Many groups have floated ideas to end the United States’ debt ceiling debate, and the credit rating agency Moody’s recently weighed in with its own plan: simply eliminate the debt ceiling.
In a report written by Moody’s analyst Steven Hess issued Monday, the credit rating agency said the plan put forth by Senators Mitch McConnell (R-Ky.) and Harry Reid (D-Nev.) “would be a positive step in the short term,” but “(w)ithout more substantial deficit reductions being included in such a plan, it would be negative for the long-term outlook,” reported an article on CNN.com.
The McConnell/Reid plan, often touted as a “backup” measure should the debt talks fail, “would allow for three short-term increases of the debt ceiling while at the same time letting lawmakers register their disapproval. The first increase would boost the debt limit by $700 billion and the next two by $900 billion each,” the article read.
“We would reduce our assessment of event risk if the government changed its framework for managing government debt to lessen or eliminate that uncertainty,” the Moody’s report read, according to CNBC.com. Last week, the agency threatened to downgrade the United States’ AAA credit rating if the Federal government cannot pay its debts.
The Moody’s report noted that other countries do not have debt limits: “Elsewhere, the level of deficits is constrained by a ‘fiscal rule,’ which means the rise in debt is constrained though not technically limited.”
The U.S. debt ceiling “has not effectively restrained spending, Moody’s notes, and the legislative process ‘creates periodic uncertainty over the government’s ability to meet its obligations,’” the CNN.com article read.