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Credit Ratings Agency to U.S.: Cut Spending or We Cut Your Credit Rating

Jan. 15, 2013 9:55am Becket Adams

Republicans and Democrats are currently locked in a heated debate over how best to address Washington’s fiscal woes. Democrats say the path to fiscal sanity is through revenue generation while Republicans insist on cuts in government spending.

And while this ideological struggle has favored Democrats in recent years, credit ratings agency Fitch may have just incentivized both groups to address deficit reduction, threatening a credit downgrade if U.S. lawmakers fail to come up with “a plan to put public finances on a more sustainable footing.”

Get that? Fitch is saying, cut spending or we cut your credit rating.

“Fitch has long warned that a repeat of the 2011 debt ceiling crisis would result in a formal review of its AAA rating on U.S. sovereign debt. While it expects Congress to raise the debt ceiling …the nature and timing of the agreement will be critical,” CNN Money reports.

The agency threatened to review the nation’s credit rating Tuesday while addressing its concerns over an increase in the nation’s debt limit.

“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 said in a statement.

As noted yesterday on TheBlaze, both Federal Reserve Chairman Ben Bernanke and outgoing Treasury Secretary Timothy Geithner support an increase in the debt limit. However, neither has put forward a comprehensive (or realistic) plan for dealing with the U.S.’ ballooning deficits.

“The last time Congress negotiated an increase in the debt ceiling, in August 2011, the talks went down to the wire, bringing the U.S. close to the point of being unable to meet its financial commitments. Markets took fright and Standard & Poor’s cut its rating on the U.S. to AA+ from AAA,” CNN Money notes.

“Congress must also decide on the fate of spending cuts deferred under the Jan. 1 deal that averted the ‘fiscal cliff’ at the turn of the year, and renew the federal government’s spending authority, due to expire March 27,” the report adds.

However, Fitch was careful to warn that another round of slipshod, last-minute patches to the nation’s fiscal woes would only “perpetuate the uncertainty over tax and spending,” which, of course, would be the opposite of putting the U.S.’ finances on a “sustainable path in the medium term.”

“In the absence of a higher debt ceiling,” CNN Money continues, “the Treasury Department will have to start delaying payments as they fall due.”

Fitch said that any delay in payments would “equate to a squeeze twice the size of the ‘fiscal cliff’,’” as CNN Money puts it.

“Arrears on such obligations would not constitute a default event from a sovereign rating perspective, but very likely prompt a downgrade even as debt obligations continued to be met,” Fitch warns.

Follow Becket Adams (@BecketAdams) on Twitter

(H/T: @freddoso). Featured images courtesy Getty Images. This post has been updated.

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Comments (62)

katzkiner
Posted on January 15, 2013 at 12:56pm
“There’s no tellin where the money went.” Tonopah Solar in Nevada.
$ 737 million loan from DOE
Partner: Pacific Corporate Group (PCG) Executive Director Ron Pelosi
brother of Nancy’s husband.
They NEED to disarm the peasants.

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- Trigus
  Posted on January 15, 2013 at 1:42pm
  Its okay: I heard on a foreign news report that China gave Barry the Okay to raise the debt ceiling. We have China’s blessing.
  
  Report this comment
- drs1969
  Posted on January 15, 2013 at 3:36pm
  We have Ben Bernanke’s blessing. He’s the one buying the debt. It doesn’t matter if the rating goes to junk, he will still buy it w/ the value of the dollars in your pocket! Bonds can go to junk status and still yield .001%, thanks to the Counterfeiter-in-Chief Ben Bernanke.
  
  Report this comment
h20sue
Posted on January 15, 2013 at 12:43pm
Obama thinks he has an open credit card. His vacations need to start coming out of his own pocket and then we should see less spending. The president needs to start fueling his own jet and paying his own way. Just a small salary is due him as the wasteful spending needs to stop immediately. No more state dinners, no more entertainment of movie stars. And for heavens sake, we do not want him in the Whitehouse for a third term. Give us a break, please….

