Without deficit reduction, US rating will fall
House Democrats have proposed legislation to repeal the federal debt limit. Instead, the U.S. Treasury basically would be allowed to borrow to pay bills as they became due.
The bill’s backers say the debt ceiling has no practical purpose. That may be true. But then, limits are of no use unless they are obeyed.
The debt ceiling was less than $40 billion when enacted in 1939. Now, it is about 400 times higher. Not really much of a “limit.”
Yes, the debt ceiling has been lifted repeatedly, but rarely without some deal making. And that’s what those Democratic lawmakers want to avoid.
Regardless of whether the debt ceiling is raised again, or eliminated entirely, another agency may lower the nation’s credit rating. Fitch?Ratings stated Tuesday the United States could lose its AAA credit rating if an agreement to raise the debt limit does not include a plan to deal with federal finances.
“In the absence of an agreed and credible medium-term deficit reduction plan that would be consistent with sustaining the economic recovery and restoring confidence in the long-run sustainability of U.S. public finances, the current negative outlook on the ‘AAA’ rating is likely to be resolved with a downgrade later this year even if another debt ceiling crisis is averted,” Fitch stated.
Unlimited borrowing might make the job easier for members of Congress. But unless those lawmakers get the fiscal house in order, paying interest on that debt will continue to consume an ever larger portion of annual revenues. It’s time for members of Congress to stop taking the easier way out.