S&P, Moody's Will Lower U.S. Credit Rating Over Debt Limit

By Kenneth R. Bazinet

Standard & Poors would downgrade the AAA U.S. credit rating to a failing grade  if Congress and the White House do not break an impasse and reach a deal on raising the federal debt ceiling in the next month.

“If the U.S. government misses a payment, it goes to D,” John Chambers, chairman of S & P’s sovereign rating committee, told Reuters. “That would happen right after August 4, when the bills mature, because they don’t have a grace period.”

Rival credit-rating service Moody’s said it will also lower its credit rating if the U.S. fails to raise its debt limit.

“We believe the debt ceiling will be raised and the government won’t default,” Chambers told Bloomberg. “Otherwise we wouldn’t have a AAA rating on the U.S. government. It’s evolving as we expected.”

The warning from the Wall Street credit watchdogs came as President Obama said he wants a balanced set of budget cuts and corporate tax loopholes eliminated as part of the package aimed at beginning to reduce the $14.3 billion federal debt.

GOP House Speaker John Boehner quickly indicated he intends to protect the corporate tax breaks, even though the White House only intends to target hugely profitable industries that it says can afford  to end the tax boondoggle.

Globally, the austerity movement moves to Britain,  which faces a strike today over cuts to public pension plans. Workers of the world unite! “Remember when teachers, nurses, doctors & lollipop ladies crashed the stock market, wiped out banks, took billions in bonuses and paid no tax? Me neither. Support the strikes against the government,” Tweeted British shop owner Bristol Green.

Greece, meanwhile, is quiet today after two days of violent clashes between protesters and police in Athens. Tear-gas clouds appear to have given way to clear skies after the Greek parliament approved a five-year package that will prevent Greece from defaulting on a loan payment next week to the International Monetary Fund and EU.

Greek authorities are cautious, however, since a plan on how to implement the $40 billion austerity program is expected to be approved in parliament today.

Read more from Kenneth R. Bazinet at The Baz File