Chicago is well known for it’s gangsters and hoodlums. I read where someone signed a 75 year contract with a meter supply company! Who in their right mind did something this stupid? There’s one thing I can promise….”I have no desire to go to Chicago, even if I won a free trip.” Chicago will never see my family or friends as we know what comes out of there, and it isn’t good. As far as we’re concerned, Chicago and Rham Emmanual is cutting his throat and American’s. We have no desire to visit his “unfair town”.

I think Bloomberg in NY, is as deranged as the mayor of Chicago. They deserve each other. Bloomberg has no real political power, he just has $$$$$ (money) , WHICH ALLOWS HIM TO BE STUPID!
People kill, not guns, and cola kills if you consume too much, but no one is forcing either one on Bloomberg or the people who live in New York. When will they wake up and smell the coffee?

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- shorelineliz
  Posted on January 15, 2013 at 3:46pm
  New York is just as corrupt as Chicago and Bloomberg is another Rahm Emmanuel. Cut off the same cloth. Rich elitist insiders.
  
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tharpdevenport
Posted on January 15, 2013 at 12:36pm
Obama should call them up and tell them like he told Boehner: We don’t have a spending problem. I’m sure Fitch will suddenly realize that ALL of them have been wrong, and not Obama.

Surely.

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- shorelineliz
  Posted on January 15, 2013 at 3:34pm
  We don’t have a spending problem! Geez. We only spend 16 trillion while we make 14 trillion but we have lots of stuff on a credit card we are paying back at 35 percent interest and what is so wrong with that, huh, huh? Just raise our credit card limit okay? And raise the interest to 45 percent okay? I just know our Government is good for it, right? Or maybe we should sell the Grand Canyon to China, huh? Huh? Would they like to buy the Golden Gate Bridge cause I heard that was made out of real gold! Yippee! Spend, spend, spend and more spending. What is the big deal about being in debt? Wow! I just got another free credit card in the mail! Yipee! I have more money! I’m going shopping for more shoes and purses and other crap I really don’t need but how can I pass up another free credit card???? Huh???? (P.S. This post was brought to you by “Congress on Crack” and “Boozy Boozy Uncle Joe”).
  
  Report this comment
- honeydijon13
  Posted on January 15, 2013 at 6:25pm
  We have a REVENUE problem
  we can further raise taxes on the wealthy/
  ‘Sustainable footing’ doesn’t translate to cut spending
  The Blaze author made that leap for y’all.
  
  Report this comment
environmentalandawake
Posted on January 15, 2013 at 12:11pm
I found the “When you go out to dinner, you dont eat and then just up and leave” comment quite revealing…I dont know about the rest of you all, but when my card is maxed out, I just dont go to dinner, Period!

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- 00gabooga
  Posted on January 15, 2013 at 1:08pm
  Amen! People who pay attention to their credit also know if you’re dumb enough to max yourself out, opening ANOTHER account will only serve to drop your credit rating.
  
  Report this comment
- shorelineliz
  Posted on January 15, 2013 at 3:38pm
  I don’t let myself get that low. I have people come into my store all day putting a 99 cent slurpee on a credit card with 24 percent interest. That is just bad fiscal management. Control yourself and say “NO!” Personal spending of non essential items needs to stop.
  
  Report this comment
txannie
Posted on January 15, 2013 at 12:08pm
Just what is obliviot going to do now? Didn’t he just say spending cuts and balancing the budget has nothing to do with the raising the debt ceiling? He can’t afford to quit handing “entitlements” to his low-info voters so he has to find a way to creatively design a statement (lie) to keep the dimwits thinking his spending won’t finally collapse the economy and end their “entitlements” not just for them, but for all, whether they paid in or not. If you paid your taxes all your life you won’t be getting them back when you need them because they are being sucked out of the account for lazy leeches and illegals. Now you don’t even need to be looking for a job or be legal to get unemployment and/or social security benefits. Every hired hand has to pass drug testing to get and keep a job so they can pay into social security, but obliviot says it is unconstitutional and violates civil rights to require people seeking jobless benefits and social security benefits to have to submit to drug testing before recieving a benefits check and/or limiting the benefits available. I’m sick of the whiners and thier leader. Someone needs to hide my soap box before I offend someone…..

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- mewnani
  Posted on January 15, 2013 at 2:20pm
  I agree with you on how bad he is but Obummer does not deserve such an awesome monicker as “Obliviot.” Save that for a better villain if you see one.
  
