In the absence of an agreed and credible medium-term deficit reduction plan that would be consistent with sustaining the economic recovery and restoring confidence in the long-run sustainability of U.S. public finances, the current Negative Outlook on the 'AAA' rating is likely to be resolved with a downgrade later this year even if another debt ceiling crisis is averted.
Fitch's warning highlights the urgency of the moment: Republicans must refuse to raise the debt ceiling without immense spending cuts and entitlement reforms.
From all appearances, President Obama wants the country to default. He has layered on so much debt, so fast, that the U.S. simply can't honor its obligations. In fact, it's questionable whether the current debt can be repaid, never mind adding in the next four years of budget-free operations.
Worse still, the administration's cascade of new regulations (like "Boiler MACT") are explicitly designed to prevent the economy from growing fast enough to help make up the difference.
The real question we should be asking is whether tough cuts now are preferential to a true default later.
It is clear that the House of Representatives should deal with an intransigent president by refusing to raise the debt ceiling without large, immediate cuts to discretionary spending combined with sensible entitlement reforms (e.g., raising the eligibility age for Social Security benefits).
It is provably better to cut now than to suffer a complete economic collapse later.
And we know that President Obama has set the country on a course for a total collapse.
That much is clear based upon the accompanying chart, which comes to us directly from the White House.
President Obama needs a collapse to occur in order to -- in his words -- "fundamentally transform" America.
So let's stop this madness now, before things get immeasurably worse.