Moody’s To Downgrade US Credit Rating If Congress Doesn’t Deal With Fiscal Cliff

With all of the 2012 Presidential Election hype in the media, many often forget that the US is still dealing with a pretty nasty economic crisis. Credit rating agency Moody’s has been threatening a national downgrade since 2011, and rumor has it, they may make good on that promise much like S&P did if Congress fails to act before the end of the year.

Moody’s said today that if Congress remains in a budget stalemate, it will downgrade the US credit rating from a AAA to an AA1. Some background: If Congress fails to reach a deal by the end of the year, the Bush-era tax cuts will expire and $1.2 trillion in cuts will trigger. What will happen to the economy as a result? How about another recession? At least that’s what many economists, including those at the non-partisan Congressional Budget Office, are saying.

The current rating would only be extended beyond 2013 if a “‘fiscal cliff’ actually materialized,” Moody’s said today in the statement, obtained by Bloomberg. “Moody’s would then need evidence that the economy could rebound from the shock before it would consider returning to a stable outlook.”

Adding fuel to the fire? House Speaker John Boehner, who says he doesn’t think a deal will be made. “I’m not confident at all,” he told CNBC. “The House has done its job on both the sequester and on the looming tax hike that will cost our economy 700,000 jobs. The Senate at some point has to act. And on both of these, where’s the president, where’s the leadership?”

The issue is far deeper than the bipartisan slander we’ve been fed by the media, as well. Republicans and Democrats all know that this is an issue. Nobody wants the country to fail. They just can’t seem to figure out how to talk about it, and that keeps both the right and the left away from the negotiating table.

“The truth is that none of the top leaders or their aides are in serious negotiations,” writes Jake Sherman and Jonathan Allen at Politico. “This leaves the key players simply pointing fingers and praying that voters clarify Washington’s power structure in November in a way that favors Republican entitlement cuts or Democratic tax hikes. The winners at the ballot box will get to set the terms, the thinking goes. Until then, don’t give an inch.”

Until then, it’s all talk and little actual talking. If you’re stubbornly partisan on this issue, consider that if the economy does go over the cliff, evidence is piling up that your allies are laying on the gas just as much as your enemies are. Instead of Left versus Right, it should be the government versus the people, and hopefully November’s elections remind both parties that they answer to us in the end.

Do you think that Moody’s will downgrade the US credit rating? Are we headed over a “fiscal cliff?”