Almost no chance Obama budget adopted: Moody's

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" Almost no chance " Obama budget adopted: Moody's

By Walter marte | Reuters – 1 hour 17 minutes ago

NEW YORK (Reuters) - President Barack Obama's budget proposal would be

" marginally positive " for U.S. credit ratings in the short term, but there is

" almost no chance " Congress will pass the plan as it was presented, Moody's

Investors Service said on Monday.

In the longer run, the budget proposal fails to address key structural issues

such as entitlement programs, Moody's senior analyst Hess said in a

report. Some of the plan's projections also are questionable, he added.

" These uncertainties, combined with the continued, elevated levels of debt,

indicate that additional measures would be required to improve the government's

finances and debt position over the long term, " Hess said in the report.

Moody's, which has recently warned about the rising likelihood of a negative

outlook on the U.S. triple-A rating, noted that the estimated budget deficit of

10.9 percent of GDP for this year represents the largest shortfall since the

World War II, resulting from the extension of the tax cuts introduced by former

President W. Bush.

It is still an open question, however, whether or not the government will raise

taxes for high-income earners after 2012, when the tax cuts expire, Moody's

said.

The agency also raises questions about some of the projections included in the

current budget proposal, in particular for non-security discretionary spending,

which is forecast to be 11 percent lower in nominal terms by 2021.

" Such an extended period of no-growth in nominal spending would be

unprecedented, " Hess said. " The feasibility of such a large, prolonged declined

in discretionary spending is highly questionable. "

(Editing by Theodore d'Afflisio)

....

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The deficit is probably higher than this because the budget doesn't include full coverage of debt servicing costs.

But it doesn't matter much if a budget passes or not. They Congress didn't pass one last year either so there really is no telling how much money was spent. If the US loses its AAA rating, then the cost of our debt will increase greatly. That cost will then eat up a large part of the budget. Add in problems like rising gas prices and actual scarcity which will drive up costs, all the new taxes and regulation, the economy is in more trouble that most realize.

In a message dated 2/21/2011 1:34:23 P.M. Eastern Standard Time, no_reply writes:

In the longer run, the budget proposal fails to address key structural issues such as entitlement programs, Moody's senior analyst Hess said in a report. Some of the plan's projections also are questionable, he added."These uncertainties, combined with the continued, elevated levels of debt, indicate that additional measures would be required to improve the government's finances and debt position over the long term," Hess said in the report.Moody's, which has recently warned about the rising likelihood of a negative outlook on the U.S. triple-A rating, noted that the estimated budget deficit of 10.9 percent of GDP for this year represents the largest shortfall since the World War II, resulting from the extension of the tax cuts introduced by former President W. Bush.