Moody's Investors Service is threatening to downgrade America's credit rating amid rising concerns over the US debt crisis.
The ratings agency has put the US' AAA debt rating on a downgrade watch.
The US government would face a debt default if an agreement on its borrowing limit is not reached between lawmakers and the White House by August 2.
Press TV interviews Jeoffrey Hall, the chief US economist with Thomson Reuters in Boston, to discuss the issue.
Press TV: Tell us more about the significance of Moody's warning?
Hall: Well, I think it is a responsible move by the ratings agency. I mean this was a well telegraphed event and it is necessary for them in the interest of their constituents to warn of a possibility of default. I still think that the risk still remains significantly low, but ratings agencies owe it to their constituents to bring these risks to light. Again this is probably not going to pan out to a failure of the debt ceiling to be lifted, and it won't result to a debt raising downgrade, but this would be a necessary step by Moody's and likely the other rating agencies as well.
Press TV: You said that a chance of a default is very low at this point. Why would you say that considering a lot of other economists are in fact arguing that a default could occur?
Hall: Well, what could in fact occur and will occur is a high likelihood of occurring of separate things. We have been down this road before. During the Bush administration, we had several debt limiting increases. There has not been one where the stakes have been this high and the politicization has been as acute as this one. But I do believe that both parties, the president and the Congress, know what is at stake. The future of the Republic is at stake. The future of the American economy, the American livelihood is very much at stake here, and there is no room for games and gamesmanship. And come August 2 -- and I'm optimistic about this result slightly before that -- we have to get the resolution done in order to keep the rating from being downgraded and interest rates from skyrocketing.
Press TV: Right now as you are considering that this must be resolved, do you believe that the lesson from what went wrong, and what brought about this recession and this issues all together, have been learnt by either party?
Hall: Unfortunately I don't. I still think there is a lot of learning and rehabilitation that needs to be done by all branches of the US government. The president's healthcare reform is a very costly policy to implement. The Congress has been spending beyond its means for several years and is trying to continue to spend money that it doesn't have and will not be able to borrow. Keep in mind, we will exhaust a new proposed debt limit increase in just 16 months, so as we talk about incremental increases to the debt ceiling, it will already have been exhausted 6 months, at the full package, and if we are getting all these stop-gap measures that leaves markets, investors -- both domestic and foreign -- with a standoffishness, they are not going to touch the US market, because they just don't know what the debt future is.