Maybe a downgrade wouldn’t be so bad after all

A downgrade to the nation’s credit would probably increase the cost of borrowing for the federal government and for everyone else. But the Obama administration, House Republicans, some economists and Wall Street strategists have concluded that the economic impact would be surprisingly modest, one reason that negotiations over a “grand bargain” for debt reduction broke down…

“A downgrade has lots of downsides, but they’re minor in comparison to not raising the debt ceiling on time, so I think the focus is correct at this point,” said Mark Zandi, chief economist at Moody’s Analytics, a sister company to the rating agency that rates debt securities…

“The fundamental strength of the U.S. economy and widespread perception of the U.S. sovereign as a high-quality credit is likely to persist for the foreseeable future, even in a moderate downgrade scenario,” Fitch said in a note in July on the consequences of a downgrade.