Moody's Calls Out Obama's "We're Going to Default" Fear Mongering

Katie Pavlich | October 10, 2013 2:00 PM

Late Thursday morning, House Republicans offered President Obama a debt ceiling increase in return for a conference on the budget. President Obama has been saying for a week that the United States could default on its debt and that Republicans in the House want it to happen (they don't). It turns out, not only was Barack Obama wrong and reckless in bringing up default, but it isn't going to happen according to the major credit rating agency Moody's.

One of the nation’s top credit-rating agencies says that the U.S. Treasury Department is likely to continue paying interest on the government’s debt even if Congress fails to lift the limit on borrowing next week, preserving the nation’s sterling AAA credit rating.

In a memo being circulated on Capitol Hill Wednesday, Moody’s Investors Service offers “answers to frequently asked questions” about the government shutdown, now in its second week, and the federal debt limit. President Obama has said that, unless Congress acts to raise the $16.7 trillion limit by next Thursday, the nation will be at risk of default.

Not so, Moody’s says in the memo dated Oct. 7.

” We believe the government would continue to pay interest and principal on its debt even in the event that the debt limit is not raised, leaving its creditworthiness intact,” the memo says. “The debt limit restricts government expenditures to the amount of its incoming revenues; it does not prohibit the government from servicing its debt. There is no direct connection between the debt limit (actually the exhaustion of the Treasury’s extraordinary measures to raise funds) and a default.