NEW YORK (Reuters) – Moody's Investors Service said Thursday there is a very small but rising risk of a short-lived default by the United States if the country's debt limit is not increased in coming weeks.
In a statement, Moody's said it would put the Aaa U.S. credit rating on review for a possible downgrade if lawmakers in Washington do not make substantive progress in budget talks by the middle of July.
"Since the risk of continuing stalemate has grown, if progress in negotiations is not evident by the middle of July, such a rating action is likely," Moody's said.
The rating outlook is stable whereas Standard & Poor's in April revised to negative its credit outlook on the U.S. rating, citing similar concerns over political wrangling in Washington over what many consider are unsustainable levels of U.S. debt.
The heightened polarization over the debt limit has increased the chances of a short-lived default. If this situation remains unchanged in coming weeks, Moody's will place the rating under review, the firm said.
Without a debt limit increase, either on August 2 or some later date, U.S. Treasury Secretary Timothy Geithner likely would have to make decisions on which bills to pay. He could decide to delay Social Security benefit payments to retirees, withhold military pay, sell some government assets or not pay off government bond-holders.
The U.S. deficit is expected to reach $1.4 trillion this year. The debt ceiling is currently $14.3 trillion.
The ratings agency said if the debt limit is raised and default avoided, the Aaa rating will be maintained. Still, the rating outlook will depend on the outcome of the debt talks, Moody's said.
"Moody's downgrade adds pressure on Congressional leaders to work hard at reaching an agreement to increase the debt ceiling," said Kathy Lien, director of currency research at GFT Forex in New York.
If a downgrade were to occur, Moody's said it would put the U.S. credit in the Aa range.
A face-to-face meeting is a chance for Geithner to make the case that the debt-limit vote is needed to address spending that has already been incurred and that with financial markets already shaky, a failure to lift the ceiling could further unsettle investors and risk grave harm to the economy.
"I think there is some consternation in terms of how politicians are going to play out the debt ceiling between now and August 2," said Fred Dickson, chief market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.
"We're in a period of above-average volatility, and I think this will probably add to that."
(Additional reporting by Nick Olivari; Editing by James Dalgleish)
COPENHAGEN (AFP) – Two Greenpeace activists who scaled an oil rig off Greenland at the weekend to protest oil prospecting in the Arctic were arrested overnight, police and the environmental group said Thursday.
"Last night, the police decided the time was right, and we arrested the two activists," Greenland deputy police chief Morten Nielsen told AFP.
"They are being transported to (Greenland capital) Nuuk, and it will be determined whether they they will go before a judge," he added.
Greenpeace also said the two 25-year-old activists, Luke Jones of Britain and Hannah Mchardy of the United States, had been arrested after hanging in a "survival pod" beneath the 53,00-tonne "Leiv Eiriksson" platform for four days.
"Our climbers are in jail now, but this won't stop us opposing the madness of drilling for oil that we can't afford to burn and in a region where a spill would be almost impossible to clean up," Greenpeace international oil campaigner Ben Ayliffe said in a statement.
The two activists arrived by rubber dinghy early Sunday at the 53,000-tonne platform, which is due to begin drilling for oil 180 kilometres (110 miles) off the western coast of Greenland for Scottish company Cairn Energy.
Greenpeace said the position of the pod prevented the rig from drilling, but Cairn told AFP that it hadn't as drilling was not scheduled to begin.
Deputy police chief Nielsen said the operation was run by local police in Greenland, which is a semi-autonomous Danish territory, but that the Danish navy had been on sight in case rescue efforts were needed.
Shortly before midnight (0000 GMT Thursday) "a climb team operating from the rig broke into the pod," Greenpeace said, adding "Danish navy inflatable speedboats were positioned below the climbers."
Cairn meanwhile said in a statement that it was seeking a court injunction in the Netherlands against Greenpeace and the owners of its ships the MS Esperanza and the MS Arctic Sunrise.
"Cairn is requesting an order from the court requiring Greenpeace and the vessel owners to refrain from future disruption of Cairn's lawful operations offshore Greenland," said the statement.
Greenpeace's Ayliff described the company's move as "trying to us a legal hammer to shut down our campaign to kick the oil companies out of the Arctic."
COMMENTARY | The federally mandated gas taxes have become a large source of revenue for the entrenched old-school spenders on Capitol Hill. Democrats and Republicans alike use the money to pay off their cronies to repave roads that are in no need of repair and to deliver jobs for thousands of workers who never set foot on a public transportation project. It is a scheme that has gathered steam over the years and now Congress sees the possibility of this money drying up.
The introduction of more fuel-efficient vehicles and the popularity of electric vehicles, combined with the demonizing of gas hogging SUVs, will eventually lead to a decrease in the money generated from the federal gas taxes. Now the elected officials are already scheming to tax their citizens in another way that will assure they can keep their pockets full and their friends happy.
The per-mile driving tax idea dates back several years but has been advocated by U.S. Transportation Secretary Roy LaHood since he arrived on the job. LaHood first began touting the idea to tax U.S. drivers per mile in 2009 and now the idea is once again a hot topic in Washington two years later.
The plan would call for a GPS chip installed in the car much like a chip being used by car insurance companies to judge whether a driver is driving safe. The proposed bill being considered is titled the "Transportation Opportunities Act." The bill ties in the Obama Administration's pet project, high speed rail, in with a per mile tax on vehicles in the United States.
Aside from being an intrusion on personal space, these GPS devices will stand for everything wrong with the thinking of the current administration. They will attempt to ram through their high-speed rail projects, which no one is clamoring for at the moment, and the projects will fail in the long term once this administration is out of office and on their assorted book tours. They will also attempt to garner support for the tax once the election is settled in 2012. If the "Transportation Opportunity Act" is passed, the voters will be to blame in the end if they do not rise up and defeat those in support of this sham.