Wall Street recorded one of the most volatile weeks in its history as investors last week reacted to the struggling American economy, Europe’s debt crisis, the downgrade of the U.S. credit rating by Standard & Poor’s, and continuing doubts about Washington’s ability to put the nation on a better fiscal path.
Joshua Gordon, policy director for The Concord Coalition, says there is understandable concern about the failure of elected officials to reach a “grand bargain” on recommendations for comprehensive fiscal reform. In their debt limit deal two weeks ago, Congressional leaders and President Obama settled instead for limited spending cuts, no changes in tax policy, and little to support the economic recovery.
“Not only did we not get a grand bargain for the fiscal challenges, but we’re still faced with the inability to deal with the economy over the short term,” Gordon says in a new Concord video about the markets' reaction to the debt deal and the S&P downgrade.
Diane Lim Rogers, Concord’s chief economist, notes in the video that the initial relief that the government would not default was soon followed by the realization: “Oh yeah, we haven’t really fixed anything.” Rogers hopes the turmoil in the financial markets will prod lawmakers to pursue more substantial fiscal reform.
Fitch Ratings today reaffirmed its AAA rating for the U.S. although it warned that more progress needed to be made on deficit reduction.