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Effect of Debt Limit/Debate on Credit Rating of US - Research Paper Example

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This essay talks that in Washington, the Government’s debt limit has been the focus of heated debate. This has been the case because Economists and Politicians argue that in order to be in a position to avoid economic disaster, the debt limit must be raised…
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Effect of Debt Limit/Debate on Credit Rating of US
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Download file to see previous pages This report discusses debt limit or debt ceiling which can be defined as the legal limit on the total amount of gross debt that can be issued by the Federal government. In U.S. the debt limit has been raised seventy four times since 1962, which includes ten increases during the last decade. According to Pew Fiscal analysis Initiative’s ‘Fiscal facts: The U.S. Debt Limit’, the treasury reached the current limit of about $14.3 trillion in May. Since then, the government has taken measures to avoid more borrowings. According to the treasury, if the debt limit is not raised, Federal salaries, Social security checks or aids to state might be held back in order for the bondholders to be paid back. The government would still be in default if it was not possible to meet other financial obligations.
This paper declares that the failure to link fiscal policies decisions to changes in the debt limit can be cited as a weakness in the process. Credit rating agencies when assigning a credit rating to sovereign nation’s debt considers a number of factors including the national economy strength, government debt overall level, monetary policies and budgetary framework. The debt limit has not compromised the US AAA credit rating but the credit rating agencies have raised concern about segregating the vote for increasing spending and revenue decreases that raises debt from the vote for additional borrowing. ...Download file to see next pages Read More
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