US meltdown causing lasting harm to its world standing

America’s credibility in its Pacific and Atlantic trade initiatives has also been undermined

Two things are changing how the world views the US. First, Washington’s shenanigans appear increasingly like the way it’s going to be. Obama’s re-election changed little. The 11 months since then have been swallowed by the fiscal crisis, as were the preceding two years.

Two things are changing how the world views the US. First, Washington’s shenanigans appear increasingly like the way it’s going to be. Obama’s re-election changed little. The 11 months since then have been swallowed by the fiscal crisis, as were the preceding two years.

Mon, Oct 7, 2013, 01:00

People say America can afford a domestic seizure every now and then. Yet almost a week into its government shutdown, the nation’s global presence has already taken a hit. President Barack Obama had to cancel an important trade visit to Asia this week because of the crisis. Logistics would have scuppered it anyway – all but one of his schedulers have been sent home. Everyone else, including Xi Jinping, China’s president, is attending the Bali summit. Mr Obama’s absence will raise further doubts about his pivot to Asia.

Likewise, US negotiators to this week’s second round of Atlantic trade talks with the EU were also deemed “non-essential”. The Brussels talks are postponed.

And spare a thought for the US Federal Reserve, where an ill-placed adverb can trigger market cyclones around the world. All but three US statisticians have been sent home. Last Friday’s jobs report was blank as will be other crucial key data releases until the government reopens. The Fed is flying partially blind. What will things look like in 10 days?

Two things are changing how the world views the US. First, Washington’s shenanigans appear increasingly like the way it’s going to be. Obama’s re-election changed little. The 11 months since then have been swallowed by the fiscal crisis, as were the preceding two years.

Whatever eleventh-hour deal is struck to stop a default in the next two weeks, it is unlikely to postpone the debt crisis for more than a few months. Republicans have offered to reopen government until November 15 to give time for talks to happen – an improbably short timeframe.

The hope among America’s foreign creditors is that the Republican party will be shocked back to its senses by losing the House of Representatives. But the next congressional election is more than a year away. And given their large majority, Republican loss of control is still remote. Besides, the party’s most vulnerable districts tend to be held by moderates. Any loss of seats would tighten the Tea Party’s stranglehold.

The disquieting prospect is that this crisis will continue until Mr Obama leaves office – and possibly beyond. Tea Party Republicans derive much of their intransigence from safe, gerrymandered districts, mostly in the south. Their only real threat comes from right-wing challengers. But the next US boundary redistricting is not until 2020, which is three elections away.

US soft power damaged

Second, America’s domestic conniptions are harming it abroad. US hard power can easily weather a spell of shuttered government – witness this weekend’s raids against suspect Islamic militants in Africa. No matter what happens on Capitol Hill, the US can afford to service its debts and fund 12 aircraft carriers. But these spells are becoming more frequent.

And US soft power – its ability to persuade and lead by example – is being tarnished. Should there be a default, the damage would spread to America’s hard assets, starting with its ability to tap the world’s money almost for free. It remains unlikely the default bomb will go off. Most assume sanity will prevail at the last minute. Yet the world is getting used to seeing the US as a suspect device.

Diplomatic penalty

Though harder to measure, Washington’s rolling seizures also bring a diplomatic penalty. Recent events underline that Congress will be a separate player in Obama’s nuclear talks with Iran. The foreign policy consensus on which most of Mr Obama’s predecessors relied is fraying inside both parties – especially among Republicans, where isolationism is gaining ground. Last month, Congress damaged Obama’s standing in the Middle East by making it clear it would not authorise strikes on Syria’s regime. Obama was saved from a humiliating setback by Russia’s Vladimir Putin. But Congress remains a wild card. There is no more guarantee Capitol Hill would give the green light to weaken sanctions on Iran, for example, than it would to approve use of force.

America’s credibility in its Pacific and Atlantic trade initiatives has also been undermined. Any deal would depend on the renewal of the president’s “trade promotion authority” that restricts Congress to an all-or-nothing vote. It is anybody’s guess whether Obama could get that reauthorised. Until then, Congress’s ability to pick any deal apart will harm the president’s leverage with America’s negotiating partners.

Optimists such as Newt Gingrich, the former Republican speaker, point out that US democracy was purposely designed to be messy. But this is worse than that. Since last week, anyone dialling the White House switchboard hears the following recording: “We apologise, but due to the lapse in federal funding, we are unable to take your call.” It takes a while to forget a message like that. –(Copyright The Financial Times Limited 2013)