With the very real possibility of a sovreign debt default in Greece, and the instability it has caused global financial markets, many have asked what it would take the USA to lose its AAA credit rating. After all, any downgrade would have devastating effects on the markets, not to mention sharply increasing the interest rate taxpayers pay on our national debt.
So, in the spirit of transparency, Moody's has released what level of national debt would cause us to lose our AAA rating:
"The key data point in Moody's view is the size of federal interest payments on the public debt as a percentage of tax revenue. For the U.S., debt service of 18%-20% of federal revenue is the outer limit of AAA-territory, Moody's managing director Pierre Cailleteau confirmed in an e-mail."
Well, that's not so bad is it? I mean I'm sure we won't hit that, will we?
Under the Obama budget, interest would top 18% of revenue in 2018 and 20% in 2020, CBO projects. But under more adverse scenarios than the CBO considered, including higher interest rates, Moody's projects that debt service could hit 22.4% of revenue by 2013.