July 29, 2011
Investors to Obama and Congress: Raise the Debt Ceiling
by Robert Kropp
A group of asset managers and owners warn that inaction could lead to a downgrading of US debt and
threaten the savings of pension plan beneficiaries.
Warning that "our nationís economic future is in doubt, and so is America's financial leadership in
the world," a group of asset managers and owners, including a number of public pension funds, sent
a letter to President Obama and members of Congress this week, urging
them to raise the nation's debt ceiling immediately.
However, the letter stated,
"Addressing the current federal debt ceiling crisis, by itself, will not fix the entire problem."
The letter went on to argue, "Without a credible action plan to reduce the budget deficit, the US
debt will likely be downgraded by one or more rating agencies."
The ongoing impasse on
Capitol Hill over raising the debt ceiling has come to focus, not upon spending reductionsóboth
parties agree that reducing the budget deficit is inevitableóbut upon increases in revenue.
Conservative Republicans in the House have thus far rejected any plan that, in their view,
increases taxes. This morning, as news of another slowdown of the US economy led to revisions of
the severity of the recession, President Obama called on House Republicans to abandon a plan that
"does not solve the problem."
Many economists argue that a significant contraction of
government spending in a time of slow growth and high unemployment could plunge the nation back
The investors' letter to the President makes no mention of the imbroglio
over increasing revenues, but stated, "The idea of America's losing its AAA rating was once
unthinkable, but now highly likely if our leaders fail to act."
"If we are no longer among
the highest rated government borrowers, investors will increasingly seek other currencies to store
their wealth," the letter continued. "The decline in the value of the dollar will intensify
inflation risk in the future, which will further erode our standard of living."
custodians of Americans' savings, we urge Congress and the Administration to reduce the deficit
substantially," the letter added.
Signatories to the letter include the Florida State
Board of Administration and the Public Employees' Retirement System of Mississippi. BlackRock, an
investment manager that is a signatory to the United Nations' Principles for Responsible Investment (PRI), also signed the