The Corner

This Is Why Debt and the Size of Deficit Matter

According to the Wall Street Journal, Moody’s Investors announced that it may very well downgrade the U.S.’s credit ratings in the future if it doesn’t get its act together.

Moody’s said the U.S. and Great Britain may test the boundaries of their triple-A sovereign ratings due to deteriorating public finances, although Moody’s said it doesn’t see an immediate threat to the ratings of any of the 17 nations for which it has a triple-A rating.

What does it mean? Basically, it means the same things as when your credit score goes down. Borrowing is harder and people are less likely to trust you, with all the consequences that lack of trust can bring about.

In fact, if you want to have an idea of what happens to countries that see their credit ratings go down, follow what happens to Greece in the next few months.

Fitch Ratings downgraded its credit rating on Greece to triple-B-minus from single-A-minus, highlighting “concerns over the medium-term outlook for public finances given the weak credibility of fiscal institutions and the policy framework in Greece.”

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

Most Popular

Trump: Yes

Editor’s Note: The following is one of three essays, each from a different perspective, in the latest edition of National Review on the question of whether to vote for President Trump. The views below reflect those of the individual author, not of the NR editorial board as a whole. The other two essays can be ... Read More

Trump: Yes

Editor’s Note: The following is one of three essays, each from a different perspective, in the latest edition of National Review on the question of whether to vote for President Trump. The views below reflect those of the individual author, not of the NR editorial board as a whole. The other two essays can be ... Read More