Debt Deal Reached, but Damage Already Done

What’s the Latest Development?

A deal has been reached by Congressional leadership to cut $2.4 trillion in federal spending over ten years. The agreement, which has yet to pass the houses of Congress, was reached after bitter political wrangling and practical paralysis. “Among foreign leaders and in global markets, the political histrionics have eroded America’s already diminishing aura as the world’s economic haven and the sole country with the power to lead the rest of the world out of financial crisis and recession.” 

What’s the Big Idea?

America’s role in the world is diminishing. With troop withdrawals expected in Iraq and Afghanistan, and the President’s unwillingness to commit large resources to the N.A.T.O. campaign in Libya, the world sees an America with changing priorities. The willingness of some members of Congress to put the country into default, however, must come as a surprise. “It seems obvious to everyone that we haven’t done anything, but veer around to avoid catastrophe,” says Yale professor of management Jeffrey Garten.