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  • Is America’s AAA Rating in Trouble?


    tripple-debt

    America’s current predicament is that it borrows money from countries or individuals to finance many of its expensive obligations, including financing the $862 billion stimulus bill as well as the wars in Iraq and Afghanistan. But what would happen if America had to pay higher interest rates on all future borrowing? This is the question that some people in the federal government have to ponder, as influential rating agencies such as Standard & Poor’s and Moody’s have both recently voiced their view that America’s AAA rating is not guaranteed or in fact even assured. The massive and growing debt obligation makes some professionals question whether this country’s rating may soon be lowered.

    A downgrade in America’s credit risk would mean paying higher interest on additional borrowing, thus making borrowing much more expensive. Just as importantly, it would signify a change in perception of quality about the American economy and by extension of the world economy.

    Moody’s softened the impact of their statement by being clear that a downgrade is not likely but just a possibility, and similarly Treasury Secretary Timothy Geithner has said that he is confident that that will not happen. The purpose of talking about this unpleasant possibility is to remind policymakers in Washington that it is important to address America’s fiscal deficit and debt. However, the fact that this possibility is being talked about and discussed should be seen as a warning, if not an ebbing sign for concern.

    Although the federal government has trillion dollars of debts to pay off and for the last couple of years America has had a budget deficit, it is difficult for Americans to imagine U.S. debt as being anything but totally risk free. Yet this just might be the reality America may one day face if politicians in Washington continue to spend with reckless abandon, seemingly funding everything in sight, and with little regard for how much money they actually have to work with.

    Aleksey Gladyshev currently is a member of the Young Leaders Program at the Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/About/Internships-Young-Leaders/The-Heritage-Foundation-Internship-Program

    Posted in Economics [slideshow_deploy]

    19 Responses to Is America’s AAA Rating in Trouble?

    1. Mark, Maine says:

      There is no question the U.S. will default, either outright or by monetizing the debt and destroying our currency. We're all playing a game of pretend right now because of the staggering impact U.S. default will have on the world. Empires come and empires go on the stage of human history. Our time is nearly finished. Long live the republic.

    2. Jon Smith says:

      Triple A credit rating for USA is jeopardized, and i don't think it is a tragedy. Will we as a nation have to pay higher interest rate for our debt? We borrow dollars and we have to pay interest on the money we borrow. But we will have to pay back in dollars! As long as there are people who accept dollars as a payment for the money and goods that they lend I think our country is capable providing them unlimited amount of green paper. If I had a printing press in my basement, APR on my mortgage of 8%, 20%, even 50% wouldn’t scare me a bit! I wouldn’t worry about my credit rating at all.

      One may tell that other countries wouldn’t want to have dollars any more. China for example is trying to get rid of them. And you know what, the more it tries, the more it have them. Let China buy Oil fields from Venezuela, or gas from Russia or iron ore from Australia, so what, dollars exchange hands, China produces more goods and exchange those goods for more dollars.

      If American credit rating really went down, and the world really didn’t want to have dollars at all, they would buy American. Let all that paper flow back to our country! Can you imagine how many jobs will be created!? The industry will flourish! It will help economy thousand times better that all those government packages to support it. Certainly inflation will be inevitable in the very beginning. Those lucky ones will pay off mortgages within couple of years. But that will be healthy process, which brings money back from .com bubbles and from those Wall Street sharks to real industry. That would bring money to middle class people who do Things and know how to do them.

    3. Myrna, Fairbanks, AK says:

      I wonder what we can do as citizens to help turn our country around and save our Republic….besides vote out this despicable Congress and the President? God help us!

    4. Bill, New York says:

      Sorry If I am about to or will insult any true Americans out here!!!!!! I will say it again I am SORRY FOR MY WORDS!!!!! But I do not care!!!!!!

      I have worked my butt off since I was 14 years old!! I have done bad things when I was a teen growing up on the streets and have gone to prison for things I did not do!!! Still I have gotten mad at the state I live in for that but never have I been mad at America!!!!!!!!!!!!!

