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Moody’s: No direct connection between U.S. debt limit, default

NEW YORK, Oct. 8 — There is no direct connection between the debt limit and a default by the U.S. government, said ratings agency Moody’s Investors Services on Monday. “The U.S. government would continue to pay interest and principal on its debt even in the event that the debt limit is not raised, leaving its credit worthiness intact,” Moody’s said in a report.

The U.S. federal government has been shut down since Oct. 1, as Republicans and Democrats failed to pass government funding bills for its 2014 fiscal year… Moody’s explained that the debt limit restricts government expenditures to the amount of its incoming revenues, and it does not prohibit the government from servicing its debt.

And Oct. 17 is the next crucial deadline, the last day that the U.S. Treasury Department estimates that the federal government is certain to have enough money to pay its bills.

The U.S. government reached its statutory debt limit of 16.7 trillion U.S. dollars in May. Since then, it has been using “extraordinary measures” to raise funds and pay government expenditures. But on Oct. 17, the government will be left with only 30 billion dollars of cash on hand, whereas its daily payments can run up to 60 billion dollars.

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