Mr. Morsi, who has links to Islamist groups looked upon with suspicion by the West, was never Washington's first choice to lead a post-Arab Spring Egypt. But President Obama made a clear choice to allow the Egyptian people to chart their own course, thinking that interference would only undermine the goal of a truly democratic Egypt.
Now, it seems, that choice could potentially blow up in Mr. Obama's face. A day after brokering a cease-fire in the Israel-Hamas conflict, Morsi took a step that could make him as much of an autocrat as his US-friendly successor, Hosni Mubarak. The implication for US and the West seemed clear: peace with Israel, but at the price of Egyptian democracy.
The Washington Post's Jennifer Rubin summed up the worst American fears in her Right Turn blog: "The Arab Spring in Egypt looks a whole lot like the Hosni Mubarak tin-pot dictatorship, minus the secularism, good relationship with Israel and reliable partnership with the West. In other words, Egypt now may have Mubarak-style oppression plus Islamist rule."
So the question for Washington now is what to do – if anything.
For Republican hawks like Sen. John McCain (R) of Arizona, who were never comfortable with Obama's relatively hands-off approach, it could be time for America to start pulling some levers. That means perhaps withholding the billions of dollars in aid that the US gives to Egypt, as well as pulling its support from international efforts to forgive Egyptian debt and to give Egypt a $4.8 billion loan from the International Monetary Fund.
"What should the United States of America do, they should be saying, 'This is unacceptable,' " said Senator McCain on Fox News Sunday. " 'This is not what American taxpayers expect, and our dollars will be directly related to the progress toward democracy, which you promised the people of Egypt when you were elected president.' "
Conservatives are already looking askance at the president's response to Morsi's declaration. Chris Wallace, the host of Fox News Sunday, characterized the Obama administration statement on the subject as "very tepid."
Indeed, as with the Arab Spring, Obama so far appears to be looking at the situation through a different lens. His administration sees the establishment of a democratic Egypt as the top goal and has acknowledged that process is likely to be bumpy. Officials say they are awaiting an explanation for why Morsi did this.
There are explanations, some analysts say, that could be – if not justified – then at least defensible. For example, the Egyptian judiciary is seen as being sympathetic to the old regime and the military that supported it. It is also seen as fearing a descent into Islamic law under Morsi. It has therefore taken steps to hinder Morsi's ruling coalition, including disbanding the popularly elected parliament.
Morsi could point to media reports that the judiciary was considering disbanding the group working on a new constitution. He could argue that his special powers are a necessary and temporary evil to protect the Constitutional Assembly from interference by an unelected group trying to maintain the vestiges of the old regime. And America could listen.
"We should do what's been working for two years, more or less: Speak softly, stay flexible, keep to certain minimal red lines, but otherwise understand that things will be uneven and ugly at times," writes Michael O'Hanlon, a security analyst at the Brookings Institution in Washington, in an e-mail. "I'm not sure [Morsi] made the wrong call. The real test is whether he relinquishes the extra powers down the road as promised."
To those in this camp, Egypt represents a precious opportunity. It is a chance for an Arab voice – long suppressed by Western-backed autocrats – to finally find a responsible place in the global conversation.
"It is impossible not to be tantalized by how much leverage Morsi could wield in the peace process, if he ever chose to engage Israel," writes New York Times columnist Thomas Friedman. "Precisely because he represents the Muslim Brotherhood, the vanguard of Arab Islam, and precisely because he was democratically elected, if Morsi threw his weight behind an Israeli-Palestinian peace deal, it would be so much more valuable to Israel than the cold peace that [former President Anwar] Sadat delivered and Hosni Mubarak maintained. Sadat offered Israelis peace with the Egyptian state. Morsi could offer Israel peace with the Egyptian people and, through them, with the Muslim world beyond."
As Mr. Friedman points out, though, that only works if Morsi remains the president of the Egyptian people, and resists the temptation to become an Islamist incarnation of Mr. Mubarak.
Whether he has the discipline or desire to do that is a primary point of disagreement in Washington. Some look at the cease-fire he brokered between Israel and Hamas and see a man who speaks in fiery rhetoric but deals in political realities. Others look at the region with cynicism confirmed by years of experience and have grave doubts about the motive behind temporary presidential "emergency powers."
It points to perhaps the fundamental and still-unanswered question arising from the Arab Spring: Has it changed the political paradigm in the region, or has it merely given a new and more anti-American face to the same old problems? With his actions, Morsi will begin to answer that question.
• Staff writer Gail Russell Chaddock contributed to this report.