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Political Economy
Posted at 09:16 AM ET, 07/18/2011

Eliminate the debt ceiling, Moody’s suggests

As discussions over the debt ceiling heat up, Moody’s has put forth its own proposal to solve the problem: The government should consider getting rid of the limit altogether.

Reuters reported that firm analyst Steven Hess put forth the idea in a new report, following the agency’s warnings that it will downgrade the country’s AAA rating if the government misses its payments.

Current animosity over raising the debt ceiling “creates a high level of uncertainty” and an increased risk of default, Hess wrote, though in the past the debt ceiling has been raised with little controversy.

Without a limit dependent on congressional approval, the report said, the agency would worry less about the government’s ability to meet its debt obligations.

The report said the Moody’s suggested looking to Chile for an example of a way to limit debt. Chile uses a “fiscal rule” to keep debt in check.

Last October, Federal Reserve Chairman Ben Bernanke also suggested the United States examine fiscal rules to rein in the deficit, The Washington Post reported.

By  |  09:16 AM ET, 07/18/2011

Tags:  budget and fiscal policy

 
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