limit, which is necessary to keep the government functioning normally. If there's no action by early August, it will trigger severe spending cuts that could cause another recession if they last for more than a few days.

Social Security recipients.
The government is due to deliver $23 billion in Social Security payments on August 3, according to forecasting firm IHS Global Insight. If the government is forced to cut 40 percent of its spending, these Social Security checks may not arrive. The suddenness with which the political battle in Washington will hit the wallets of ordinary Americans is one reason many analysts assume that a true impasse over the borrowing limit will be short-lived. But it could still be damaging. Social Security recipients who depend on their checks to pay other bills could end up running behind, incurring costly late fees or damaging their own credit. And it's no guarantee that if stopped, the government's check-writing machinery will start up again without delays or snafus that hold up checks even longer.

[Rick Rowlands]

Thats not a compromise, that is a complete surrender!

[Towntalk]

Debt Talks: Dire Warnings, a Possible Compromise?

http://abcnews.go.com/Politics/wireStory?id=14068188&singlePage=true


A pox on both houses 

[Towntalk]

Standard & Poors says it could downgrade the U.S. credit rating in the next three months over the debt-ceiling impasse.

The credit rating agency said in a statement Thursday it was placing the United States' sovereign rating on "CreditWatch with negative implications."

"There is at least a one-in-two likelihood that we could lower the long-term rating on the U.S. within the next 90 days," the agency said.