The next U.S. downgrade in the works?Harry Reid Would Back Obama If He Bucks GOP On Debt Ceiling.

The next U.S. downgrade in the works?Harry Reid Would Back Obama If He Bucks GOP On Debt Ceiling. (HP).Senate Majority Leader Harry Reid (D-Nev.) has privately told other Democrats, including President Obama, that if the administration used its constitutional and executive authority to continue paying its debts in the face of House Republican opposition, he would support the approach, according to a source familiar with Reid's message to the president.
The simplest escape route out of the debt ceiling impasse is for the president to direct the Treasury to find a legal way to pay its debts. The Treasury then has a variety of options. One gaining particular attention relies on a law that allows the Treasury to mint a coin of unspecified value and deposit it with the Federal Reserve. Those funds could then be used legally to pay debts.
"Reid has not dismissed any option," said the source close to Reid.
The 14th Amendment states that "the validity of the public debt of the United States, authorized by law ... shall not be questioned." Last month, White House spokesman Jay Carney told reporters that "[t]his administration does not believe that the 14th Amendment gives the president the power to ignore the debt ceiling -- period."
It would be possible, however, for that statement to be true and for the president to pay the debts by citing 14th Amendment powers. If the president went the route of the so-called "platinum coin," he could use the 14th Amendment to tell Congress that the constitution gives him no choice but to find all legal ways to honor the "validity of the public debt." The Treasury could legally mint a coin worth enough to cover debts for several years and deposit that coin with the Federal Reserve. The funds would not be used for spending that isn't authorized and appropriated by Congress, but only to pay debts. The president, therefore, would not be ignoring the debt ceiling, because there would be no new debt subject to the limit.
On Monday, Reid again raised the 14th Amendment with the president in a conversation about the deal struck between Minority Leader Mitch McConnell (R-Ky.) and Vice President Joe Biden. Reid noted that Obama would soon need to ask House Speaker John Boehner (R-Ohio) for a $2 trillion hike in the debt ceiling, and Boehner would likely demand drastic cuts. "What do you do? You already took the 14th Amendment off the table," Reid said, according to notes of the call.The president assured Reid that he simply would not negotiate over the debt ceiling. He didn't elaborate. Read the full story here.

Related: Why the next U.S. downgrade will really matter.(MW).RBC Capital Markets is calling it: the U.S. is going to lose its triple-A rating from another rating agency. And this one may matter more because it would affect how investors have to look at the government’s debt.
“In the absence of a grand bargain in the next two months, it is likely that the U.S. is downgraded,” analysts led by Tom Porcelli, RBC’s chief U.S. economist, wrote in a note Thursday.
“This downgrade is likely to have a more significant market impact than the SandP downgrade” in 2011, he said. “In particular, many investors can look towards the most common rating of an issuer, so despite the AA+ rating from S&P most issuers could still count their Treasury and agency MBS [mortgage-backed securities] exposure in their AAA bucket” because it still has that top rating from Moody’s Investors Service and Fitch Ratings.Read the full story here.