On Sunday July 31st, President Obama announced that a compromise has been reached to avert an American credit default. The President’s announcement came just as the Asian markets opened for business causing Tokyo’s Nikkei Index and the valuation of the American dollar to respond favorably.
If it passes in the House and the Senate, this deal will succeed in averting a Tuesday, August 2nd deadline.
A credit default would be devastating to the environment and the economy. As a sector with unparalleled growth potential, the green economy could address the revenue shortfalls that cause debt crises without raising taxes. As many economists are warning, investment in the green market is vital to economic growth and competitiveness.
Additional economic hardships arising from a credit default would all but eliminate any hope for government investment in the green economy. Government investments in things like renewable energy and efficiency are crucial to protecting the planet and helping the economy to grow. The US cannot afford to wait for jobs that will never return, it is time to address climate change and create jobs by investing in the next economy.
Although this is hardly a good deal, it is better than having no deal at all. The credit rating agencies made it clear that the AAA rating the US has enjoyed since 1917 was at risk. Many pundits predicted that in addition to eroding confidence, increasing inflationary pressures, raising interest rates and perhaps even auguring a double dip recession, a credit default would have a ripple effect felt around the world.
The President wanted an agreement, but this was not the deal he wanted. Despite the unhappy people on both sides of the political divide, the agreement will have to be passed quickly in both chambers of Congress to beat the August 2nd deadline.
Further cuts are expected as part of this agreement. However, this is at odds with the fact that further investments are also required if America is to be competitive in the new green economy.
Servicing a $14 trillion debt is enormously expensive. Cuts are necessary, but if the US hopes to be competitive in the economy of tomorrow, the US government must follow the leads of other states like the UK and China and invest in the future. This means investing in the kind of growth that produces good jobs.
America once rallied around the iconic words of President J.F. Kennedy, “We will go to the moon and do other things, not because they are easy but because they are hard.” Now we must say, we invest in the green economy, not because it is easy, but because it is necessary.
America’s economic well being and the health of the environment are intimately interdependent, you cannot have one without the other. Budget cuts are necessary, but so are investments that position the US as a leader in the emerging green economy.
© 2011, Richard Matthews. All rights reserved.
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