Standard & Poor’s lowering of the United States’ credit rating for the first time in history is a sign that America is in decline. The reasons are obviously economic, blatantly political and, to an extent, voluntary.
Of course, it doesn’t have to be that way.
The consequences of the S&P downgrade will be higher interest rates, which will result in direct hits to the housing market and new car sales.
Our stagnant economy will likely remain flat or sink back into recession. July’s jobs report, issued last week on the same day of the S&P announcement, highlighted a too-high and long-lasting unemployment rate — at 9.1 percent, it was the 30th straight month over 8 percent — but it really could get worse. Last month, according to the same report, there was a net gain of 117,000 jobs; imagine if that becomes a negative number in the next month or two.
S&P’s decision was based on two main factors — the rising national debt and a dysfunctional Washington. The nation’s deficit must be addressed, but to tie the politics of budgeting to a necessary rise in the debt ceiling was incredibly irresponsible. Tea party Republicans who insisted on holding the economy hostage to get the expense cuts they wanted did the nation a grave disservice — it was a wrong-headed notion of epic proportions.
The situation in Washington appears no better in the wake of the S&P’s wake-up call. Immediately, Republican presidential candidate Mitt Romney issued a statement blaming it all on President Obama’s lack of leadership. He has a point about Obama’s ineffectiveness, but to lay all the blame at his feet is to forget history. Let’s remember that Bill Clinton handed George W. Bush a federal budget surplus in 2000, then eight years later, Bush dumped not only a rising deficit but a credit market crisis on incoming President Obama.
Now, if the politicians would just set aside their posturing and take on issues that really matter, they could turn these dismal circumstances around. Here are three opportunities:
• Jobs. Even a divided Congress should be able to pass some payroll tax breaks and other incentives to employers. Make it financially advantageous to hire more people and businesses will do so.
• Entitlements. Social Security and Medicare are critically important programs, but they’ve become too expensive for the long haul. Congress must address this. A place to start is with a modest and gradual increase in the retirement age for Social Security recipients.
Just a little bit of an adjustment would go a long way in solidifying these programs for the future.
• Tax reform. Hidden in the budget debate between cutting spending and raising revenue is the need to create a more equitable, business-friendly and simplified tax structure — and while would-be reformers are all over the map in what they advocate, there are actually some changes that should be palatable to both Republicans and Democrats.
A bill proposed this year by U.S. Sens. Ron Wyden, D-Ore., and Dan Coats, R-Ind., would be a good place to start.
If the U.S. would address these matters, our decline as an economic superpower might just be reversed. The question, of course, is whether our leaders have the political will to do so.