http://www.nytimes.com/2011/06/01/us/politics/01fiscal.html?pagewanted=2&_r=1&hp<snip>
For Republicans and Democrats to agree this summer on such a far-reaching deficit reduction plan is a hurdle that is all the higher given how far apart the parties are. Republicans oppose any new taxes while Democrats say a balanced package must include higher revenues.
Just as the political dynamic is more precarious than in years past, so too, say some analysts, is the economic recovery. The combination “definitely makes it more dangerous” to even flirt with default, said Rick Rieder, a managing director of BlackRock, the world’s largest investment management firm.
“The practical ramifications of it are dramatic, and I truly believe this,” Mr. Rieder said. At some point short of actual default, he said, “you’re going to run down the road where the rating agencies are going to have to react, the Fed is going to have to make a set of decisions, international investors are going to have to interpret what this means, and you could functionally have a self-fulfilling prophecy in terms of the risk while not actually having a default.”
“That is such a dangerous path to go down,” he said.
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