Even as House Speaker John Boehner is pressuring Republicans to toe the line for a Thursday vote on his two-step bill, the Democrat-dominated Senate vows to reject the legislation and advisers of President Barack Obama hinted they will recommend its veto.
The managing director of sovereign credit ratings at Standard & Poor’s said it is not sufficient for American politicians to hike Washington’s $14.3-trillion borrowing limit, but they must also agree on a deficit reduction package to avoid a downgrade of the U.S.' AAA credit rating.
The S&P executive said the political divide that has caused the impasse will not likely be closed in the next three, six or 12 months. The agency gave a 50 percent odds forecast that Washington’s debt rating would be downgraded within the next three months unless the country’s political leaders could craft a meaningful deficit-reduction package.
According to JPMorgan Chase, a credit rating downgrade would hike Treasury rates by 60 to 70 basis points over the medium-term, which would increase the U.S.’s borrowing costs by $100 billion yearly.