Fitch Ratings Gives Payment Prioritization a Thumbs Down

Jeannette Neumann of the Wall Street Journal has news that might prove disappointing to advocates of payment prioritization, drawing on a conversation with David Riley, head of the sovereign-rating team at Fitch, a major credit-rating firm:

“If we have another one-minute to midnight deal, which we think is damaging to confidence and the recovery, and simply sets up another deadline for six months later, it’s not something which from our perspective would be consistent with retaining the triple-A.”

Also inconsistent with a triple-A rating, Mr. Riley said, is if lawmakers staring down the debt ceiling limit choose to make debt payments while skipping out—even temporarily—on Social Security payments or other government obligations.

“Living hand to mouth based on robbing Peter to pay Paul…that’s not what we associate with a triple-A rated government,” Mr. Riley said. A downgrade triggered by missed Social Security payments could be less severe than a rating cut following a missed bond payment, he added.

This doesn’t change the fact that a default is worse than a technical default, but it does undermine the case for payment prioritization as an attractive political alternative to raising the debt limit.

Reihan Salam — Reihan Salam is executive editor of National Review and a National Review Institute policy fellow.

Most Popular


Courage: The Greatest of Virtues

EDITOR’S NOTE: The following is Jonah Goldberg’s weekly “news”letter, the G-File. Subscribe here to get the G-File delivered to your inbox on Fridays. Dear Reader (Or Listener), As the reporter assigned the job of writing the article about all of Sidney Blumenthal’s friends and supporters told his ... Read More

My American Dream

This morning, at 8 a.m., I did something I’ve wanted to do for as long as I can remember: I became an American. I first applied for a visa in early 2011, and since then I have slowly worked my way through the system — first as a visa-holder, then as a permanent resident (green card), and, finally, as a ... Read More

The Gun-Control Debate Could Break America

Last night, the nation witnessed what looked a lot like an extended version of the famous “two minutes hate” from George Orwell’s novel 1984. During a CNN town hall on gun control, a furious crowd of Americans jeered at two conservatives, Marco Rubio and Dana Loesch, who stood in defense of the Second ... Read More