The new decline debate has reached a full boil just as Americans are electing a new president. Bush administration officials dismiss the talk of decline as a predictable and episodic ritual. "We've been here before," says Eliot Cohen, Rice's counselor and a leading neoconservative foreign policy figure. "It is periodically fashionable to talk about how the United States is all washed up." No doubt, other low points have occasioned bouts of declinist gloom. Take the 1970s, with the painful setbacks of Vietnam, Watergate, stagflation, and musings about "malaise." Many analysts, here and overseas, saw the geopolitical advantage shifting toward the Soviet Union—an assessment that, in retrospect, seems ludicrous. In the mid- and late-1980s, concerns about a debilitating American "imperial overstretch" failed to come true. Japan, with its industrial success and high-profile acquisitions of American assets, was pegged by some to have attained a trajectory that would eclipse U.S. economic might—another short-lived projection.
This time, however, might not turn out as well for America, some analysts worry, because the trends eroding America's pre-eminence run deeper. "It's not simply that we've run into a rough patch, shaking our self-confidence," warns Andrew Bacevich, an international affairs specialist at Boston University and author of this year's The Limits of Power: The End of American Exceptionalism. "It's different this time." That there is some sort of big change is widely accepted, even mainstream. Defense Secretary Robert Gates now speaks of a "multipolar world." In its 2007 annual survey, the International Institute for Strategic Studies referred to "the profound loss of authority suffered by the United States since its invasion of Iraq."
Diminished dominance. Yet more troubling was the vista painted by Thomas Fingar, the U.S. intelligence community's top analyst. Foreshadowing a conclusion of a coming report called "Global Trends 2025," he said in September that "American dominance will be much diminished over this period of time" and "will erode at an accelerating pace with the partial exception of the military." In future competition, he added, the military will be "the least significant" factor. Fingar labeled U.S. pre-eminence since World War II a "truly anomalous situation." Indeed, shifts in economic and military power—played out slowly, over decades and centuries—are the norm, as Yale historian Paul Kennedy pointed out in his 1988 work, The Rise and Fall of the Great Powers. Some analysts conclude that if the reality of America's power position has changed, so must American attitudes. "We should disenthrall ourselves from the idea that the well-being and security of the United States can only be attained by seeking to maintain primacy," says Bacevich.
In any case, the new financial shock is rattling a load-bearing pillar of American strength—its role as global financial superpower, including its privileged position as issuer of the world's favored reserve currency, the U.S. dollar. The dollar's special role has been critically important. It allows the federal government to affordably cover budget and current account deficits. The Feds are selling about half the new national debt to foreign investors, including governments like China's and sovereign wealth funds like those in Abu Dhabi and Kuwait. That has bridged the yawning U.S. fiscal gap, financing, in effect, global military activities and domestic spending without sparking inflation or driving up the interest cost of such monumental borrowing. It has also allowed Americans to maintain a notoriously low net savings rate.