In academic terms, the U.S. just earned a capital “F.” The debate over the deficit crisis has finally reached a head, taking the U.S.’s economy from an AAA credit rating to an AA+ — still decent but subpar in comparison to the score the country has always managed to maintain. Subject to inflation, the U.S. dollar no longer holds the promise of keeping up with interest on loans from other countries it’s currently accumulating and is upsetting citizens from all parties.
Global credit ranking agency Standard & Poor’s dealt out the downgrade, and has been underwhelmed by attempts made by the U.S. government so late in the economic turmoil. Regardless of the Debt Ceiling Bill passage on Aug. 2, S&P was fed up with Congress’s childish six-day stalemate, especially considering that the issue should have been addressed months ago.
The Obama Administration is now up in arms about the downgrade, claiming that S&P’s U.S. debt accumulation projection was off by $2 trillion. S&P explained its decision had a political rather than fiscal basis and is concerned that U.S. policymaking is fundamentally broken.
The possibility of default for any economy is embarrassing, but what’s far worse is our policymakers’ behavior during the past several months. Typically bathing in the global spotlight, the U.S.’s congressional divide is broadcasting a message to our investors that we “don’t have our act together” and a “house divided against itself cannot stand.”
The major issue with passing Republican House Speaker John Boehner’s bill was the suggested spending cuts to many social programs supported by Democrats. In response, Democrat Senate Majority Leader Harry Reid proposed a similar bill with the spending cut emphasis on defense while continuing to raise the debt ceiling. Republicans finally agreed to a planned increase of the debt ceiling while Democrats conceded to a heavy spending cuts plan. Neither party is pleased.
As tensions rise, and with the next election around the corner, both parties agreed that the next time the debate can be re-opened is in 2013. This allows candidates to use the progress or failure of the bill as a major platform in their campaigns while also providing the opportunity to challenge the winning party a year into office. This is slightly disconcerting, seeing as how elections have developed a more emotional theme, blurring looming fiscal issues with pathological appeals. I’m sorry, but for once I’d like the more economically astute to take the reigns and not rely on straight-ticket voters, catch-phrase band-wagoners or the apathetic to elect a president in such dire circumstances.
Had Congress reached a consensus about raising the debt ceiling sooner, the downgrade might have been avoided. However, at the rate our debt-to-GDP ratio has been approaching 100 percent, it would have only been a matter of time before our credibility was affected. Hopefully this sends a stronger message to our government and encourages swifter policy amendments and more concrete plans of action.