      I am a father and like most parents want the kids to have it a bit better than I did!! My current job because of my past I put in 70 to 90 hours a week and have never asked to state or the federal government for any money or a handout!!!! I have seen lazy people milk ever social aid program for every penny they can get and have never worked a day at a job in their life!!! Is the fair????

      I too am to blame for are current national government (“because that is what they are trying to create”) you see up till two years ago I never voted!! I went to work and said it was none of my business what the crooks did in the government till things that they did started to affect me!! 2 years ago I woke up and started to look at the parties involved both are bad democrats and republicans!!! My best friend is a Black American and I am a White American and he and his wife are our boys god parents as we are their boys and little girl!!! Ed has no use for obama he said as much before that thing was elected president!!! Back then Ed said he was a black communist and today I can repeat his words!!! We grew up when these communist of the 60’s were protesting the Federal Government and the States today you do not see the TV clips news clips of the things they did they have hidden all that from the youth of today!!!

      If I could with the way they have everything rigged!!!! I as a person would ask the Chinese Government to help the American people to take back are Federal Government and put those of the national government behind bars!!!!!

      To most people it is nice to sit on their ass and get everything they need handed to them and they don’t care where the money comes from as long as they get there free handout!!!! Kids of today are like that!! Maybe we should shut this Country down!!! It would be easy to do at this point!!!! The question is are “WE THE PEOPLE” Strong Enough Willing Enough to make the Real Change that needs to be done!!!

      Stock up then just shut America DOWN ALL JOBS ALL BUSINESSES!!!! And then descend onto are State Capitals and demand that are State Governments shed this national government and go back to our United States Constitution!!!!!! What we have now is not of our Constitution!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

      I would think that just maybe Wall Street, and the Banks, Big Business, and are Rich people would stand with us to people that work at are jobs and don’t ask for that free handout We The People that work and build and make this Great Country of ours what it is!!!!!

      What this all is about is Control and power and money, money,money to get control and power control the money!!!!!!! Just shut it down no more MONEY!!!!!!! No money to take no money to GIVE NO MONEY TO BUY VOTES NO MONEY TO BRIBE!!!!!!!!

      Will this hurt the people??? Yes will we Survive??? Yes Can we rebuild???what in GODS GREAT name do you think??????

    5. Dexter60, San Franci says:

      "We’re all playing a game of pretend right now because of the staggering impact U.S. default will have on the world."

      The disaster was telegraphed more than a year ago and the haste to take over the economy was to capture as much as possible since real wealth and the means of production are vaporizing; those that were playing pretend are a minority that is now mostly in government, because they still think they can walk way with a prize.

      Trading votes for cash, when we are close to Law by Executive Order.

      Even at that it is far from over for those who toil, even if we must struggle on amongst the broken bodies of those who brought this down on us all — for them there is no place to hide unless it's under the trainwreck and nothing else for us to do but rebuild.

      Their wealth and power will be gone and/or serve as the flag for ground-zero.

      It is time the media and chattering class to learn that it will not be the poor who are hit the hardest.

      There's a long way yet to go before the social engineers match Hitler's suicide pact with the Devil. The history lesson has just begun.

      Never give up, America has been through this and worse before.

    6. VinceP1974 says:

      This is the true hockey stick of death.

    7. SB Owner Springfield says:

      The tipping point is near for not only defaulting on our debt, but Patriots refusing to stand by while Obama defaults on the constitution.

    8. Reuven Koblick says:

      It's too bad that the ratings agencies S&P and Moody's are still the conventional yardsticks used to measure credit worthiness given their performance leading up to the financial crisis of 2008. Recall that they turned triple-B bonds to triple-A because they didn't read the prospectus.

    9. Zack says:

      so bush and republicans add 5.1 trillion to public debt. plus another 2.5 trillion for both tax cuts. another 500 billion for private military contracts in the iraq war. over 8.1 trillion added to the public debt. infact bush spent more in 2008 then obama did in 2009. wow heritage, your making this too easy. every debt graph you post on this website never comes close to anything accurate. stop just making things up. seriously, stop. it's not working. use this real source…

      -treasurydirect.gov.

      ps. in order for obama to "triple" the national debt we would have to be over 30 trillion by 2019. he is very unlikely to even double the national debt. bush and reagan are the experts in that field! haha, this website makes my day!

      go ahead with the personal attacks and blah blah blah, ive heard it all before. you guys really really really need to start doing personal research and get the facts straight.

