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Sen. Toomey Calls On Administration To Rule Out Possibility Of Default

Moody’s Release Latest Wake-Up Call For Administration

Thursday, Jun 2

WASHINGTON, D.C. - Following Moody's Investors Service's release on America's credit rating today, U.S. Senator Pat Toomey (R-Pa.) called on the Obama administration to rule out the possibility of default and get serious about deficit reduction.

Moody's release highlights two discrete problems, both the fault of the Obama administration. Sen. Toomey has offered solutions to both.

The first, Moody's warns, is that the increasing prospect of a technical default on the U.S. debt could cause the credit rating agency to downgrade the U.S.' AAA credit rating. Since a technical default could only occur as a result of the administration's conscious decision, the administration has a responsibility to make it clear that it will not choose to default, including a technical default.

Sen. Toomey and his colleagues have asked the administration to rule out the possibility of default since the federal government will have more than enough money to service its debt in case the debt ceiling is not immediately raised. The federal government's tax revenue is projected to cover about 67 percent of all government expenditures, while interest on our debt amounts to only 6.5 percent of all projected expenditures. The administration will have more than enough income to honor the government's debt obligations without defaulting.

The second problem, Moody's warns, is that doing exactly as the administration asks - increasing the debt limit with no spending limitations - may also result in a downgrade in the U.S.' credit rating due to the country's unsustainable ongoing deficits.

That is why Sen. Toomey has urged the administration to cut spending and institute structural spending reforms as part of its effort to raise the debt ceiling.

"Moody's release today should serve as a wake-up call to the administration," Sen. Toomey said. "It is clear that the administration's implicit threat of default and its refusal to embrace serious spending cuts are having negative consequences on the country's economic outlook. I sincerely hope the administration will take Moody's warnings seriously and affirm that it will not choose to default on the debt of the United States of America under any circumstances."

 

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