Governors urge debt deal, discuss jobs

SALT LAKE CITY Sat Jul 16, 2011 6:09pm EDT

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SALT LAKE CITY (Reuters) - U.S. governors meeting in Salt Lake City this weekend called for a quick resolution to the current impasse over raising the U.S. borrowing limit, saying they worried about impacts to their own credit scores.

The impasse in Washington, which could lead to missed debt payments, has prompted rating agencies to say the nation's AAA rating could be in jeopardy, and the credit ratings of a big chunk of the U.S. municipal bond market could be at risk if it actually downgrades the U.S. rating.

This week, Moody's placed more than 7,000 ratings affecting about $130 billion of muni debt on review for a possible downgrade due to a close connection with the U.S. government.

"This is big stuff that somebody is playing with, and the fact that it's become a partisan battle ... it's not what's good for America," said North Carolina Governor Bev Perdue, a Democrat.

The National Governors Association is meeting this weekend in Salt Lake City.

Perdue said her finance director was notified by Moody's on Friday that it would review the Aaa rating of her state. Perdue said she was confident North Carolina would hold on to the top rating.

A Moody's spokesman said the rating agency was "looking at the Aaa rated states and will announce any rating actions over the next week for states."

Rhode Island Governor Lincoln Chafee, a political independent who was once a Republican, also urged a speedy resolution to the debate.

"We went on a tax-cutting rampage and a spending spree," he said of U.S. policies during the last decade. "And the math just does not add up. We're a crippled economy as a result."

CHINESE INVESTMENT

Elsewhere at the conference, governors said they hoped to emphasize investments in manufacturing and university-based innovation will help jump-start their economies in the wake of the 2007-2009 recession.

Alabama has approved new tax incentives to encourage foreign investment and the state hopes to expand its "Made in Alabama" push to include more aerospace and biotechnology development, Republican Governor Robert Bentley told Reuters.

And in Rhode Island, following the lead of states like Massachusetts, Chafee is building a strategy to keep entrepreneurial college students in the state.

In a presentation to the governors, Susan Hockfield, the president of the Massachusetts Institute of Technology, said reviving the country's "innovation-based economy" would help create jobs.

"If we want to make U.S. jobs, we can't just make ideas here, we have to make products here," she said.

The governors' meeting, which attracted about half of all U.S. state executives, is also coinciding with the weekend-long meeting between governors and provincial leaders from China.

"It's huge," Wisconsin Governor Scott Walker, a Republican, said of the impact of potential Chinese investments in agriculture and related technology.

"People typically think in the trade relationship it's about jobs going to China, but that's not been the case for Wisconsin," Walker said.

(Reporting by Edith Honan; Editing by Jerry Norton)

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