Will the events of last week send shocks into the barely recovering economy?
Last week, two highly publicized events occurred in the United States that could shake the foundations of the limping economy. The first one, the passage of the Arizona immigration bill, has already led to boycotts and broken agreements. The second, an oil spill of epic proportions in the Gulf of Mexico by the huge British Petroleum oil corporation, is becoming one of the worst man made environmental disasters of all time.
We will skip all the political and environmental ramifications and concentrate on the effects on the economy.
I. The Effects of the Immigration Law on the Economy are Exaggerated.
Most people know that there have already been attempts to start boycotts against Arizona because of the passage of the immigration law. Furthermore, the Mexican government and many NGO’s have told travelers to stay away from Arizona – a state that attracts 15 million tourists a year. Also, people have begun boycotting Arizona Diamondback (a baseball team) games because one of the board members of the team supports the law, which I think is foolish, because the entire team is placed in limbo because of the individual actions of one man.
However, the two most significant actions that have yet to be realized are a possible breakup of business contracts by the city of Los Angeles (which does over $10 million in business with Arizona a year) and a similar action by California. I feel like the media has emphasized this a lot because it can really leave a crater in Arizona – which is home to one of the highest percentage of foreclosed homes in the nation.
Now, I feel like the threats from Los Angeles/ California will never be realized for one simple reason. LA’s budget deficit is very high and its already becoming hard for the city to accept loans due to its bad credit rating. The same story holds for California, which can’t afford to lose business to anyone. Will a Republican governor ever endorse a bill that means losses for businesses and contractors? Never.
There might be some pockets of boycotting against Arizona, but its going to be very hard (and probably unconstitutional) to end state contracts due a legal clause. It will get even harder if the Supreme Court upholds the legality of the law in the coming months. Will this be enough to affect Arizona? Maybe… but only because anything can effect Arizona at the moment.
II. How about the Oil Spill off the Gulf of Mexico in previously pristine waters?
The British Petroleum Oil Spill is a nightmare for everyone and could lead to a huge uproar against both the private and federal emergency efforts. As of today, the spill has a land area the size of Puerto Rico, in an area of the country where the fishing industry dominates the economy.
In the short term, crude oil prices have been hovering at a recent high of $86 per barrel because of investor fear of the ramifications that BP will have to face in the coming months as the publicized disaster chips away at the hearts of conservationists and environmentalists.
In the long term, the fishing industry is going to take a long time to recover. It might be a year or two before all the oil is cleared away and the fish begun to return to damaged areas. Fisherman, who pay a lot of taxes in the Gulf Coastal area, are going to be jobless and will stop being productive consumers and taxpayers until they can find new jobs or return to fishing. All in all, the carelessness of a giant company is not only going to hurt the marine ecology, but the economy of the country it relies on for off shore drilling.
Hopefully, the beauty of the coastal regions and wetlands can be restored.
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