Lost in all the concerns over how Moody’s and S&P will view any deal to raise the debt ceiling and whether such a deal addresses our country’s long term budget imbalances is the fact that at least three rating agencies have already downgraded U.S. government debt. One of these agencies, Weiss Ratings, treats U.S. government debt as barely better than “junk” or speculative grade.

It would be easy to dismiss these agencies as irrelevant and attempting to simply grab attention, but at least one of these agencies, Egan-Jones, has a track record of correctly predicting problems at such companies as Enron, WorldCom, Global Crossing, Bear Stearns and Lehman Brothers that the major rating agencies missed until it was too late. Egan-Jones also employs a business model of having investors pay for its services, rather than the debt issuer.

The simple truth is that the U.S. government has made more future promises than it will have the capacity to pay, under almost any circumstances. The fact that the major rating agencies downplay these long term imbalances is further testament to their entrenched monopoly status. But then when the government provides you with some regulatory protections, its only natural to assume the government will expect one to return the favor.

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