EDITORIAL

Implications of recession loom large

Posted 3/30/23

The weather may finally be heating up, but Rhode Islanders should be prepared for a freeze when it comes to the local and greater economy.

Although you can get any different number of projections …

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EDITORIAL

Implications of recession loom large

Posted

The weather may finally be heating up, but Rhode Islanders should be prepared for a freeze when it comes to the local and greater economy.

Although you can get any different number of projections out of economists regarding how severe and long-lasting the looming economic recession will truly be, there is already evidence to show that private developments and critical public infrastructure projects alike throughout our cities and towns are facing an equally uncertain future as the costs of labor, materials, and utilities continue to rise. Compared with rising interest rates deployed to strategically target inflation, there is ample reason to be somewhat concerned.

Locally, projects to build crucially-needed school buildings and developments to supply more housing will be affected, as the days of historically low interest rates are in the past, which will have ramifications years and decades down the line when calculating principal and interest payments for these expensive but vitally important endeavors.

This might not come as a surprise to everyday Rhode Islanders, the majority of which are counting dollars and budgeting everyday expenses to account for the increased cost of everything from a cup of coffee to a 30-year mortgage on a first home. With rents also on the rise throughout the nation, and wages staying flat, the added burden of additional taxpayer money needed to fund suddenly-not-so-affordable capital projects will seem like adding additional heaps of straw on the back of an already overburdened camel.

The frightening aspect of recessions and extended periods of economic downturn is how every element is intricately connected to one another. Builders are less likely to take on capital debt for new projects amid higher interest rates and the cost of materials and labor, resulting in less work for skilled laborers and more people out of work. Higher unemployment or underemployment leads to less spending overall within municipalities, leading to bad quarters for local businesses, layoffs for small business owners, and ultimately to shortfalls on anticipated revenues and budgetary problems down the line for municipalities.

In times of looming financial crisis, it is up to the financial experts within local, state, and federal governmental entities to try to safeguard outstanding investment and provide a backdrop of protection for those willing to invest in communities despite the uncertainty of the times. Protections against rampant rent hikes should also be explored to prevent frightened landlords from causing a wave of unnecessary homelessness, which would overburden already stressed social support networks.

Individually, although we are at the mercy of many forces beyond our control, it is important to exercise wise financial decisions whenever possible. If you have high-interest debt that has been hanging over your head, make the effort to put aside money each week to try and pay it off now, lest things get worse and that debt becomes even less wieldy down the line. Save what is possible, and consult with a financial advisor before making large investments.

We have seen recessions come and go, and while no two are the same, savvy forward thinking and refusal to panic will always go a long way towards lessening its impact.

recession, editorial

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