Washington’s scandals won’t stunt America’s recovery
Scandal has visited the Obama administration, and thanks to the media narrative it’s larger than the sum of its parts. With a talking-point imbroglio after Benghazi, the IRS’s discriminatory practices and the Justice Department’s procurement of Associated Press phone records, the Obama administration and its allies are right to be worried.
But those of us invested in U.S. growth have little reason to fret. The past few years have proved that dysfunction in Washington has almost no effect on America’s attractiveness to investors. As the rates of U.S. Treasury bonds prove, America continues to be the place for investors to park their money. That’s because petty politics don’t control the fate of the country.
In major emerging markets, politicians have to behave to appeal to investors. In capitals like Moscow, Delhi and Pretoria, this is largely an act of optics, but it’s an important one for countries trying to earn the trust of investors who see opportunity, but not necessarily stability. For further proof of developing countries’ precarious position, look to Bangladesh, where a country’s economy has been threatened by its politicians’ negligence before, during and after the country’s latest garment industry catastrophe.
Things are not nearly as volatile in the United States, and they won’t be even if the Obama scandals metastasize. Growth has already been moving in the right direction, and the Unites States doesn’t need a pristine Obama administration to ensure that it continues.
On energy, the Obama administration has wisely shifted regulation to the state level, allowing states such as Texas, Oklahoma and North Dakota to create drilling jobs even as a state such as New York wrestles with the environmental impact of fracking. This has helped control unemployment and keep energy prices down, and solidify the country’s long-term energy security. Nothing about that is likely to change.
On trade, Obama has led a remarkably pro-free trade administration, despite critics who say otherwise. His administration is remaking international trade architecture away from a failed Doha round and toward transatlantic and transpacific partnerships. None of that changes, either.
Finally, Congress has not actually been that dysfunctional recently — and the recent scandals should not set it back. Policy items such as immigration reform, tax reform or another debt ceiling extension are framed by congressional incentives. On immigration, it’s a political win for both parties, one that has been driven by a bipartisan Senate initiative. not the White House. Now that Senate tax chief Max Baucus has announced his retirement, his focus has shifted from a grueling 2014 reelection campaign to his legacy: a bid for comprehensive tax reform. That gives us motivated committee chairs in the Senate and the House, where David Camp, chairman of the House Ways and Means Committee, has already pushed for a revenue-neutral reform effort. Congress needs to raise the debt ceiling so as not to be remembered for crashing the economy — and Republicans will be in a position to tie its passage to reasonable demands (perhaps even tax reform).
With Congress finally making progress, an embattled Obama administration won’t hurt, and could even help, the passage of these measures. That’s because the administration’s problems are just that — the administration’s. If the 2014 coattail strategy becomes less palatable for congressional Democrats facing re-election, Democrats may be more eager to cut a deal with Republicans so they can run on their legislative accomplishments instead of their association with the president. Similar logic applies to a harried Obama, who may be more willing to get behind new legislation in the hopes of diverting attention from the scandals.
That a floundering Obama administration doesn’t necessarily equate to a floundering country is an uplifting story. Washington is working as it should — ills affecting the executive branch can largely be contained therein. The congressional agenda and the health of the American economy don’t have to suffer along with it.
This column is based on a transcribed interview with Bremmer.
PHOTO: U.S. President Barack Obama and Attorney General Eric Holder attend the National Peace Officers Memorial Service at the Capitol in Washington May 15, 2013. REUTERS/Kevin Lamarque