Fight Over Debt Ceiling Risks Credit Rating, Moody’s Warns

The warning, from one of the agencies whose assessments of creditworthiness help determine interest rates, amounted to a stern reminder from Wall Street to Washington that global financial markets are watching the budget battle closely and that a standoff or brinksmanship could have economic consequences.

Both sides seized on Moody’s statement to reinforce their bargaining positions, with Republicans demanding that President Obama get more serious about deep spending cuts and Democrats saying that Republicans are risking a financial crisis in pursuit of an ideological agenda.

Moody’s said a review of the credit rating was “likely” in July, given that “the risk of continuing stalemate has grown.” Its warning followed a similar one from another major ratings firm six weeks ago, and it came as the administration met Thursday with both House Republicans and Democrats in search of a deal.

The treasury secretary, Timothy F. Geithner, met on Capitol Hill with House freshmen, including Republicans who have suggested that they see little or no risk in a showdown over the debt limit. Citing the Moody’s statement, Mr. Geithner urged them to support raising it or risk an economic crisis.

“We didn’t create this mess,” one Republican told Mr. Geithner, according to a person in the room.

Independent analyses have shown than more than half of the $14.3 trillion debt is from policies enacted during the past decade when Republicans controlled both the White House and Congress, and much of the rest from lost revenues and stimulus spending and tax cuts since Mr. Obama took office at the height of the financial crisis and recession.

Mr. Geithner, as he left the Capitol, told reporters: “I’m confident two things are going to happen this summer. One is we are going to avoid a default crisis. And we are going to reach agreement on a long-term fiscal plan.”

Representative Austin Scott, the Georgia Republican who is the leader of the freshman class, said after the meeting that House Republicans had a “fundamental” difference with Democrats on taxes: instead of new tax revenues, the Republicans want additional tax cuts to increase economic growth. Still, he said, “I think we are all hopeful we will get to a resolution.”

Earlier, Mr. Obama and Mr. Geithner met privately with House Democrats at the White House about debt-reduction matters, following a similar session on Wednesday with House Republicans.

“Just as he discussed with the Republican caucus, the president highlighted the need for both parties to work together to take a balanced approach to deficit reduction, one that allows us to live within our means without hurting our ability to invest in the future or burdening our middle class or seniors,” an administration official said. 

House Democrats said they would support Mr. Obama if he reached a compromise with Republicans that included long-term spending cuts, but not to Medicare benefits, as well as higher tax revenues, according to those briefed on the meeting.

The House speaker, John A. Boehner, said in a statement, “The White House needs to get serious right now about dealing with our deficit and debt.” He interpreted the Moody’s report as bolstering his contention that “a credible agreement means the spending cuts must exceed the debt-limit increase.”

Moody’s, however, made no mention of how a deficit-reduction agreement should be structured.

The Moody’s report was unexpected. In April, Standard & Poor’s lowered its outlook for the AAA rating on United States debt — but not the rating itself — to negative from stable. Moody’s cautionary note was more pointed in that it was pegged to the current political maneuvering over the debt limit and it urged a resolution weeks sooner than the White House and Congressional leaders were aiming for.

Its warning was two-pronged. First, Moody’s said, if Congress does not increase the Treasury’s borrowing authority in coming weeks, the nation’s credit rating may be lowered “due to the very small but rising risk of a short-lived default.” That is likely to translate into higher interest rates at a time when the recovery shows signs of slowing again.

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Couple Sentenced to Prison in 18-Year Kidnapping Case

Phillip Garrido, 60, received a term of 431 years in prison. His wife, Nancy, 55, was sentenced to 36 years to life. They waived the right to appeal as part of their sentences.

Ms. Dugard, who was kidnapped at age 11 and held for 18 years, was not in the courtroom. But her mother, Terry Probyn, read a statement from Ms. Dugard, who is now 31.

“There is no God in the universe who would condone your actions,” Ms. Dugard wrote. “You stole my life and that of my family.”

But, Ms. Dugard told the Garridos, “You do not matter anymore.”

Ms. Probyn also spoke of her own suffering as she wondered what had happened to her blond, blue-eyed daughter after the abduction. “I thought I was going insane,” she said, adding, “My baby was gone.”

Hands shaking, her voice rose. “It was you, Nancy Garrido, and it was you, Phillip Garrido, that broke my heart,” she said, adding: “I hate you both.”

The judge, Douglas C. Phimister of El Dorado County Superior Court, was stern and scolding in a lengthy dissection of Mr. Garrido’s life as an experienced and manipulative criminal who snatched Ms. Dugard off a South Lake Tahoe street and then raped and imprisoned her. “You took a human being and turned them into chattel,” Judge Phimister said. “You reinvented slavery.”

The Garridos sat placidly in court, hands in the pockets of their orange jumpsuits.

The couple had confessed to their crimes and pleaded guilty in April to kidnapping Ms. Dugard in South Lake Tahoe, about 50 miles east of Placerville, and then holding her at their home outside Antioch, Calif., a Bay Area suburb.

Mr. Garrido, a convicted sex offender, raped Ms. Dugard, eventually fathering two girls by her. Ms. Dugard became pregnant with her first child at 13, and for a second time when she was 16.

In court on Thursday, Stephen Tapson, a lawyer for Ms. Garrido, read a statement on her behalf, saying that while “being sorry is not enough,” she loved both Ms. Dugard and her two children. Of her sentence, Ms. Garrido said, “I deserve every moment of it.”

In August 2009, the authorities discovered Ms. Dugard after the campus police at the University of California, Berkeley, alerted the parole authorities to Mr. Garrido’s suspicious activities and statements made on campus. It was soon discovered that Mr. Garrido, who had served 11 years in prison for the rape of a Nevada casino worker in 1976, had been holding Ms. Dugard at his home and in a secret backyard compound behind it.

Mr. Tapson had long maintained that Ms. Garrido did not rape Ms. Dugard but that she was aware that the sexual abuse was going on, saying that both she and Mr. Garrido had become addicted to methamphetamine, and that the drug had fueled their actions. But Ms. Garrido pleaded guilty to both kidnapping and forcible rape.

Mr. Garrido was sentenced on a larger array of crimes, which Judge Phimister outlined in exhaustive fashion on Thursday, adding that he believed that Mr. Garrido had tried to hide his crimes and play up any mental illness to avoid punishment.

Ms. Dugard, who plans to publish a memoir next month about her experience, now lives with her two children in a secret location. In July 2010, the State of California settled a claim with her and her children that state parole agents had not adequately monitored Mr. Garrido.

Susan Gellman, a lawyer for Mr. Garrido, said in court that he was also remorseful, and that he agreed with the scathing depiction of his life of depravity, violence and crime. But, Ms. Gellman said that Mr. Garrido was suffering “mental health issues,” including a desire to “tell his story,” something he gave up by pleading guilty.

In his final statement, Judge Phimister said Mr. Garrido would not feel the same desire while incarcerated, suggesting that other prisoners would not want to hear “what a wonderful story this was.”

“What you did to this child is beyond horrible,” the judge said. “May you think long and hard about what you did.”

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