    10. Drew Page, IL says:

      So losing our AAA rating would cause the U.S. to pay higher interest rates when we borrow money. When has the cost of anything ever matter to Obama and his band of socialists?

    11. Norma from Nebraska says:

      You know, it is absolutely no secret that our financial situation in this country is dire. But instead of wondering "Is America’s AAA Rating in Trouble?", perhaps we should be asking, "Does Anyone in Washington Care if America looses our AAA Rating?" Our elected officials either live in the basement of White House and never see the light of day getting only feeds for the President's daily speeches . . . .OR . . . . they simply don't CARE what happens to this country and once the AAA rating is gone, they can get on with implementing the rest of the socialistic programs they have on their wish list.

      Who has the CONTROL and POWER in this country to impact the debt we are incurring? It is not the poor smuck who gets up every single day, goes to work to receive even less pay than he did last year, and just tries to keep a roof over his family's head, food on the table and pay his bills. No sir, it is the "Fat Cats" who live in Washington who eat on OUR dime, who get the best medical care this country has to offer on OUR dime, who dips into petty cash for any little old thing they want on OUR dime, who get living expenses to wine and dine whomever they want on OUR dime, who fly to Copenhagen and stay at Five Star Hotels and party on OUR dime, who drive leased cars on OUR dime, and finally feel no need to listen to what the folks back home.

      So are we loosing our AAA rating? ABSOLUTELY! Does anyone in Washington care enough to CUT spending . . . . not on your life!!! It is NOT the average American citizen who is uneducated about our national debt and its consequences. It is our elected officials in Washington . . . . . who are spending OUR money!

    12. ATB2 says:

      Zack: the medical marijuana seems to have impaired your ability to count as well as read. Being a leftist I presume your impaired thinking predates your substance use/abuse. Tax cuts do not = subtraction of revenue to Treasury. Bush terms, with able assist from Congress (Controlled by Dems after 2006) added 2+ trillion to national debt. Obama has added $1.9 trillion in 1 year. His own budget projection (source of the chart) will take the public debt from $6 trillion to $14+ trillion by 2019 (true not 3X but getting closer), and this does not count the swell new health care entitlement just passed. Oh that's right, that's going to LOWER the deficit and reduce public debt. Better fire up another joint to keep that fairy tale alive.

    13. Zack says:

      continue to complain about the government and washington. i will complain about all of you in love with the free market and this "so called republic". you blame everything on the government when plenty of blame is to go around for all the lenders in the free market based housing market, the free market based healthcare system. the free market based banks, all that fell apart. you know whats interesting. less then 10% of the entire housing market share was subject to cra or any government regulation. that leaves 90% free market based lenders. the healthcare system is 90% non-competitive based on free market principles! government is not always the answer but if it wasnt for government we would be much much worse. tax cuts for the rich do nothing. deregulating the market again is a good idea how? we just did and look where it got us. pure confusion.

    14. Zack says:

      conservatives and republicans have already spent 8.1 trillion of your money! the tax cuts were for people that make 200k and over. they cost 2.5 trillion! the same policies that you stand by are the same policies that fight against you. find a very large mirror and look in it please.

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    16. Tim AZ says:

      Another article by another author that continues to lie to his or Her self and pretend that all of this spending is not intentionally designed to collapse the capitalist system. You can't fix any problem as long as you refuse to identify it's cause just because it makes you uncomfortable. In other words you refuse to believe you are being shot at until the bullet tears through your heart.

    17. JOHN G. KEPHART says:

      RECALL THEM ALL PRESIDENT,SENATE ALL NOT THE1/3 THAT WILL RUN THIS YEAR CONGRESS THEN THE WORLD WILL KNOW WE MEAN WHAT WE SAY.NO PERKS FOR CONGRESS,NO RETIREMENT.NOW HOW DO WE START

    18. JOHN says:

      TERM LIMITS 2 OR 3 TERMS AND YOUR OUT

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