It used to be said when the U.S. sneezes the world catches a cold, referring to the global impact of the U.S. economy and financial markets. However its influence has declined and the stalemate in Washington isn't helping any.
President Obama canceled a trip to the Asia-Pacific Economic Cooperation Summit in Bali, Indonesia, this week so he could deal with the situation, and sent Secretary of State John Kerry instead. Obama told a press conference Tuesday that he personally missed "critical meetings in Asia to promote American jobs and businesses" and this "hurt U.S. credibility around the world...It makes it look like we don't have our act together," said Obama.
Ian Bremmer, president of Eurasia Group, tells The Daily Ticker, "The perception of the U.S. internationally and the role we play internationally has taken a hit," as a result of the stalemate in Washington.
But the impact isn't just perception. "American trade deals will be delayed--TTP (Trans-Pacific Partnership) and T-TIP (Transatlantic Trade and Investmentic Partnership)," says Bremmer. "They'll probably be watered down a little bit because you don't have the president himself showing the priority, getting the lifting done. And some allies may engage more with the Chinese as a result."
Even the president admitted that. ""I'm sure the Chinese don't mind that I'm not there right now," he said at Tuesday's press conference. "There are areas where we have differences and they can present their point of view and not get as much push back as if I were there."
But the big issue for U.S. allies and competitors is not the government shutdown but the approaching debt ceiling and possible government default if the ceiling isn't raised.
IMF Chair Christine Lagarde, warned this week: "The government shutdown is bad enough, but failure to raise the debt ceiling would be far worse, and could very seriously damage not only the U.S. economy, but the entire global economy. It is mission-critical that this be resolved as soon as possible."
"The debt limit would actually cause pain," says Bremmer. But he's optimistic that Congress will "stand down when it costs and hurts."
Bremmer has faith that investors "can still believe in the dollar and the U.S. economy," but he is not so sanguine about the country's global leadership otherwise. "The fact that we have been talking democratic free market values for decades and yet we can't seem to govern ourselves has an impact," says Bremmer.
"We have been very happy for decades to go around the world telling other people how they should govern themselves...We've got to stop doing that...We need to try humility."
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