![]() Treasury deciding to prioritize payments to bondholders would mean the United States is “one step closer to potential default,” Foster said. The X-date has never been crossed,” said Foster. Still, delayed payments to Social Security recipients or government employees and contractors would cause real economic pain and create vast uncertainty for families, business leaders and investors. Thankfully, there is a bit of time before the next interest payment is due on US debt on June 15. If any other payment is missed, that is not a default by our definition,” said Foster. “Our definition of default is missed interest or payments on principal. Yet Foster made clear that delayed payments on things like Social Security checks or government salaries would not be considered by the credit ratings firm a default. Certain payments would be missed and others paid first,” Foster said. “If you get past the X-date and Treasury can no longer pay all of its obligations, Treasury will need to prioritize payments in some way. However, given the tight timetable between now and the June 1 deadline set by the Treasury Department, Moody’s isn’t ruling out the idea that the federal government could be forced to delay payments on other items beyond payments to bondholders. “First of all, I don’t think there will be a default,” McCarthy told reporters on Wednesday.ĭelaying payments won’t be deemed a default “We’re expecting the noise to be pretty loud but fundamentally the outcome to be the same.”Īsked if Republicans should be blamed if the United States defaults, House Speaker Kevin McCarthy questioned the premise. “The message is clear: Neither side intends to default,” Foster said. The Moody’s executive also reassuring comments from Republican and Democrat leaders alike about the importance of America paying its bills.
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