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By Catholic Online (NEWS CONSORTIUM)

10/9/2013 (1 year ago)

Catholic Online (www.catholic.org)

U.S. could lose credit rating, Congress doesn't care.

Countries around the world are growing anxious as the U.S. nudges closer to a default on its debt repayments. If the deadline passes on Oct. 17 without  agreements to pay debts to foreign countries, those nations could suffer as a result.

China and Japan are especially worried about a U.S. default as they are our largest creditors.

China and Japan are especially worried about a U.S. default as they are our largest creditors.

Highlights

By Catholic Online (NEWS CONSORTIUM)

Catholic Online (www.catholic.org)

10/9/2013 (1 year ago)

Published in Business & Economics

Keywords: Debt ceiling, congress, credit, impasse, Obama


LOS ANGELES, CA (Catholic Online) - The United States is about to default on its debt on Oct. 17 without an agreement from Congress which is as divided as ever over whether and how to raise the national debt ceiling. While both Republicans and Democrats want to raise the ceiling, Republicans want to tie any raise to future reductions. Democrats led by Obama are demanding a clean bill, without any agreements and a promise to negotiate afterwards.

The Republican strategy hold the feet of the Democrats to a virtual fire, but Democrats have succeeded in blaming the Republican party for the worst of the impasse and as long as the public accepts this belief, Democrats have very little incentive to negotiate.

Meanwhile, the international community, particularly China and Japan, two of the largest foreign creditors, are imploring the U.S. to reach an agreement soon and to pay their debts on time. Late payments could prove disruptive to those economies.

International ambassadors are appealing to the Obama administration to sit down and talk to Republicans to reach a deal. On Monday, Chinese Vice Finance Minister Zhu Guangyao made comments about the crisis saying that China was "naturally concerned" and that he had been in touch with U.S. representatives over the issue.

If Congress does not approve a debt ceiling increase by October 17, scheduled payments to foreign creditors will go without their influx of American cash. This could cause foreign investors and governments to be stuck without money to finance their operations forcing disruptive changes to their plans and policies. The longer the impasse runs, the worse the impact.

Of course, the United States would lose its prime AAA credit rating as part of the failure. This would increase borrowing costs for the government and make future borrowing more expensive. Future generations would pay higher interest on a larger debt.

Unfortunately, Republicans and Democrats don't care too much about future generations and interest payments. Instead, members of Congress are greatly concerned about reelection, which is only possible if they two absurd and extreme party lines, refuse to negotiate with one another, and generate massive campaign contributions from their handlers to whom they are beholden.

The considerations of the American people do not matter. The considerations of foreign people matter even less.

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