Stocks took a dive in the first day of trading after Standard and Poors downgraded its rating of U.S. debt. Despite an early afternoon statement from President Barack Obama, the Dow Jones average closed down more than 600 points for the sixth biggest single-day drop ever. The state of Georgia’s fiscal economist told FOX 5 his biggest concern about it all is the unknown.
Ken Heaghney says if uncertainty about the economy keeps the stock market sinking, there’s a risk of another recession. At the most, he believes people shopping for new homes and cars may have to pay a little more because interest rates could increase. But, he believes that increase will be slight.
The bigger concern, he says, is if the credit rating crisis adds to the turmoil in the overall economy. He says if, for instance, the stock market continues to plunge, large businesses and employers will be even more reluctant to create new jobs.
And if that in turn sends consumer confidence sinking with the average American afraid to spend money, the results could mirror what we saw in ’07 and ’08. That is what Heaghney means about these being uncertain times for our economy.
Heaghney says one other thing to think about is the debt ceiling agreement made in Congress that preceded the credit rating downgraded. Heaghney says federal spending cuts will trickle down to state and municipal cuts, potentially putting things like Medicaid, education, and transportation on the chopping block. That, he says, will also have an impact on the future of the economy.
MY FOX ATLANTA