As the White House yesterday announced a series of meetings with lawmakers from both parties to focus on the continued stalemate in Washington, now in its 10th day, House Republicans circulated a memo from one of the nation's top credit-rating agencies to press an argument that the risk of a U-S default is not as serious as the administration is portraying it.
In the memo, Moody's Investors Service said even if Congress fails to lift the limit on borrowing next week, the Treasury Department is likely to continue paying interest on the government's debt, thus leaving the nation's Triple-A credit rating intact.
A key reason for the claim is the memo's argument that things are actually much less serious than in 2011, when the nation last faced a pitched battle over the debt limit.
"The budget deficit was considerably larger in 2011 than it is currently," said the memo, "so the magnitude of the necessary spending cuts needed after 17 October is lower now than it was then."
Interestingly, the lower deficit happened under a president in which Republicans warned that deficits would skyrocket. And yet it hasn't. Its gone down. So is this the part of the memo that Republicans are passing around to show how totally fiscally irresponsible the President and his administration is being? Yet, Republicans refuse to sign off on the existing bill that keeps the sequestration spending levels.
Curious, though, is the caveat noted by one economist who warns that a strategy of making only interest payments would be short-lived at best.
Even if the government made its Nov. 1 payments, a $29 billion interest payment due Nov. 15 looms after it. Including that payment, Washington is likely to have a cash shortfall of $60 billion to $70 billion from Oct. 17 until Nov. 15.
Said the economist: "If they don't prioritize payments, there's no way they make that payment on time."
Who's the economist? Mark Zandi. Who does he work for? Moody's. In fact, he's the chief economist for Moody's. And yet, perhaps purposely, House Republicans touting that memo from Moody's didn't include Zandi's warning. Why do you suppose not?