What the US economy downgrade means for Americans

Over the last two decades, Congress has failed to bring financial stability to the country. Year over year, lawmakers burn through hard-earned American taxpayer dollars carte-blanche, abusing the privilege of controlling the federal government’s purse strings. Due to our nation’s fiscal deterioration, inflation, and the burden of an unfathomable $32 trillion national debt, the U.S. economy rating was downgraded from “AAA” to “AA+.” This is the second downgrade of the economy in just over a decade.

The erosion of our nation’s fiscal management can no longer be ignored. Although a few fiscal hawks in The U.S. House of Representatives are fighting tooth and nail for budget reform in fiscal year 2024’s appropriations process, every lawmaker in Washington must face the sobering reality that the federal government has an addiction to spending. Time has run out, and they can no longer continue to kick the can down the road. If Americans are expected to follow a monthly or annual budget to stay out of debt, why can’t Congress?

So, how does the nation’s economic downgrade affect every American? Interest rates currently sit at uncomfortably high rates, and this decision will continue to raise those rates. Additionally, like an individual who has a poor credit history and wants to to buy a home or take out a personal loan, lenders will be hesitant to approve such a request. If the loan request is approved, it may come at the cost of paying a higher interest rate on the loan. If the federal government has to pay higher interest rates on its debt, it is likely that Congress would have to implement higher taxes and Americans will have less money to put back into the economy, resulting in slower economic growth. As a result, goods and services will begin to disappear, inevitably forcing a decline in the standard of living. 

The current economic hardships the European Union is dealing with is an example of what the U.S. could see in the near future. In recent years, Europeans have consumed less, causing their economies to slow. This is due to various factors: an aging population, less incentive to work harder to get ahead, etc. With the help of COVID-19 and the war in Eastern Europe, food prices have skyrocketed, and Europeans have cut back on certain necessities just to get by. Additionally, wages have declined at a minimum of 3 percent in most European countries. Taxes are already higher in Europe compared to other “wealthy” countries, estimated at around 40 percent of their GDPs. Does any of this sound similar to what the U.S. has dealt with in recent years?

As depressing as this sounds, the United States economy remains stronger today. However, Europe’s economic decline is a foretaste of where the U.S. is going if the financial ship is not righted. This stark warning should motivate Americans to advocate for fiscal responsibility by the federal government and hold them accountable for needless spending. 

What can Congress do to get us out of this dire financial circumstance? The simple answer is to rein in out-of-control federal spending. Basic steps toward financial responsibility must be made before we can address specific types of reforms that should be made. And if we are to successfully return to a financially secure path, the elephant in the room that neither party wants to acknowledge must be addressed: entitlement spending reform.

In fiscal year 2022, the federal government spent $1.19 trillion on more than 80 different welfare programs. President Biden’s proposed budget for this upcoming fiscal year requests over $2.6 trillion in new entitlement program spending. This is absurd. Over $2 trillion, alone, for entitlement programs is unconscionable. 

If we refuse to address the nation’s dangerous fiscal trajectory, the outlook of the U.S. economy is grim. Businesses will move overseas to more stable economies, causing our markets to lose their competitiveness. People will stop moving here because there will be fewer jobs available. Wages will decline, and Americans will not have the opportunity to get ahead. But the most sobering reality is that the American dream will die. The idea that people can come to America for a better life with more freedoms and liberties to do as they please will cease to exist. Do you want that for your children, grandchildren, or great-grandchildren?  

Adam Brandon is the president of FreedomWorks.