US Aaa bond rating threatened by Obama's budget says Moody's

Bloomberg reports today that Obama's budget plans threaten the US's debt rating:

Moody’s Investors Service Inc. said the U.S. government’s Aaa bond rating will come under pressure in the future unless additional measures are taken to reduce budget deficits projected for the next decade.

MSN Money also reports today that Moody's is unimpressed with Obama's budget "freeze":

Unless further measures are taken to reduce the budget deficit further or the economy rebounds more vigorously than expected, the federal financial picture as presented in the projections for the next decade will at some point put pressure on the Aaa government bond rating. "Freezing part of discretionary spending for a three-year period beginning in the next fiscal year is a positive step from a rating perspective, says Moody's Senior Credit Officer Steven Hess. "However, the deficits projected in the budget do not stabilize debt levels in relation to GDP, and the portion of government expenditures going to pay interest on the debt shows a steady rise." [Emph. original]

Moody's managing director describes the problem with the deficit:

“The deterioration has been pretty severe,” said Pierre Cailleteau, managing director of sovereign risk at Moody’s, in a Bloomberg Television interview in London. “We expect a pretty strong policy response in the next couple of years in order to keep the debt in the Aaa range." ....

The U.S.’s debt burden will climb to 97.5 percent of gross domestic product next year from 87.4 percent, the Organization for Economic Cooperation and Development forecast in June. National debt in the U.S. climbed to $7.17 trillion in November.

The "severe" "deterioration" refers in part to the US budget deficit that has grown so rapidly since the Democrats regained control of Congress in 2007:
The practical meaning of a lowered Moody's rating is that the US government has to pay higher interest on its debt which, in turn, means that (deficit) spending has to increase to pay the interest on the debt. (If that increased spending is enough to cause Moody's to lower the rating again, then we have what liberals would call a "vicious circle.")

WELCOME Instapundit, Shout First, and Dr. Sherry Jarrell readers.

UPDATE: Treasury Secretary Geithner denies that there is a problem.

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