Just a few days after President Obama sent a letter asking for Congress to raise the nations debt ceiling, Standard and Poors (S&P) lowered the credit rating for several European nations. According to Politico, S&P’s rational was that they “concluded that the political agreements and combined $1 trillion in potential bailout funding reached at a December summit were not of ‘sufficient size and scope to fully address the eurozone’s financial problems’.” So one might ask, what does this have to do with America? Simple, not only can the troubles in Europe hurt the U.S., but this latest downgrade also proves that more government intervention/stimulus was needed to help the U.S. economy.
When S&P downgraded America’s credit the rational was not an economic one, it was because S&P was afraid that the current political climate in Washington was not suitable to adequately address the serious problem at hand. Now when they decide to downgrade Europe’s rating, their reasoning is almost the opposite. The small actions Europe took were not strong enough to spur growth, while across the pond conservatives were complaining Obama was doing too much.
Republicans have been arguing that the White House has irrationally increased the nation’s debt while millions of Americans are still looking for a job. The entire Recovery Act (including tax breaks, entitlement programs, and direct spending) was worth $787 billion. Now three years later, when most of the program has been implemented, the unemployment rate has gone down, less people are asking for government benefits, and investors feel much more confident in America’s future. We were lucky that an extra $787 billion infused into people’s wallets, enabling them to spend money on items they need while at the same time giving a much needed jolt to the economy.
As the campaign season is just starting to take shape, there is no doubt that Republicans will be saying the Recovery Act did nothing to help the economy. Some of the criticism is valid. The unemployment rate is still high and when it first passed, the Obama administration said at this point America would be out of the recession. Well, technically we’re out of the recession, but many families are still struggling.
But Republicans in Congress have been adamantly against raising the debt ceiling, which would cause the government to come to a halt and the economy to go into another tailspin. All the spending from that Recovery Act that has helped create millions of jobs since its implementation, and those that need help putting food on the table, will not be able to get the support they need.
The last time the debt ceiling had to be raised the stock market took wild swings and caused many business leaders to go into a panic. The increase only occurred when Democrats in the House decided they would vote for it and risk being branded as big spending liberals. But in the end, both sides looked bad which allowed reporters to tweet an insurmountable amount of “winning” jokes.
If we did not know it before, we know now that government does play an important role in the economy, and despite what Ron Paul says, that is the world we live in. If the Recovery Act was not implemented, if the debt ceiling was not raised last year, and if Republicans had their way on both these issues, Republicans worst fear of America becoming like Europe would actually be coming true.
The dirty secret about politics, is that no one likes politics. When serious decisions need to be made, the last thing people want to see is their elected official calling each others names and positioning themselves to win. It is not good for the country, it is not good for the economy, and it is certainly not good for members of Congress’ chances of being reelected. People should not have to do this, but this time it might be worth asking our elected officials please, not another fight that’s debt.