(Reuters) - If Moody's Investors Service strips the United States of its triple-A credit rating, a possibility the rating agency warned of on Tuesday, the ratings of three states and dozens of local governments could also be affected.
Moody's put federal officials on notice that unless they agree on a plan to tame the nation's debt load, the U.S.'s rating could be downgraded a notch to Aa1 next year.
A downgrade could negatively affect the Aaa ratings of states, cities, counties, school districts and other debt issuers that Moody's has identified as having substantial links to the U.S. government in terms of federal employment and procurement, and Medicaid, the state and federal funded healthcare program for the poor.
"If the U.S. rating is downgraded then we have to answer the question, 'which states and local governments have enough links to the U.S. government so that their ratings should not be higher,'" said Naomi Richman, a Moody's analyst.
A previous downgrade warning for the nation in 2011 triggered a review of a slew of municipal credits by Moody's, which in December finalized negative outlooks on the Aaa ratings for Maryland, New Mexico and Virginia, along with 36 local governments. The rating agency at that time noted those issuers would not likely retain their top ratings should the United States be downgraded.
But Moody's analysts said on Tuesday that downgrades would not be automatic and would instead occur on a case-by-case basis.
Most of the local governments are in Maryland and Virginia, which have large concentrations of federal workers and companies that do business with the U.S. government. Others are in Texas, Colorado, Alabama, Missouri, Indiana, Pennsylvania, Oklahoma and New Mexico.
Bob Kurtter, a Moody's analyst, said some muni ratings may be under pressure even if the United States retains its triple-A rating and slashes its budget. For example, deep federal defense spending cuts could negatively affect Maryland and Virginia, he said. On the other hand, federal officials could decide instead to drastically reduce spending on social programs, which would affect other muni credits.
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Publishers Notes: Could the school teachers pension attribute to such a dramatic downgrade?
Deficit predicted because feds 3.1 million set to expire. Then - we have the school teachers pension shift whereby it escalates dramatically from 2014 and forward.
http://www.wcboe.org/file/September42012-2207
It is not as though we did not try and warn our elected County officials about what was about to come down the 'pike'. The time has now arrived.
Look at Line Item 32 on Page B.2 in the attachment above.
DelMarVa's Premier Source for News, Opinion, Analysis, and Human Interest Contact Publisher Joe Albero at alberobutzo@wmconnect.com or 410-430-5349
7 comments:
This scenario was as predictable as tomorrows Sunrise. Why in the world some of our elected Democratic state officials thought that the pension problem would simply vanish by shifting the liability from the State's balance sheet onto each County is beyond me.
Well - you can't blame this media and particularly the Tea-partiers as they all tried to warn them about the budget and credit implications. The flim-flam bookkeeping maneuver has now gotten the major credit rating bureaus attention.
Please take a moment to read before going off on a political tirade. While I do get more "enthusiastic" through the message, I would like to engage in serious conversation on this matter. Everyone is entitled to their opinion.
The economic problems in this country started on April 5, 1933. The diversion from an international standard for the value of currency allowed the US to slowly bleed away every penny from the united states. We ran out of money LONG ago! You are seeing the true impact of the great depression today.
There were a few courses the country could take at the time. The decision was made (By executive order, mind you) to eliminate the gold standard of the currency and push the problem further away.
But wait!!! They print the money, why didn't they just let inflation take its course and turn the dollar into a peso? That negotiating point, salary, allows politicians to pocket unions and all of the people demanding handouts. No one wants to make half what they did before!
Here is a real simple scenario for everyone to think about;
People are demanding financial support from their government, the government has no money to give, they run the debt up(which is really just a gradual devaluation of the currency). The government gives the people what they want, by printing money with no backing and they push the problem further into the future.
Food products lag behind in the inflation of cost as they are produced here, imported items like consumer electronics begin to rise in price. The citizen does not realize the price increase in the electronics because the manufactures source cheaper labor and substitute quantity for quality in order to maintain production volume and control of the market.
Over a few years the cost begins to rise on the domestic products as things like fuel, insurance, regulation, taxes, and labor begin to drive up the production cost of even the food people eat.
Can anybody show that this is not happening? What is happening??? In the end it is a tax... The adjusting of the exchange rate of the US currency and the burden it places on each American is taking money from each citizens pocket in order to fulfill the demands on the government.
Put it this way;
You make $1.00 and $0.26 goes to the federal government, leaving you with $0.74.
The government devalues the currency so that $1.00 is only worth $0.84 by increasing the debt(printing money).
That $1.00 earned is actually only worth $0.58. The government has consumed $0.42 of the $1.00. It does not matter to the people though as the tax rate did not go up. Every penny increase in the national debt, devalues the dollar.
Oh wait, did I mention that people are taxed by the states as well? don't forget the taxes levied on goods like fuel.
The biggest impact on our day to day lives is the value of our currency. This economic crisis is easy to blame on a political party, or some bank, but in the end it is the greed of our own people that is driving it. It is even more scary when you realize that this is self perpetuating.
Even scarier, is the point that you can't disprove what I have said. A step beyond that is the point that WE ARE NOT FINISHED DESTROYING OURSELVES!
To 10:13
That is what is happening right now in Chicago with the Teachers union demanding a 30% pay raise over the next two years. The Chicago school teachers already are the highest paid in the US where the average is $74,000 per year.
You are witnessing self destruction of nation from within right now. You could say this is a LIVE FEED.
when y'all is done identifying the problems, how about identifying some solutions to go with it.
I knew this was going to happen. Pollitt and Strausberg said that the budget would not be affected as the teachers pensions were to be paid by the BOE.
Now that the 'chickens have come home to roost' we see that the BOE now claims that they are short the amount of the teachers pensions or $2.173 million dollars.
Bernie Madoff could not have pulled off a better caper.
To 8:02
SOLUTION - Institute Charter Schools ASAP. And while we are at it - give the parents a choice by offering a voucher so that they can apply it to the Charter/Private schools.
That is why I keep coming back to SBYnews - they tell it like it is.
They just tell the real facts like it is and that is the way the Free Press is suppose to operate.
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