WASHINGTON |
(Reuters) - The status of the United States as the world's dominant
power will be at risk if it does not meet the immediate challenge of
overhauling its economy, a top U.S. diplomat warned on Monday.On the line is America's ability to act as a free-market model in a world where powerful, centralized systems such as China's are on the rise, the State Department's top economic official Robert Hormats said.
"We have to demonstrate that the political system can deliver economic results," Hormats told the Reuters Washington Summit. He stressed the need to refocus the United States' stretched resources on infrastructure and education spending.
"Whether we're the primary, competitive power in the world 10-15 years from now depends on what I call the law of long lead times," Hormats said.
"That means that what we need to do today, regardless what China does or doesn't do ... (is) we have to demonstrate our political system can deliver results... We need to invest," said Hormats, a former Goldman Sachs banker.
"When I was in New York, I used to drive everyday under the Brooklyn Bridge ... There was a netting and the purpose of the netting was to prevent part of the Brooklyn Bridge from falling onto your car."
Fresh back in Washington from a summit in France of the world's economic powers that was dominated by Europe's debt crisis, Hormats said the United States remained able to influence such discussions about the global economy.
But if U.S. lawmakers fail to strike a deal on how to start tackling the country's huge budget deficit, confidence might start to run thin that the world's biggest economy can sort out its own deep problems.
"I don't want to get involved in domestic politics but I would say from the point of the view of the rest of the world that the super committee's inability to reach an agreement would be seen as very troublesome," Hormats said.
"It would again raise questions about our ability make decisions ... that would improve our long-term economic prospects," he said.
A dozen lawmakers on a special committee in Congress are trying to strike a deal to cut at least $1.2 trillion from the U.S. budget deficit over the next 10 years.
The so-called super committee faces a deadline of November 23 and with just over two weeks to go, there are no signs of a breakthrough. The failure to reach agreement will trigger automatic spending cuts starting in 2013.
Talks are stuck on deep-seated differences over raising taxes and cutting spending.
For Hormats, the bigger issue is matching the long-term focus of countries such as South Korea and Finland which have done well at investment in education and infrastructure.
That would represent a new phase for the U.S. economy after unsustainable, debt-fueled consumption blew up and caused the 2007-09 recession.
"We have to do it today in order to be a strong, effective economy in 10 or 15 years," Hormats said.
A Republican leader in Congress, also speaking at the Reuters Washington Summit, said he was confident that the United States would overcome the challenge of fixing its deficit crisis.
"These are challenging times, but I have supreme optimism in the ability of the American people to overcome huge challenges," said Sen. John Cornyn, a Texas Republican.
"We've done it before, the existential threats to our way of life, we corrected historical injustices in the civil rights period, and I think we can do this."
(Reporting by the Reuters Summit team; Editing by Jackie Frank)
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