According to Reuters, a majority of economists now think that U.S. credit will be downgraded.
The debt ceiling plans being proposed likely will not avoid a debt downgrade.
Indeed, as Zero Hedge notes, the cuts being proposed in the debt ceiling proposals would be offset by the costs of the downgrade:
The US downgrade alone, now virtually taken for granted by everyone, will offset any beneficial impact from any deficit reduction that will have to happen for the debt ceiling to be increased.
Indeed, many are starting to say that a downgrade is inevitable.
In truth and in fact, we could still avoid a downgrade … but only if we immediately:
(1) End the imperial wars, which reduce – rather than strengthen – national security (and see this and this);
(2) End the never-ending bailouts for Wall Street;
(3) Prosecute fraud and claw back ill-gotten gains;
(4) End the Bush tax cuts, which Ronald Reagan’s budget director David Stockman said were the worst fiscal mistake in history; and
(5) Slash pensions for public employees, at least when they are pegged to an artificially “spiked” final year’s salary.
The talking heads will say that these actions are not politically feasible.
However, as I’ve previously noted, that phrase is just code for:
The powers-that-be don’t want it, even if the people overwhelmingly and passionately support it.