  Report this comment
LukeAppling
Posted on January 15, 2013 at 11:52am
If Americas credit rating had been cut under George Bush all hell would have broken loose under Obama it is ignored so he will cause it to happen again…and again…and again until we are bankrupt and Greece loans us money.

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- shorelineliz
  Posted on January 15, 2013 at 3:48pm
  That’s cause you can’t critique an African American man who is President of the United States on his job performance or you are a “racist, hater, homophobic.” Hands off Barry okay? He is a victim!
  
  Report this comment
love the kids
Posted on January 15, 2013 at 11:51am
Why does the president insist on holding a gun to our heads over spending cuts? The Republicans want to cut spending, the President says he wants to, but will not put 1 specific out there. If it is cut, then the Dems and the president are responsible!!!

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DebateMe
Posted on January 15, 2013 at 11:50am
Two things I expect this year. An increase in interest rates and another downgrade of the U.S.’s credit worthiness. Obama, his administration, and the Senate have no plans whatsoever to reduce spending (Obama’s ‘unfreezing’ of pay raises for federal employees DURING the ‘fiscal cliff’ negotiatoins in December is all you need to know of the passionate devotion to endless federal redstribution of wealth by this president).

Our divided and anemic House cannot negotiate competently against the ruling progressives who are easily outsmarting them at every political turn. Add to that an electorate foolish enough to allow the status-quo another 4 year alotment who are effortlessly convinced that EVERY SINGLE ailment the country experiences is the automatic fault of anyone who opposses the progressive point of view.

I expect this will be the year, among perhaps several or many years, when the dollar shows the first real signs of true devaluation.

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- Walkabout
  Posted on January 15, 2013 at 2:10pm
  Debate you?
  
  “(Obama’s ‘unfreezing’ of pay raises for federal employees DURING the ‘fiscal cliff’ negotiatoins in December is all you need to know of the passionate devotion to endless federal redstribution of wealth by this president”
  
  If a person is correct & you realize it, you do not argue with them. You might get depressed, but you won’t argue with them.
  
  Report this comment
- drs1969
  Posted on January 15, 2013 at 3:46pm
  Interest rates will not go up as long as Bernanke buys the debt, regardless of ratings. Interest rates only go up with a lack of demand. Bernanke is supplying the demand by purchasing bonds thru his Primary Dealers (22). This is to prop up banks thru inflation.
  The gov. is the beneficiary of this propping, but not the target of Bernanke’s money printing, hence the reason he said the debt ceiling should be tossed out. That way he could buy trillions more to bail out the banksters.
  
  Report this comment
patriotsofworkingamerica
Posted on January 15, 2013 at 11:44am
The first American President in history to have our credit rating downgraded was Barack Hussein Obama. How can he be the one to fix it?

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- Free_Thought
  Posted on January 15, 2013 at 2:27pm
  Apparently you choose to ignore Boehner and congress’ role in that downgrading.
  
  Report this comment
- Walkabout
  Posted on January 15, 2013 at 2:52pm
  Unfree Thought
  
  Apparently you deny that people change there behaviour, when the tax code changes.
  
  So you get an F in human psychology & therefore an F in economics.
  
  Come on back when you start using your brain.
  
  Report this comment
FormerUSAF
Posted on January 15, 2013 at 11:28am
It makes no difference if they reduce our credit rating creating an increase in costs of borrowing, Obama is dead-set that he is going to borrow at all costs. He couldn’t manage a 7-ll and here he is trying to manage a country as large as ours.

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SREGN
Posted on January 15, 2013 at 11:23am
Fitch must be a racist.

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- hi
  Posted on January 15, 2013 at 12:16pm
  Lol! Exactly.
  
  Report this comment
- barber2
  Posted on January 15, 2013 at 1:44pm
  STEGN: Buy, you forgot to mention the ” ignorant , ” mouth-breathing, gun-nut conservative ” part …..
  
