If Congress fails to raise the credit limit, S&P says they will immediately drop the US bond rating from AAA to D, the lowest possible rating.
http://m.cnbc.com/id/43596789
Moody’s says they would drop the rating to Aa.
Not raising the debt ceiling does not mean the US will default (unless Tim Geithner wants to). It might mean suspending payments to suppliers, not making payments into government pension funds, selling off government assets, and probably a dozen different accounting tricks. It would cause problems, but the highest priority thing the US Treasury would pay is interest on the debt.
I say go ahead and call the S&P bluff… and along with it, their credibility.
This is hardball time. Seriously. This is the 1933 moment…. President Hi…. Obama says he isn’t going to talk to the Republicans. A strong [non-crying] Republican needs to say something like [If the President doesn’t meet with us by the weekend, we will demand that he prepare a plan for how to deal with the emergency he is about to create.