Where direct obligations of federal, state, and local governments enjoy investment grade ratings, it is largely because of their taxing power. Functionaries cover cash outflows mostly by exercising that unique authority.
For whatever reason, a wing of whack jobs inside the House of Representatives has caused the U.S. Government to repudiate its taxing power. Financial analysts have had no choice but to crank this into the equation. If the new metric is deemed to be of no consequence, an aberration perhaps, something that will pass after the next election, the AAA rating can stand, but events in Washington will be put on some kind of “watch” status. If these flakes truly deny our nation the flexibility of raising additional taxes to cover budget shortfalls, then Treasuries would have to be marked down to junk status, given everything else going on in Washington right now, including its total inability to control spending - ever.
Paramount there is the whack job denial that war spending put us down this path. There’s no way an analyst can throw that one into the mix and come up with the kind of financial projections that would support a gilt edge rating.
Estimates related to the latest “debt deal” cite total budget savings of $900 billion over ten years, less than our call on what the mess would eventually cost if AAA turned into AA as a result of fabricating the unnecessary crisis in the first place.
