The congressional Republicans aiming to blow up the government took us past a scary new milestone Wednesday.
Moody's put the United States' triple-A credit rating on review for a possible downgrade, citing a "small but rising risk of a short-lived default."
The move comes after talks broke down between the White House and Republicans in Congress over raising the U.S. debt ceiling. One so-called Republican leader, Sen. Mitch McConnell of Kentucky, said progress was impossible with Barack Obama as president. Another, Rep. Michele Bachmann of Minnesota (pictured at right), said what we really need is not an increase in the debt ceiling but a president with a "titanium spine," whatever that means.
Earth to Republicans, anyone home? No answer. Which suggests those awaiting progress on the bloated U.S. budget and shrunken federal tax intake are engaging in wishful thinking.
Moody's certainly did not seem to be heartened. It said the review "is prompted by the possibility that the debt limit will not be raised in time to prevent a missed payment of interest or principal on outstanding bonds and notes." The rating agency said the probability of a default on interest is "low but no longer ... de minimis."
The Treasury has said the government will run out of money Aug. 2 if the $14.29 trillion debt ceiling isn't raised. That could put the U.S. in default on its obligations, a state of affairs that all sane people agree would be disastrous, raising the risk of flight from the dollar and permanently higher federal borrowing costs.
But Tea Partiers, rather than sane people, are a major force in the so-called debate in Washington right now, and there is every reason to believe that many of them would like to see the government blown up because it would make for a memorable spectacle.
"Moody's assessment is a timely reminder of the need for Congress to move quickly to avoid defaulting on the country's obligations and agree upon a substantial deficit reduction package," Treasury said. Unfortunately there is every reason to believe that warning will fall on deaf ears.
This quick quiz just in from Citigroup's Steve Wieting. What do these disasters have in common?
Three Mile Island
Indian Ocean tsunami
"These are five tragic events with one thing in common: They didn't precede U.S. or global recessions."
True enough. So while a big stock market selloff is not exactly an all-clear sign, Wieting contends the issue is uncertainty, rather than sure economic doom, and investors should proceed accordingly. Predicting a recession off this MOREColin Barr - Mar 15, 2011 5:08 PM ET
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