Moody's threatens U.S. debt downgrade

Moody's Investors Service warned on Thursday that "if there is no progress on increasing the statutory debt limit in coming weeks, it expects to place the U.S. government's rating under review for possible downgrade."

While the emphasis on raising the debt ceiling could aid Democrats in negotiations, Moody's also said it "would like to see substantial deficit reduction" -- a caveat some Republicans, like House Ways and Means Chairman Dave Camp, R-Mich., have already seized on in the push for significant budget cuts to come with the debt ceiling vote.

Treasury has said it would start defaulting on its obligations as soon as August 2 if the debt ceiling is not raised; "if the government misses any interest payments, that would likely trigger a downgrade of one to three notches" from the United States' AAA rating, The Wall Street Journal reports.

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