Political price
October 10, 2013
A group photo at the end of the Asia-Pacific Economic Cooperation(APEC) summit in Bali, Indonesia, showed John Kerry standing in the back row, at the far side, looking slightly forlorn. Naturally, the Russian and Chinese presidents were placed in the middle of the first row, but, in accordance with protocol, the US Secretary of State had to make do with an outsider position. After all, Kerry only came to the summit because President Obama cancelled his Asia visit at short notice, choosing to stay in Washington during the budget crisis.
The fact that Kerry represented the US instead of the President was the most visible sign that since October 1, it has not been "business as usual" in Washington because large parts of the US government and administration have been put on hold by the government shutdown. At the same time, repercussions for US foreign and security policies are minor.
Summit without results
In view of Obama's absence from the APEC meeting, Malaysian Prime Minister Najib Razak said the US President missed a golden opportunity to "show leadership in that context of the new emphasis toward Asia." In fact, Obama's absence - with the exception of the group photos - remained without consequences: The APEC summit did not come up with any concrete results.
"The consequences are more symbolic than practical - at least short-term," Matthew Baum, who teaches Global Communications and Public Policy at Harvard University, says. "The US appears not to have its house in order, and as a consequence, to be incapable of managing its implicit responsibilities as a world leader."
The shutdown has two other visible consequences on US foreign and security policies that reinforce this impression: the cancellation of the next round of talks about a Transatlantic Trade and Investment Partnership (TTIP) and of a military exercise with Japan. Again, the symbolism is stronger than the actual fact. The TTIP talks have not been cancelled, but merely postponed. And with only about 1,000 soldiers involved, the US-Japanese military exercise was but a minor field exercise.
Important defence expenses and duties, for instance in Afghanistan, are exempt from the budget gridlock.
Long-term funding for US development aid
"US foreign policy continues to move forward," Professor Baum says. "Embassies are not closed and consular offices are still on the job." There are practical effects, however, such as "delays in processing passports and immigration applications within the United States."
US development and military aid is also barely affected at this point. Despite the shutdown, the US agency for international development, USAID, manages to sustain the vast majority of its projects. Most of the aid agencies have multiyear appropriations or financing that are not tied to a fiscal year, so they are not yet affected by the shutdown, the New York Times reports. But the longer the shutdown lasts, the more strapped for funds such development programs will become.
The same is true for Washington's considerable grants of military aid. The 2014 budget earmarked $3,1 billion (2,28 billion euros) in military assistance to Israel and $1.3 billion to Egypt. If the budget crisis continues, these funds might not be disbursed. In the case of Egypt, some US military assistance has now been suspended, but that decision was made before the shutdown began. Due to the political unrest in the country, only part of the aid was transferred last fiscal year, and ever since the military's ouster of Egyptian President Morsi, US military assistance to Egypt has been under review.
October 17 deadline
Compared to the consequences of a failure by Congress to raise the debt ceiling by October 17, even the worst possibly imaginable repercussions of the budget dispute are but a storm in a teacup. "That will have dramatic consequences,"Heinz Gärtner says. "The state will no longer be able to take out loans, and there will be consequences for foreign and security policies, consequences concerning sanctions and even the free trade agreement," the US expert at the Vienna-based Austrian Institute for International Affairs (OIIP) says.
If the US actually slides into a dual fiscal deadlock and default crisis on October 17, it could have incalculable consequences not only for the US, but the entire world. If the worst predictions come to pass, "it would be bad for all aspects of US policy, domestic and foreign," Baum says.
The professor warns that failure to raise the debt ceiling would lead to a potentially substantial US and global economic slowdown. "But this is speculative at the moment since nothing like this has ever happened," Baum concludes.