Ratings agency Moody’s on Thursday warned it would consider cutting the US’ coveted top-notch credit rating if the White House and Congress do not make progress by the middle of next month in talks to raise the US debt limit.
US Treasury Secretary Timothy Geithner, seeking to convince Congress to increase his borrowing authority and prevent a government default, went to Capitol Hill to press his case in a 45-minute meeting with first-term lawmakers.
“I am confident that two things are going to happen this summer,” Geithner told reporters after the meeting. “One is that we are going to avoid a default crisis and we are going to reach agreement on a long-term fiscal plan.”
The meeting occurred just hours after Moody’s Investors warned that slow-moving deficit talks led by US Vice President Joe Biden, hindered by entrenched positions on both sides, had increased the odds of a short-lived default by Washington.
Moody’s warning increases pressure on US President Barack Obama and House of Representatives Speaker John Boehner, the top Republican in the US Congress, to strike a deal soon or risk upsetting global financial markets.
Geithner has predicted a financial catastrophe if Congress fails to increase the current US$14.3 trillion borrowing cap by Aug. 2, when his department will exhaust the extraordinary cash management measures it has been using since reaching the debt limit on May 16.
Geithner said he had a “good meeting” with the first-term lawmakers, but some of the skeptical Republicans, who oppose increasing the debt limit without implementing deep spending cuts, were less pleased.
“It is frustrating when the secretary talks in circles and that is very unfortunate,” Representative Stephen Lee Fincher said. “We are all big boys and girls. We need a framework put forward and we are not seeing that out of this administration, only seeing talk, talk and talk.”
Saying the risk of “continuing stalemate” between the two sides had grown, Moody’s urged progress on deficit reduction soon before politics takes over in the run-up to the presidential election in November next year.