Just like having too much debt can hurt your credit score, the same holds true for the US. And a new report released by credit rating agency Moody’s says that the US has lost its margin for error when it comes to its credit rating. Right now the US carries the highest triple-A rating. But the report said that the US’s margin for error “has in all cases substantially diminished,” due to huge amounts of debt and weak growth outlook.
While the quick answer may be for the US to cut back on public spending, Moody’s said that that could lead to a double-dip recession. And maintaining stimulus initiatives too long could lead to a quick increase in interest rates. According to Reuters, U.S. Treasury Secretary Timothy Geithner responded to the report at the US House of Representatives Appropriations Committee hearing. “What people who look at our country — credit rating agencies, investors, Americans, what they look at is whether we have the political will to restore gravity to our fiscal position,” Geithner said.
Geithner pointed to actions proposed by the Obama administration that will “dramatically” help reduce the nation’s debt over the next four or five years. According to the Moody report, interest payments on general US government debt could rise above 10% of all revenue by 2013.
Tags: credit, Finance, Moody's, government debt, Timothy Geithner, credit rating
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