U.S. debt debacle sends global shockwaves
At the eleventh hour, the U.S. Congress agreed a short-term deal to raise the U.S. debt ceiling. Although a worst-case scenario of debt default has therefore been dodged for at least a few more months, the troubling episode has nonetheless sent seismic shockwaves across the globe.
For some time, world leaders and senior U.S. officials have warned that the impact of recent Washington political infighting has undermined the country’s reputation as a responsible international power, both in terms of domestic and foreign policy. As Secretary of State John Kerry has asserted, this episode has sent a message “of political silliness” that we “can’t get our own act together ... we need to “get back on a track the world will respect”.
Worrying, political gridlock in Washington may only intensify in the build-up to next year’s congressional elections. This threatens key domestic reforms on the horizon, including an immigration overhaul, which is of interest to many internationally.
The perception, in many foreign capitals, is that growing partisanship and polarisation is also infecting U.S. foreign policy. And, this is feeding angst over the reliability of Washington as an international partner, has been vocalised recently by countries, including China, Japan and Mexico.
Already, this month, President Barack Obama has lost the opportunity to advance the Trans-Pacific Partnership trade deal as a result of the cancellation of his trip to Asia. Meanwhile, U.S. trade officials were forced to cancel second round negotiations with Brussels over the proposed Trans-Atlantic Trade and Investment Partnership.
The gravity of this reputational issue for foreign affairs was recently acknowledged by two former defense secretaries.
Republican Donald Rumsfeld asserted that “lack of leadership is sending a signal around the world that the United States is in decline, that that we’re withdrawing, that we as a country are not going to behave in a rational manner”. Meanwhile, Democrat Leon Panetta bemoaned that by “governing by crisis after crisis after crisis…the world will view the United States as less able to back its word with power”.
The spectacle of what is perceived, internationally, as Washington’s growing political dysfunction is as bemusing as it is alarming. And, according to some data, this is a driver behind a decline in the country’s international reputation.
For instance, the 2012-2013 FutureBrand Country Index shows a continued fall in the international ranking of the United States compared to other states. Based on a sample of around 3,600 people in 18 countries, it concludes that the country is “in decline”, partly because of “successive fiscal crises”.
This builds on earlier studies by the organization, including in 2011-12 which highlighted “intensified speculation about America’s long-term stability”, partly as a result of the downgrade by Standard & Poor’s of the country’s credit rating. This was prompted by the last near debt default of Washington in 2011.
These findings on the U.S. reputation are echoed by the 2013 BBC Country Rating Survey, which interviewed around 26,000 people in 25 countries, and also the 2013 Pew Global Study based on a sample of about 37,600 in 39 countries. The BBC poll recorded a fall in positive views toward the United States for a second consecutive year, while the Pew survey found that pro-U.S. sentiment is slipping, after a strong bounce following Obama’s election in 2008.
To be sure, the scale of reputational damage is not—yet—as serious as that which faced the country during the previous Bush administration. For much of that period, surveys indicated profound international concern with US foreign and military policies. Indeed, the country’s reputation fell to its lowest level since at least the Vietnam War.
Then, as now, however, the country retains attractive qualities for many foreigners, including its popular culture and economic innovation. And the fact remains that, in times of major urgency, Washington can sometimes transcend partisan divisions and work in the national interest.
This was demonstrated, for instance, during the 2008-9 financial crisis when Congress and the administration acted more swiftly and comprehensively than many other countries to counteract the worst economic turmoil since at least the 1930s. This has been key in enabling the country to recover more quickly from recession than some other areas of the world.
While current problems should therefore be put into context, the situation is nonetheless troubling. And this is not the first time this year that a Washington political impasse has threatened negative economic repercussions.
Only very close to the wire did Congress in January agree a deal to prevent the United States falling off the “fiscal cliff”. It is estimated that the automatic tax increases and spending cuts might well have taken the U.S. economy back into recession.
At the core of the current troubles is not just growing polarisation between Democrats and Republicans, but significant intra-party divisions too. This is especially so between moderate and right-wing Republicans (and the Tea Party faction). Thus, although House Speaker John Boehner, the Republican leader in the House of Representatives, had pledged that Washington would not default, his views were not shared by more conservative colleagues.
While the full impact of this latest debacle remains unclear, one sure thing is that it has genuinely shocked and alarmed many across the world. This will not just further undermine the U.S. reputation as a responsible international power, but could potentially send it into freefall again.