The U.S. is 7 years away from a possible debt downgrade under President Obama's budget, based on Moody's standard for gauging the nation's creditworthiness.
The Congressional Budget Office's (CBO) analysis of the president's plan showed that by 2018, debt service would equal $725 billion, or 18.2% of the $4.0 trillion in projected federal revenue.
That would exceed the 18% threshold that Moody's has said would constrain policy options and would be inconsistent with a triple-A rating.
If an 18% interest-to-revenue ratio were hit due to a steady increase in debt, "the rating would certainly have to be reconsidered," Steven Hess, Moody's lead analyst for the U.S. rating, wrote in an e-mail. "But depending on an assessment of what was being done about the future level of debt, a downgrade would not be automatic."
Over the 10-year period, CBO projected that public debt would double over the coming decade to $20.8 trillion. Debt would reach 87.4% of gross domestic product at the end of fiscal 2021.
U.S. May Lose AAA Rating In 2018 - Chart & Commentary Courtesy of Investor's Business Daily
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