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Debt Ceiling: Va. Governor Urges Lawmakers To Find Common Ground

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In the final week before a deadline to reach an agreement on the country's debt ceiling, Virginia Governor Bob McDonnell called on Congress to find a way to make a deal.
Gage Skidmore (http://www.flickr.com/photos/gageskidmore/4379679497/)
In the final week before a deadline to reach an agreement on the country's debt ceiling, Virginia Governor Bob McDonnell called on Congress to find a way to make a deal.

Maryland and Virginia are among several states that rating agencies have put on a watch list -- meaning their bond ratings from agencies such as Moody's and Standard & Poors -- could be downgraded in the case of a federal default.

That's why McDonnell is desperate for federal lawmakers to reach an agreement and avoid defaulting on debt obligations -- and clearly, he favors a solution without revenue increases.

"They've overspent and over-promised for decades, and now the bills are due," McDonnell says. "The worst approach to me is giving them more money."

McDonnell says he's not advising Virginia congressmen on policy; he's simply alerting them to the dire consequences of default for the commonwealth.

And he hinted that if comes down to choosing between some revenue increases and default, he'd urge his political allies on Capitol Hill to find a way to compromise.

"Look, with a Democratic Senate and a Republican House, it may be that not everybody gets what they want and they've got to find a way to bridge the gap and get things done," McDonnell says. "But we cannot default on our obligations."

The possibility of a federal default isn't just affecting the outlook for state government. Moody's Investor Service has said that all AAA-rated entities would be at risk of downgrade in the event of the failure to raise the debt limit. It's something Fairfax County Board of Supervisors Chair Sharon Bulova lamented in a statement Tuesday.

"For the first time since 1975, Fairfax County (as well as local and state governments across the country) is facing the possibility of losing our AAA credit rating from Moody's Investor Service, a decision that will not interfere with our ability to meet our financial obligations but is nonetheless very troubling," she said.

CLARIFICATION: Fairfax County has not received any direct communication from Moody's or any other rating agency about a possible downgrade. Moody's has indicated that it would have to take another look at all AAA rated municipalities should a federal default occur, and Fairfax falls into that category.

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