Negative' Rating for U.S. Debt Sends Jolt Through Capitol Hill Debate on Debt Ceiling
The United States' latest fiscal standoff -- an intensifying impasse over whether to raise the federal debt ceiling -- got a sudden jolt Monday when a top credit rating service expressed pessimism at D.C.'s political will to solve the debt crisis.
It remained unclear whether Standard & Poor's decision to change its outlook on U.S. fiscal health over the next two years from "stable" to "negative" would prompt the White House and Congress to agree on a debt fix. But it certainly prompted both sides to affirm they are serious about the issue.
“Serious reforms are needed to ensure America’s fiscal health," House Majority Leader Eric Cantor said in a written statement, calling S&P's announcement " a wake-up call to those in Washington asking Congress to blindly increase the debt limit."
Republicans have called for attaching spending reductions to any increase in the debt limit, which nearly has been reached at over $14 trillion, but the White House has warned that failing to increase the limit in the coming months could be ruinous for federal finances and the economy as a whole, because the nation's creditors may lose confidence in the United States' ability to pay its debts.
S&P's announcement sent stocks tumbling Monday, but White House Press Secretary Jay Carney downplayed it, saying the political process will outperform the agency's expectations.
The Obama administration also acknowledged that there is increasing agreement on the scope of the problem.
"Both political parties now agree that it is time to begin bringing down deficits as a share of GDP," Mary Miller, assistant secretary for financial markets at the Treasury Department, said in a written statement. "We believe S&P's negative outlook underestimates the ability of America's leaders to come together to address the difficult fiscal challenges facing the nation."
Not everyone is convinced that raising the debt ceiling is necessary, even with strings attached.
"I wouldn't raise the debt ceiling. I never vote for the spending, so I'd hardly want to accommodate the big spenders," Rep. Ron Paul, R-Texas, told Fox News. "We should be, you know, live within our means. And you'd be forced to do it that way.
"And of course ... you'll hear the fear mongers. They've already started, 'The end of the world is coming.'"
Republican Sen. Jim DeMint even threatened Monday to block a vote in Congress on raising the debt ceiling unless he wins a balanced-budget amendment to the Constitution.
The filibuster threat comes a day after Treasury Secretary Tim Geithner suggested Republican leaders had offered private assurances to the White House that they ultimately would vote to raise the $14.3 trillion ceiling, regardless of whether a deal is reached on long-term spending cuts.
"The issue here is the debt ceiling has to be raised," Carney said Monday, and it cannot be held hostage to a process that is very complicated and difficult," he said. "We hope we will reach an agreement on deficit reduction -- a bipartisan agreement on deficit reduction within the time frame. We believe that's possible."
Sen. Tom Coburn, R-Okla., told Fox News on Sunday that Republicans need commitments to significant cuts before a higher debt ceiling can be passed, and he took the S&P's announcement Monday as a "warning" of "the dangers of waiting for the perfect political moment to tackle our debt crisis.
"It’s time for both sides to drop their partisan talking points and decide what we can do together while we still control our own destiny," Coburn said Monday. "If we refuse to negotiate within our own government, we will soon find ourselves negotiating with foreign governments and the international financial community on terms far less favorable than we enjoy today."
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