The “Premature” Anticipated Decline of American Power
Sep 15, 2012

The 2009 economic meltdown of American financial institutions and its concomitant effects on the American economy has caused a flood of international speculation about the future of the United States as a military and economic power. Various national and international strategic and economic forums have predicted that America will face a major decline as a world power in the coming decades, as other nations invade traditional American markets and catch up to American military capability.

At first glance, it is easy to accept such assessments. In terms of debt, the American government is indebted to international financial agencies, mainly Chinese banks, to the tune of approximately 20 Trillion dollars. U.S. government deficits are running in excess of a trillion dollars per year, with no relief in sight. To put this debt load into understandable terms would be to consider that every member of the U.S. population of some 330,000,000 persons carries a personal debt load of approximately $200,000.

Additionally, the American economy has not recovered from the significant job losses created by the recent economic slow down. The loss of a significant number of well-paying “high tech” jobs is only now beginning to show some improvement. Most of the jobs that have been created since 2009 have primarily been lower paying jobs in the service industries. Coupled with this loss has been the predilection of American industry to “outsource” not only production jobs such as the textile industry, but also otherwise highly paid, technologically skilled jobs to Asian countries such as China as cost avoidance measures. As yet, there has been no significant movement yet to repatriate these jobs back to America.

Additionally, the inaction of American politicians to put forth legislation to remedy these issues has not helped the international perception of an American economic and military decline. Faction-driven political battles has both obscured American policy objectives and hindered the passage of meaningful legislation that is required to address the fundamental issues at the root of many of the nation’s problem. Obstructionist representatives in the U.S. Congress have failed to pass any economic legislation that has been presented by the Executive branch of government to the Congress. So, because of their social conservative agenda issues, there has not been a budget bill past since 2009. The consequence of this action on the part of a number of Congressmen with their own agenda items which have focused on social conservative issues rather than the overall economic health of the nation means that hey have only succeeded in adding to the already stressed government fiscal system by keeping spending limits at 2009 levels that are not adjusted for either inflation or increasing costs for goods and services.

As well, the current Administration is recovering from the expensive war that is a legacy of the previous administration. Many pundits apparently forget that the American involvement in the Middle East was not funded by a tax increase, but through the sale of American debt through bonds. The war, at its height, was costing the American government a Billion dollars per day, and although the cost is currently reduced, the expenses of the continuing residual American operations is still being funded by deficit financing.

Add to this the cost, in human terms, of the economic decline of American society where there exists a much higher number of citizens having to rely on government benefits in order to survive.

It will take a long time to rectify these problems, and could conceivably may take American governments some 25 to 30 years to recover. In that interval, some believe America could be superseded by China, India and the Russian-European economic block. Experts already point to the fact that China now does more business with Africa, South American and South East Asian than the USA, and they see unparalleled growth potential. Many observers believe the Asian ability to keep low labour costs, sounds a “death knell” for any chance for America returning to its ­previous pre-eminent position.

Is it as simple as that? Are we to believe that “Third World” economies will become so strong as to dominate world trade for the foreseeable future? Is the United States of America sliding irretrievably into a more modest economic and military position in the world?

I suspect this is “wishful” thinking on the part of a some financial analysts who are cherry-picking information to suit their (possibly partisan) purposes. Have they neglected to review or understand American history to determine how the United States has handled fundamental issues such as these in the past?

Affirmative Action
As a country, the United States has proved more than capable of addressing its major internal political and economic issues. While often somewhat slow to take the necessary affirmative action, it has always pulled together to work towards solving any major problems facing their nation.
One of America’s greatest faults has been her generosity to the rest of the world. The U.S. government has expended billions of dollars in disaster relief, the provision of humanitarian and military aid and assistance to governments facing internal and external threats from other “non-standard” agencies. They have, in the course of their short history, fed most of the world during multiple crises, provided protection for a host of countries, and medical aid throughout the world in times of need.

Historically, the United States has been a “boot strap” country – one that uses its own resources, skills and business acumen to sort out its own domestic problems. It has successfully faced significant economic problems since its independence, and has always found ways to solve its own internal and external problems. From the Reconstruction Period following the Civil War, to the Recovery Plan during the Great Depression, the American government and economy has always adapted.

