Debt Talk Damage Has Already Been Done

Video

Debt doomsday looms one week away (NBC “Today,” July 26, 2011) — Will lawmakers in Washington reach a deal in time for the Aug. 2 deadline? CNBC’s Jim Cramer and NBC’s Chuck Todd talk about what the deals being proposed in Washington mean for Americans. (03:28)

By John W. Schoen

Senior producer

July 26, 2011

As Washington dithers over raising the nation’s debt ceiling, investor confidence is flowing away.

There’s a week left before the Aug. 2 deadline to raise the federal government’s borrowing authority so it can pay its bills on time to avoid a default. Bond rating agencies and the investors who rely on them are rapidly losing conviction that debt issued by a dysfunctional government is a risk-free bet that deserves a top-notch credit rating.

“The issue is not just whether Moody’s or Standard and Poor’s were to downgrade (U.S. Treasury debt), it’s whether the market decides to downgrade,” said Rochdale Securities bank analyst Richard Bove.

“If they lose faith in the Congress and the government to, in essence, create a solid security for the buyers of that security, then you get the downgrade,” he said. …

“We live in a highly interconnected international financial world that is really based upon confidence,” said financial services industry lobbyist Paul Equale. “And without confidence, both domestically and internationally — that the United States is mature enough and has a system that can handle making the big decisions — without that confidence we’re going to see things like the dollar becoming less important as the world’s reserve currency.” …

Full story

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8/6/11 Update

U.S. government loses triple-A credit rating (Reuters, CNBC, and NBC News via MSNBC.com, Aug. 5, 2011) — The United States lost its top-notch AAA credit rating from Standard & Poor’s Friday in a dramatic reversal of fortune for the world’s largest economy. S&P cut the long-term U.S. credit rating by one notch to AA-plus. The credit agency said it was making the move because the deficit reduction plan passed by Congress Tuesday did not go far enough to stabilize the country’s debt situation. … Full story

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Related reports on this site

Ronald Reagan’s Plea to Raise Debt Ceiling (July 20, 2011)

Bachmann: Freeze Veterans’ Health Care, Slash Disability Compensation
(January 29, 2011)

Defense Cuts on Tea Party Table (Jan. 23, 2011)

Bachmann: U.S. Will Soon Give Up Dollar As Currency (March 28, 2009)

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FROM THE ARCHIVES

One Year Ago — July 26, 2010

WikiLeaks: Grim View of Afghanistan War

One year ago today, I reported that a six-year archive of classified military documents released on the Internet by WikiLeaks offered an unvarnished picture of the war in Afghanistan that is in many respects more grim than the official portrayal of the war.

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Two Years Ago — July 26, 2009

North Korea Ready to Deal?

Two years ago today, on July 26, 2009, I reported that North Korea expressed an interest in holding direct talks with the United States and provided an abridged summary of my psychological profile of Kim Jong-Il, developed for the U.S. government.

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Three Years Ago — July 26, 2008

Campaign Against Michele Bachmann: Day 12

Three years ago today, on July 26, 2008 — the 12th day of my 2008 campaign against incumbent U.S. Rep. Michele Bachmann for the Republican nomination in Minnesota’s 6th Congressional District — I traveled to Minneapolis to tape an interview with Ken Avidor for The UpTake, focusing on my background, my reasons for running, and my core issues of national security, law enforcement/public safety, and border security/illegal migration.