Cutting the Federal deficit could "test social cohesion"

The investment rating agency Moody’s Investment Services issued a report today, which still gives the US its AAA rating.

That allows us to keep borrowing money from foreign lenders at relatively low rates. But Moody’s also cautioned that our reliability as a debtor has been ‘substantially diminished.’

Here’s the nervous bit. Moody’s also cautions that addressing the debt situation will be brutally hard, according to the New York Times.

“Growth alone will not resolve an increasingly complicated debt equation,” Moody’s said. “Preserving debt affordability” — the ratio of interest payments to government revenue — “at levels consistent with Aaa ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion.”

The Times article points out that countries like Greece and Portugal are already wrestling with fundamental realignments in how their private and public sectors function.