Failing Grade For The U.S. Economy

Image via WikipediaDays after the United States government (just barely) avoided default on its loans, the stock market drops 1100 points over a three day period, and the bond rating service Standard & Poor's downgrades the country from AAA status to AA+, leading to fears of a new recession.

Who said the debt crisis was over?

In response to the downgrade, President Barack Obama said that this country would always have a AAA rating.  (Well, what did you expect him to say?  He's the President.)

It isn't just the U.S. that's having these problems.  Europe is having a financial crisis of its own, partly caused by looking the other way for too long when it came to balancing the books.  Greece has already had to be bailed out.  Italy could be next.

All the finger pointing and stall tactics Congress did while the American economy was on the brink before coming up with a last-second agreement that nobody liked, but did allow the U.S. to avoid default, tended to obscure the fact that (A) there's still high unemployment, (B) sales are down because people can't or won't buy stuff unless they have to, and (C) corporations respond to all this by sitting on its record profits instead of adding new jobs so people can buy their products.

President Obama, whose re-election chances have been called into question because of how the debt deal went down, isn't just trying to atone for the fiscal extravagances of previous Presidents, but his own too.  Two wars and a new cabinet department, natural and man-made disasters, the cost of health care reform, and the continuation of the Bush tax cuts have made it almost impossible to balance the budget without major surgery.

Complain all you want about Standard & Poor's rating and how flawed some people thought it was, but it's really nothing to take lightly.  There are two other major bond rating agencies besides S&P, and they both say that they aren't changing the U.S.' AAA rating.  Nonetheless, this episode should remind Washington that they shouldn't be playing politics with people's lives and a nation's economy.