The US government’s Aaa rating could be reviewed for a downgrade imminently if the country has not made progress on increasing its debt limit by mid-July, Moody’s warned
Are you sick of hearing about this? Me too. They will raise the debt ceiling and don't expect much in the realm of spending cuts or fixing the entitlement problem.
Think about it this way. The US GDP is 14.3 Trillion/year. Our deficit for 2011 is approx 1.6 trillion. If we balanced the budget, knowing that a 1 for 1 dollar reduction in spending does not come off of GDP, we would contract by approximately 8-10% in GDP. During the last recession, we contracted by around 4%. So if we balance the budget, we would be in a 'recession' twice as bad as in 2008.
Expect an "extend and pretend" attitude. Congress will make promises and throw a lot of ideas around but in the end they all know that right now we cannot cut spending.
Ultimately the bond market will make the decision for the US congress, and I don't expect to see much change before then.
