Moody's: Kill the Debt Limit

Credit agency urges US to be more like Chile
By Kevin Spak,  Newser Staff
Posted Jul 18, 2011 7:36 AM CDT
Updated Jul 18, 2011 7:59 AM CDT
Do we really need a debt limit?   (Shutterstock)

(Newser) – With the debt ceiling hanging over Washington like the Sword of Damocles, Moody’s offered a novel suggestion today: Why not just scrap the thing entirely? “We would reduce our assessment of event risk if the government changed its framework for managing government debt,” to prevent future showdowns over the debt limit, Moody’s analyst Steven Hess said in a new report, according to Politico.

Hess suggests the US adopt a system more like Chile’s, where "the level of deficits is constrained by a 'fiscal rule,'" so that "debt is constrained though not technically limited." The credit agency last week said it was considering lowering America's credit rating even if Congress raised the debt limit, in part because the flap has raised the possibility that the US might not raise its debt limit in the future.

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