Yes, by all means, let’s incur some more debt. Moody’s and S&P are again warning that the US credit rating is in jeopardy. If our credit rating is downgraded, that means it will cost even more to service our debt. This is insanity.
Credit rating agencies Moody’s and Standard and Poor’s (S&P) have warned that record levels of federal debt would eventually damage the government’s AAA credit rating, a move that would make further borrowing more difficult.Moody’s, in its most recent update of borrowing conditions for AAA-rated sovereign debt, said that if the United States does not take action to reform entitlements and control deficit spending, it could lose its coveted AAA rating, which denotes that U.S. debt is the safest type of investment.
“We have become increasingly clear about the fact that if there are not offsetting measures to reverse the deterioration in negative fundamentals in the U.S., the likelihood of a negative outlook over the next two years will increase,” said Sarah Carlson, senior analyst at Moody’s, as reported in the Jan. 14 The Wall Street Journal.….
How long can we keep this up?
Think of it this way, if you have a mortgage with a high interest rate, your payment is going to be higher than if you had a low rate. It’s no different for federal debt. If our rating is downgraded, the interest we pay on our debt will increase, further exacerbating the problem. The answer, of course, is to decrease spending. But our political leaders just don’t seem to understand. I read earlier that someone in the Obama administration said we can raise the debt ceiling, again, because interest rates are so low. But how long will that last? What sane person thinks we continue incurring debt at these levels and not suffer severe consequences?