Politics: Credit rating of nation running $1 trillion in annual red ink strangely jeopardized
Published by: Herman Cain on Thursday January 3rd, 2013
By HERMAN CAIN - Of course, that's not the story you'll hear.
The credit rating agency Moody’s is again warning that the federal government needs to do more about improving its fiscal situation if it wants to protect its Triple-A credit rating. What’s surprising is that we’re still getting a Triple-A rating from two of the three top rating firms, while the other one, Standard and Poors, has already downgraded us to Double A Plus.
The reason this matters is that your credit rating has a lot to do with your ability to borrow money, and the interest rates you have to pay. In case you hadn’t noticed, the federal government borrows a lot of money. We’ve been getting around this problem in recent years by borrowing more and more of the money from the Federal Reserve, which keeps interest rates artificially low and downgrades the value of our currency by printing more money to paper over the true cost of the debt.
You can only do that for so long, though, and eventually one of two things happens. Either your currency collapses or you have to get serious and raise interest rates to reflect reality. That will have a quick and immediate impact on the federal budget because much of Washington’s borrowing is short-term and has to be constantly refinanced.
You will hear from the media that the possible downgrade is the fault of Republicans who might once again demand spending cuts in exchange for raising the debt ceiling. Bolshevik! Your credit rating gets in trouble when you’re carrying too much debt and have no plan for paying it back. Sound familiar? The fiscal cliff deal did nothing to address the debt problem, and we can’t expect a golden credit rating forever when we operate like that.