While Americans currently face an economic downturn, there are a number of pragmatic steps the government could take. It will take a concerted effort both domestically and externally to come to grips with the problems. Any mixture of the approaches below could provide the wherewithal to solve problems. Plausible solutions could contain aspects of the approaches below:

  1. Foreign Aid – The government of the United States could opt to significantly reduce their foreign aid to other countries. This could include reducing funding of international programs, cutting direct aid to countries (after a period of assistance) for natural catastrophes, or cutting funding for international students to study in the United States. The U.S. Government could limit aid to a period of time or until a dollar level is reached. Given the increased wealth of the economies of other economically competitive nations, the United States is in a position to demand that these nations accept a greater share of responsibility.
  2. Military Assistance – After World War II, the role undertaken by the United States as the major player in protecting peace and democracy should be more equitably shared by other major powers. This would significantly reduce the cost of American military “assistance” operations.
  3. Program Funding Cuts – There is no doubt that, in the next government mandate, there will need to be a significant “scrub down” of government programs and projects. Non-vital programs and “pork barreling pet projects” will be terminated. As well, many of the ­military’s programs to develop new weapons and service equipment will be also reviewed extensively. Selected developmental programs may simply have their projected delivery date extended. The recent experience of personnel shortages during the Afghanistan and Iraqi conflict will see no major reduction in manning levels. In fact, it is likely that many of the current trades that are short will be expanded to redress current difficulties.
  4. Revision of Tax Structure – The current U.S. tax structure is still based upon the discredited concept of “Supply Sided Economics” which was premised on cutting taxes for wealthy investors who presumably then invest in the American economy to create new wealth and more jobs. Unfortunately, that concept failed to deliver on its promises. In the next budget, there will be a need to reverse the current practice of minimal taxes for ­families that have major income from their investments or corporations. This would generate a significant increase in the Federal tax base. It would also enable the government to reduce the tax burden on both the middle and lower classes, thus increasing their spending power.
  5. Federal Support to State Governments – The current practice of, in some cases, blind funding of State programs with Federal funds will likely change. The Federal government will likely take steps to ensure that jointly-funded State programs are, in fact, matched by State funds, and that negotiated objectives and goals are equally matched. In addition, the Federal government could develop legislation to override State referendums regarding taxation.
  6. Employment – Repatriation of Outsourced Economic Production – The current practice of outsourcing jobs to foreign manufacturing sites will probably come under extreme scrutiny after the next election. It is highly likely that the government will impose significant ­tariffs and other charges to level the playing field. It is also conceivable that the ­American government procurement system will refuse to buy products or services that do not contain a very high percentage of American-made parts or systems.
  7. Economic Espionage – The growing problem of foreign economic espionage will likely be addressed by the next government. Significant resources will be spent to prevent, protect and strengthen American commercial and financial computer systems. In concert with these defensive measures, there will be companion efforts by the US government to shut down foreign hackers who attempt to steal industrial sanctions.
  8. Major Infrastructure Building Program – Following the actions of the Roosevelt action plan to deal with the Great Depression, the next government will likely develop a strategy and funding plan to replace the older infrastructure items such as highways, bridges, government buildings and to rehabilitate currently polluted tracts of land. This will be a major job-creating program that will put money back into the hands of more consumers.

While the outcome of the next U.S. election will likely be decided when you read this, the requirement to address its fiscal concerns will likely preclude any other action to resolve the current budgetary problems that the American economy currently faces. Remedial action will need to be taken, and it is likely that, other than the repudiation of its international debt, the American executive will need to take a program of stringent measures to control and manage their economy in order to return to a balanced and profitable economy.

Failure is not an option
On a final note, the character of the American people has always been to take current problems head on and to solve them. Just as they reacted to 9-11, any suggestion that they will lose their preeminent position as the military and economic powerhouse of the world will be met with stern resolve to ensure otherwise. All they need is to be given a “cause” and a competent leader to undertake strong fiscal measures to maintain their status.

Will obstructionists to set aside ­partisan politics and direct their efforts towards ­creating a solution after this election?

Americans have, in the past, met every major crisis head on and, through their determination and hard work (as a collective society), have always won in the long term. It is difficult to imagine that this time they would simply throw in the towel and accept a reduced international status. Instead, look forward to seeing the Americans coming together to solve these issues through a set of comprehensive progressive legislation coupled with a totally revised America-centric ­foreign policy. In the American mind set, “failure is not an option”.

Robert Day is a military historian and analyst at FrontLine Defence.
© FrontLine Defence 2012