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FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS APPROPRIATIONS

ACT, 1996 (Senate - November 15, 1995)

S&P Highlights Broad Implic of US Gvt Dbt Limit Debate

New York: Standard & Poor's CreditWire 11/10/95--Standard & Poor's, while maintaining its triple--`A' rating on the United States government, is increasingly concerned about the global financial market ramifications of the current U.S. budget impasse. Even a short-lived default on the U.S. government's direct debt obligations would profoundly impact a broad range of securities and financial market participants.

Even assuming a debt ceiling agreement is enacted in time to forestall default, the global capital market's unquestioned faith in the United States government's willingness to honor its financial obligations has, to some degree, been diminished by the failure of the government to act in a timely fashion. As a result, the reduced level of market certainty may require some time to overcome, well after the immediate fiscal dispute is resolved.

Standard & Poor's triple--`A' rating of the U.S. government is predicated on the dual components of the government's overwhelming capacity and unquestioned willingness to honor its debt obligations. The U.S. government's financial capacity to meet its debt obligations remains a worldwide standard based on the size and strength of the U.S. economy. However, the current budget dispute between the President and Congress has raised issues regarding the government's willingness to make timely debt service. Standard & Poor's continues to regard that fundamental willingness as consistent with the highest credit rating category, but in the midst of the current budget struggle, the threat of delayed U.S. debt service payments has become a highly charged political tactic.

While the current debate in Washington has focused substantially on the government's ability to honor its debt obligations in the absence of an agreement to raise the existing ceiling about $4.9 trillion, there are numerous, ancillary debt issues that would also be negatively affected by the failure to reach an agreement. Corollary credit ramifications of a U.S. government default would affect; corporate and municipal agency debt linked to U.S. securities, pre-refunded municipal bonds amounting to $400 billion, collateralized by U.S. obligations. A disruption of U.S. government debt payments also would have major implications for the liquidity of various financial institutions, money-market funds, and government bonds funds.

[Page: S17067]

Mr. CRAIG addressed the Chair.

The PRESIDING OFFICER. The Senator from Idaho.

Mr. CRAIG. Madam President----

The PRESIDING OFFICER. The Chair informs the Senator that the Senator from Kentucky controls the time.

Mr. CRAIG. Will the Senator from Kentucky yield me 5 minutes?

Mr. McCONNELL. I yield 5 minutes to the Senator from Idaho.

The PRESIDING OFFICER. The Senator from Kentucky.

Mr. CRAIG. Madam President, I have listened in the last several minutes to my colleague from Maryland talk about tactics that have caused certain financial interests and indicators in this country to react.

There is a clear tactic that has been played out here for the last several weeks by the Secretary of the Treasury saying that if we did not do certain things, the Government will shut down. All the while he was saying that to the American community of financial interests and to this Congress, he knew and we knew that was nothing but a tactic. And yet he went on with the scare game that has been used and is currently being used.

I suggest, if there is a sense of irresponsibility, then the Secretary of the Treasury ought to know that suggesting something that is not real, and that is financial collapse of this Government if we did not pass x pieces of legislation when he knew he had the capacity to keep our Government running and to honor its debt structure for the next several months, is in fact the worst tactic of all.

Now the White House is suggesting that they will not deal with us to achieve a 7-year balanced budget under CBO figures. `Nonstart, won't go, can't go,' says the President and his men, although the President has suggested in a variety of ways that he could accept a balanced budget in 5 years if we gave him a large tax increase. And he got the tax increase, and now it is 9 years and maybe 7 years, but he is not really sure because he does not really know.

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