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IndyGuy
Posted on January 15, 2013 at 11:05am
But…But…Obama says we don’t have a spending problem…

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1FreeVoice
Posted on January 15, 2013 at 10:56am
Remember where he grew up. Tinpot dictators have more real power than the president of the united states. He is the leader of the most powerful country on earth, and he can’t even kick an irritating news station out of the pressroom? He feels that he is due far more power than he has under the constitution. He rules by decree when he can’t get congress to line up for him. he has sent up enough test balloons to know he will be allowed to get away with it.

The fluff about his birth certificate was a red herring that distracted us from the far more serious matter of where and how he was raised, and his core assumptions and beliefs. He is legally an American, but in his heart… he doesn’t even know. He is a globalist, in part, because no country holds his deepest heart.
In Africa, American blacks are regarded as offspring of people who didn’t run fast enough, and didn’t fight to the death to stay free. He is the son of an American white woman and an AFRICAN black. Do you think he regards himself as a black American, with all that implies? %^%$ ! NO.

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The_Almighty_Creestof
Posted on January 15, 2013 at 10:38am
Someone at the Blaze want to explain why I’m reading ALL about the new NY gun laws that were signed and sealed last night on my crappy email serves news partition and there is nothing on the Blaze?

7 round capacity max…1 year to sell all others before you face charges
a pistol grip by itself = assault rifle
background checks and electronic storage of data on all AMMO purchases
doctors required to report all who hint at gun violence (even upon themselves) to authorities which will result in your guns taken away
mandates a police registry of all assault rifles
pistol permit holders and assault rifles registerd must be recertified every five years
and on and on…

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- Cavallo
  Posted on January 15, 2013 at 11:02am
  The Blaze is more and more on the side of the progressive BS. It’s why we get promoted stories of basketball shots, UFOs, and cutesy XYZ stories and fewer and fewer real stories with any substance. For instance: I have yet to see a well researched story about executive orders. What are their constitutional limits, how might Bobo’s differ from GHW Bush in the early 90s concerning guns? Is it really possible to default (this year) on the debt service if we don’t borrow the money to service the debt?
  
  Report this comment
progressiveslayer
Posted on January 15, 2013 at 10:29am
It’s been a crisis a day with this community agitator fraud POS and he was playing us long before he was installed in the oval office. No budget since he was installed because it’s by design,he wants the system to collapse so he can seize absolute power. Look at the gun grabbing,we have a massacre of kids and the lifetime politicians all mug for the camera and tell us how stripping us of our rights is good for us.Make no mistake that POS wants a total collapse of the system,how else could he seize absolute power?

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- dublinthewagons
  Posted on January 15, 2013 at 10:57am
  He is not worried about the debt. The fundamental transformation. Is the same as Russia did it.
  Change governments and a name and denounce all debt of the old government.
  
  Report this comment
- ArmedAndReallyPissed
  Posted on January 15, 2013 at 11:29am
  SLAYER…….Are you ever at patriotsdonotcomply-dot-com ? If not, i think you might like it. Just curious.Later.
  
  Report this comment
- progressiveslayer
  Posted on January 15, 2013 at 1:24pm
  ARMED I’ve never seen it but I’ll check it tonight,thanks.
  
  Report this comment
SREGN
Posted on January 15, 2013 at 10:19am
Obama’s credit card chickens are coming home to roost.

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Woggie
Posted on January 15, 2013 at 10:16am
I’m confused:

Fitch say to keep from lowering our credit score, congress must make spending cuts and act responsibly.

But, Harry Reid told us last week we need to keep overspending to maintain our “full faith and credit.”

Which one should I believe? Hmmmmmmmm.

I think I’ll pick the one that deals in the real world and real finances.

P.S. Congress,I got the fix to our debt ceiling woes, OPERATE WITH A BALANCE BUDGET! problem fixed.

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- txannie
  Posted on January 15, 2013 at 12:14pm
  @woggie…you are much too smart for the country’s good. You mustn’t make the bobo look bad….just ask bobo’s advisors…anything you suggest is too radical to be implimented. Just imagine, a balanced budget and quit spending…..that’s just for us dumb folks.
  
