Good morning. Here’s the news:

1. Bloomberg reports: “In the last decade, as a wave of baby boomers began retiring, America’s biggest state pension systems earned less than half what they needed to keep up with promises made to millions of graying civil servants.” Add in unfunded civil servant retiree health benefits and you’re talking big problem.

2. In a last gasp effort to avoid the largest municipal bankruptcy in U.S. history, holders of more than $3 billion in debt issued by Jefferson County, Alabama, are working on a rescue that would leave them with about $1 billion in losses

3. Appearing before a House subcommittee, Standard & Poor’s executives left open the threat of a downgrade of the US’s AAA credit rating.  “We’re waiting to see what the final (legislative) proposal is,” Deven Sharma, the credit-ratings firm’s president, told a House subcommittee.

4. The Financial Times reports: “The cost of buying insurance against a default by the US rose to a record on Wednesday, in a sign of growing unease that gridlock in Washington over raising the federal debt ceiling may result in the Treasury failing to pay interest to bondholders.”

5. Wall Street executives and traders are complaining that the Federal Reserve is not more engaged in contingency planning for a US default or a downgrade of the US credit rating. 

6. House Speaker John Boehner’s bill to lift the debt ceiling and lower the federal budget deficit will be voted on today in the US House of Representatives. The vote is expected to be close. For those still wondering what this is all about, The New York Times has a useful “explainer” here.

7. President Obama has been relegated to the sidelines as Congress tries to get a deal done on raising the debt ceiling and lowering the federal deficit.  His aides fret that the president is being marginalized.

8. Elected officials in Washington are using the “intensity” of the debate over the debt ceiling and deficit reduction to raise money for themselves and their allies. Party campaign operations like the DNC and the RNC are also actively fund-raising off the debt ceiling/budget deficit impasse.

9. The Wall Street Journal reports: “Almost half the nation’s health-care spending will come from government coffers by 2020, up four percentage points from 2010, according to new federal spending figures to be released Thursday.”

10. U.S. military commanders say that Iranian weaponry is killing American troops in Iraq at an accelerating pace. As National Journal reports, this development poses “new dangers to the remaining forces” and highlights “Tehran’s intensifying push to gain influence over post-U.S. Iraq.”

11. Sarah Palin has accepted an invitation to keynote a Tea Party rally in Waukee, Iowa over the labour Day weekend. It is unclear what this means, if anything. Her supporters in Iowa are hoping that it means she will run for the 2012 GOP presidential nomination. 

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