The more time the US stays in a recession, the more hope Americans seem to lose. Problems begin to accumlate and people begin to worry about their children’s futures. According to Rasmussen Reports, only 32% of Americans think that the US best days are in the future, 51% believing that they are in the past, and 17% not sure. In the recent decade, economic growth has been mostly stagnant or negative. In 2011, 1 out of 611 homes in the US, 1 in every 396 homes in Florida and 1 out of every 301 homes in Fort Lauderdale will face foreclosure. Not to mention the financial market is increasingly volatile and the unemployment rate continues to be the highest it has been since the Reagan administration.
To add gasoline to the chaotic economic flame, Standard and Poor’s recently downgraded the US credit rating from AAA to AA+. This act will inevitably increase the country’s interest rates, raising costs up to $75 billion over the next few years. Third Way estimates that a simple 0.5 percent increase in interest rates could erase more than 640,000 jobs. Companies that discriminate against the unemployed by only considering those who are already employed are not helping the situation.
Governor Scott has assured Floridians that the downgrade will not affect our state. Quite ironic since Florida has been perilously close to a decline with Moody’s due to his own massive tax cuts. College tuition has been on an upward slope for the past few decades. Florida’s Bright Futures scholarship program has been cut 20% recently in an attempt to alleviate the state’s deficit. Even though decreasing, the gas prices are still a burden to most especially when the public transportation system here is egregious. Students are paying more to go to college and after graduation, face a merciless job market.
A huge silver lining on this darkening economic cloud: many economic experts believe downgrade is essentially nothing to panic about. Economist Steve Levy of the Center for the Continuing Study of the California Economy says the S&P’s downgrade was simply a political statement. Wharton professor Kent Smetters explains, “bonds prices already reflected a certain level of risk so there won’t be the expected disaster for consumer credit”. Bankrate Vice President and financial analyst Greg McBride claims, “The significance of the downgrade in terms of a consumer pocket book issue is very minimal”. As for student loans, private loans rates will increase, federal loans will most likely not. The government profits from the interests of federal student loans, to increase the cost of borrowing will decrease profits.
Another optimistic fact: Japan and China do not have AAA credit ratings and are two of the world’s leading economies.
The most effective result of the downgrade is the message it sends to not just Americans, but to leaders around the world that no nation is a perfect indestructible entity. As powerful as the US continues to be, it is not invincible to the self-sabotage that are poor policies, extreme partisanship and irresponsible spending all steming from a complete disregard for our future generations. Those in Washington need to stop arguing who is to blame for past mistakes and focus on the future by setting innovative goals, this is the key to reignite the economy. The US economy is still capable of rising from this recessionary ash, wiser and stronger than before– it is up to the voters and the chosen representatives to take this as an important lesson learned.