How U.S. deficit and debt affect financial reputation internationally

¶ … United States Deficit, Surplus, and Debt Have an Effect on the United State's Financial Reputation on an International Level

The objective of this study is to examine how and why the United States deficit, surplus and debt have an effect on the United States' financial reputation on an international level.

The United States has been historically viewed as a country that is financially sound. In 2011, as the United States government appeared it was going to default on its debt it is reported that there was a great deal of "bitterness, division and dysfunction that resounded around the world." (Sanger, 2011, p.1) It is reported that the United States is experiencing a diminishing of its "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." (Sanger, 2011, p.1) Additionally, the United States debt levels have served to "chip away at the global authority of President Obama, who was celebrated aboard when he came to office as a man who would end an era of American unilateralism." (Sanger, 2011, p.1)

I. International Monetary Fund

The head of the International Monetary Fund stated that in the past "there was always a positive bias towards the United States of American, towards Treasury bills" but that the events had resulted in that positive bias being negatively affected. Not only is the public perception affected by the debt crisis but as well, the governmental operations of the United States are affected in a way that drains the perception of the power of the United States and effectively does slow down technological progress and therefore lowers the perception of the prowess of the United States. For example, cutting funding for NASA will certainly result in the United States space program being stunted. The United States space program has always been a source of pride for Americans and a source of awe for other countries. America has been respected and feared for its technological advances and its progress in space. In addition, the United States has historically sent aid to other countries in times of extreme need but the current debt burden of the United States is likely to bar the ability of the U.S. To assist other countries in times when historically the United State would have provided assistance and this too will serve to lower the esteem of the United States in the eyes of other countries. According to the work of Levit et al. (2011), "It is difficult to perceive all the adverse effects that a government default for even a short time would have on the economy and the public welfare." (p.8) It is well understood that a default would result in the government failing to honor its commitment to pay such as employees' salaries and wages as well as social security benefits. Should this happen the international reputation of the United States would suffer greatly. Levit et al. (2011) states that should this happen "the full faith and credit of the U.S. government would be threatened.