Standard & Poor's downgrade of U.S. debt, along with the political battle over the debt ceiling and a faltering U.S. economy, will siphon away the time President Barack Obama has to deal with foreign policy issues. CFR's James M. Lindsay says that while the United States remains the world's dominant power, the downgrade strengthens the hand of those who argue that it is "in terminal decline."

Some may continue to point to the structural advantages enjoyed by the United States...of its rare combination of hard and soft power; of the fact that it remains the only serious power with true global reach... But in the current climate such facts appear to be cutting little ice with those who now insist that as result of Bush's ill-conceived war on terror, followed by the financial crisis, American decline is now a foregone conclusion.

Obama "seems to be a passive figure at a time when the world needs a leader." Obama and his advisers should pay heed to this quietly devastating observation. Even if they're right about where Obama is positioned politically, they have to worry whether all the concessions and maneuvering undercut a president's most important asset: an earned image of strength rooted in principle.

It's the economy that will increasingly set the limits on commitments Western powers are willing to make abroad, whether in the form of military intervention or even of aid. And, on the flip side, it will be economic pain that will increasingly serve as the main driver of rebellion and political instability across the global spectrum.

The steepest decline in American prestige took place during the Bush years, and President Obama doesn't look like he has the wherewithal to reverse the trend. Overleveraging of credit led to a housing bubble in the US and then to a full-blown financial crisis that enveloped the world in 2008.

The American image now faces several new and worrisome challenges: doubts about its superpower status, a decline in favorability among some of the closest allies, and giving more and more consideration to the People’s Republic of China as superpower.

Few Americans know, or much care, about the opinions foreigners hold of the United States. This was displayed during the ignorant and solipsistic debate over when or whether the United States will pay its debts, which concluded Tuesday with a promise that it will soon be renewed.

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. Now the topic of discussion...is whether the Age of Obama is giving way to an Age of Austerity, one that will reduce America’s influence internationally.