I was pretty dismissive of Standard & Poor's debt downgrade last month. Re-reading that post, I stand by my political analysis of events going forward. Furthermore, the recovery of U.S. equity markets, the sharp reduction of yields on U.S. debt, and the failure of the other ratings agencies to follow suit are further data points suggesting that the S&P decision was flawed.
There's reality and perceptions of reality, however. On that latter front, after a recent expedition to Washington, I've concluded that regardless of whether S&P was right, they've won the argument in terms of perception. The summer debt debacle is, in many ways, the political equivalent of Hurricane Katrina. Perceptions of the Bush administration never recovered from that event, even though one could plausibly argue that the policy outputs of Bush's second term were better than the first term. Neverthelesss, Katrina was an inflection point that has caused a number of actors to reassess their perceptions about the political and policy competency of the White House and Congress.
The Conference Board this week reported the biggest monthly decline in consumer confidence since the height of the financial crisis in 2008, its consumer confidence index falling from a reading of 59.2 to 44.5, the lowest in two years....
“The debt ceiling negotiation is an extremely significant event that is profoundly and sharply reshaping views of the economy and the federal government,” Republican pollster Bill McInturff wrote in a presentation of survey work he has done recently that suggests the debt ceiling debate has led to a significant shift in public opinion.
The partisan struggle over raising the debt went on for weeks before Obama finally announced on the night of Aug. 1 that a deal had been reached that resolves the issue for now. But while Washington has moved on to its next drama — the deliberations of the so-called supercommittee agreed to in the deal — its psychological impact has resonated widely.
McInturff said the result has been “a scary erosion in confidence” in both the economy and the government “at a time when this steep drop in confidence can be least afforded. … The perception of how Washington handled the debt ceiling negotiation led to an immediate collapse of confidence in government and all the major players, including President Obama and Republicans in Congress.”
A recent Washington Post poll found that 33 percent of Americans have confidence in Obama to make good decisions on the economy and just 18 percent have confidence in Congressional Republicans to do so.
These are especially dangerous readings when Federal Reserve Chairman Ben Bernanke has essentially said it is up to politicians to help boost the economy now that the Fed has fired nearly all its monetary policy bullets.
[P]erhaps most challenging, the country would be well served by a better process for making fiscal decisions. The negotiations that took place over the summer disrupted financial markets and probably the economy as well, and similar events in the future could, over time, seriously jeopardize the willingness of investors around the world to hold U.S. financial assets or to make direct investments in job-creating U.S. businesses. Although details would have to be negotiated, fiscal policymakers could consider developing a more effective process that sets clear and transparent budget goals, together with budget mechanisms to establish the credibility of those goals.
I happened to be in Hong Kong a few weeks ago, and I said confidently that we were going to resolve this; we were not going to default; we would make some kind of political compromise.
But I have to tell you, it does cast a pall over our ability to project the kind of security interests that are in America’s interest. This is not about the Defense Department or the State Department or USAID. This is about the United States of America. And we need to have a responsible conversation about how we are going to prepare ourselves for the future
Clinton's statements were confirmed by officials I talked to while down in DC.
So, can this perception be changed? Here, I'm bearish in the short-term. These kind of perceptions can be self-fulfilling. Economic growth is a remarkable political palliative, but growth looks anemic for a good long while. The Obama administration can try to change the narrative, but that's almost as difficult as Inception -- for the same reasons:
As Reinhart and Rogoff have observed, the economic aftereffects of debt crises are long-lasting. From here on out, the political effects of such crises will be on full display.
As someone who studies global political economy, this is fascinating. As a U.S. citizen, this is utterly depressing.
I think the notion that mere election of Obama would represent a “soft power surge” as it were, should be tempered. It’s not that there would be no Obama effect. It’s just that it would be concentrated in places where elites are enthusiastic about him and his policies. This would mean Europe, Africa and Latin America, I suspect. Other regions — the Middle East, Russia and Asia — might be less receptive.
As the race draws to a close, I see prominent commentators are starting to speculate about whether electing Obama would bring a soft power surge.
Hey, now we have some real live data! Foreign Policyand Gallup have run polls in 70 countries from May to September 2008. The big findings:
Gallup Polls conducted in 70 countries from May to September 2008 reveal widespread international support for Democratic Sen. Barack Obama over Republican Sen. John McCain in the U.S. presidential election. Among these nations, representing nearly half of the world's population, 30% of citizens say they would personally rather see Obama elected president of the United States, compared with just 8% who say the same about McCain. At the same time, 62% of world citizens surveyed did not have an opinion.
Looking at the interactive map, I see that my initial supposition was partly in error. I was right about Europe and Africa leaning heavily towards Obama. I was surprised to see, however, that Japan, South Korea, and Saudi Arabia all trended towards Obama as well. On the other hand, large swathes of Latin America and South Asia are pretty indifferent to the whole election.
As for McCain, there was no country in which enthusiasm for him outpaced Don't Know/Refuse to Say. He did the best in Georgia (23% to 18% over Obama, with 62% not knowing or saying).
One final thought -- it's too bad that other countries (Russia, China, Brazil, Ukraine, Iraq, Israel, Indonesia) were not polled.
UPDATE: Two online and unscientific global responses: one from the Economist and one at If the World Could Vote.
At The National Interest, Nikolas Gvosdev points out that the global affection for Obama could be fleeting:
It would be foolhardy for the Obama team to assume that these strong ratings can easily and swiftly be translated into renewed acceptance of U.S. policies. And publics in other countries that are expecting an Obama administration would reverse or alter every last policy of the Bush administration are going to be disappointed.
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