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- drs1969
  Posted on January 15, 2013 at 3:58pm
  If Congress cuts spending, then less debt would be issued. Less issuance means that the FED would be less able to bail out the Banksters thru it’s Primary Dealers(22 of them) by buying this debt. Then they would go under and need a ‘direct taxpayer bailout’ or closure(my choice!). Hugely deflationary. This is why they continue to grow gov. at the expense of our dollar. The debt ceiling will be raised, to bail out the Banksters. Go ahead and send a Thank You letter to your Congress Critter for selling us out!
  
  Report this comment
13th Imam
Posted on January 15, 2013 at 10:15am
Theft of other people’s property is a truly animal trait. Here DEMOCRATS RULE

Soon the “Folks ” being robbed will turn and fight. It isn’t going to be pretty. I can’t wait for my puke liberal so-called friends to come for my help. The city trash will eat themselves first, then come to the country where they will meet the guns that Barry is trying to confiscate. Then we can teach them the CONSTITUTION, All over again.

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ArmedAndReallyPissed
Posted on January 15, 2013 at 10:13am
“In the absence of a higher debt ceiling,” CNN Money continues, “the Treasury Department will have to start delaying payments as they fall due.”

HAS ANYONE EVER PLAYED DOMINO’S ?

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jeffo184
Posted on January 15, 2013 at 10:13am
We need to balance our budget, and politicians will never do it unless mandated by law. Read and sign the petition: http://www.ostlerreport.com/Taxes.html

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ArmedAndReallyPissed
Posted on January 15, 2013 at 10:09am
“Credit Ratings Agency to U.S.: Cut Spending or We Cut Your Credit Rating”…………………………….
Führer Obama seen in background laughing,licking his Purple Lying Lips and saying “My plan is working perfectly.”

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- fatsomann
  Posted on January 15, 2013 at 2:47pm
  Truth.
  
  Report this comment
P4cooler
Posted on January 15, 2013 at 10:05am
The credit rating agencies are doing the right thing. I cannot wait for the fall of Obama. America will see the largest celebrations the world has ever witnessed.

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- barber2
  Posted on January 15, 2013 at 10:14am
  P4: People will celebrate. As usual the MSM will not cover it.
  
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Cavallo
Posted on January 15, 2013 at 10:05am
But according to Bobo the Wonder Marxist.. the Gay, Dog Eating Messiah, the One, Sort of a God, .. we don’t have a spending problem. How can they drop our credit rating over spending if we don’t have a spending problem? Why.. that would just be blasphemy to go against the word of the Messiah.

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kaydeebeau
Posted on January 15, 2013 at 10:04am
I don’t understand why they would downgrade the credit rating since everyone knows that there isn’t a spending problem in our govt and increasng the debt limit doesn’t lead to spending increases – didn’t the credit rating guys listen to “that guy” in his press conference yesterday? (sarcasm for those who failed rhetorical writing)

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Walkabout
Posted on January 15, 2013 at 9:57am
Obama to Fitch “____ off, I’ll spend as much as I want to spend”

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- Zipit
  Posted on January 15, 2013 at 10:06am
  I disagree Walk! (Respectively) Obama, to Fitch! “Go ahead, I love it when a plan comes together!”.
  
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- Cavallo
  Posted on January 15, 2013 at 10:09am
  He’ll do it with the help of the spineless jerkwads in the house. Time Bomb will tell you! Peace be unto the Obamessiah, may his queer desires find more fertile fields.
  
  Report this comment
- barber2
  Posted on January 15, 2013 at 10:12am
  WALK: Exactly. Get ready for the Democrat Media Character Assassination Squad to attack Fitch. The Obama Big Brother Chicago radicals do not take to opposition. ” We don’t have a spending problem” is the Obama message. Either sell it or shut up !
  
  Report this comment
- Walkabout
  Posted on January 15, 2013 at 1:58pm
  The conversation that Cora with her father in the film “Last of the Mohicans” comes to mind. Substitute Americans for colonists & another country (pick one) for France and it is not too far from the truth.
  
  We cannot ask the liberals to do anything so much as “by your leave”. they have out lives planned out to the smallest minutia. What cars we drive, if we drive, what out carbon (read economic ) footprint will be, whether we will have the right of self defense, whether we can contract with our own doctors. They get a little further involved & they will decide who goes to college & what our jobs will be. It will probably take connections in the Democrat party to go to college.
  
  Report this comment

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