This assumes that there is no "slack" or inertia in the system that is to say the system requires top performers in the leadership position to function properly. But if we make a different assumption, namely that there is a lot of inertia or "forgiveness" for bad or marginal performance - no ill consequences are to be expected.
Research on organizational behavior seem to support the second assumption. One of the main purpose of organization is "risk pooling" and that included the risk of uneven performance of human agents. The notorious "taylorisation" was just that - designing a system that does not depend on top human skills bur rather on minimum skills and motivation.
That principle operates on all organizations level - from the assembly line to top management. The stories of managerial incompetence are abound - from urban legends to cartoons (Dilbert) to organizational studies showing two traits of managerial behavior. First is "satisficing" that is performing at the minimum acceptable level. Second is ex post facto rationalizing their own actions and blunders in terms of accepted ideologies, tropes and myths. The organization did ok during the past year? This was because of the vision and aggressive benefit maximization policies of its leadership. The organization did not do so well? That was a result of unfair competition, government red tape and stubborn unions that thwarted the vision of the leadership.
It is safe to say that most corporate and political leaders are, on average, mediocre nullities who rose to the top by connections, conmanship and the ability to say what the powers that be want to hear, careful ass covering, backstabbing and sheer luck. Yet despite that prevalent mediocrity on the top, the sky does not fall, and the system seldom runs aground. This is true not just about the US, but most countries as well.
With that in mind, Bush strategy of surrounding himself with mediocre sycophants is a mirror image of corporate behavior and makes a lot of sense. The chances that mediocrity derails the system are rather low, but the chances that sycophantic lieutenants will help to solidify the power of the top bosses are quite high. What is more, the chances that top performers turn to obedient sycophants are not that great either. It thus is only logical that surrounding oneself with sycophantic mediocrities gives the best chance of success, at least for the bosses.
In sum, expect more mediocrity and do not hold your breath waiting for the system to grind to a screeching halt. I am not saying that the grinding will not eventually happen, but there is a lot of inertia in the system that will propel it for a while. I would love to see the US system unraveling during my life time, but I would not bet on it.
Wojtek