It's the interest.
In the wake of the financial crisis and recession, Moody's Investors Service has brought new transparency to its sovereign ratings analysis — so much so that 2018 lights up as the year the U.S. could be in line for a downgrade if Congressional Budget Office projections hold.
The key data point in Moody's view is the size of federal interest payments on the public debt as a percentage of tax revenue. For the U.S., debt service of 18%-20% of federal revenue is the outer limit of AAA-territory, Moody's managing director Pierre Cailleteau confirmed in an e-mail.
Under the Obama budget, interest would top 18% of revenue in 2018 and 20% in 2020, CBO projects.
But under more adverse scenarios than the CBO considered, including higher interest rates, Moody's projects that debt service could hit 22.4% of revenue by 2013.
Chaos is the name of Obama's game.
2 comments:
Ah yes, Moody's, the fine folks who so thoroughly misunderstood collateralized debt obligations that they rated the WORST of assembled piles of dog poo mortgages as "investment grade" securities.
Point taken on the phenomenal debt that Washington is piling up, but citing Moody's is like citing Arthur Anderson as an authority on Enron's finances.
Also remember that it was Arthur Anderson which invented "EBITDA."
Except in their case it stood for "earnings before indictment, trial, disposition, And [imprisonment].
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