America in Decline?

It’s a Matter of Choices, Not Fate

By Robert J. Lieber

The notion of American decline, although now pervasive, is not entirely new. Current concerns need to be seen against a history of pessimistic assessments, as for example during the Great Depression, the post–Vietnam War era, and again in the late 1980s when fears of Japanese primacy and the rise of the European Union as a world power were widely held. Once again the United States needs to overcome serious problems, but much of the thinking and writing about the American future reflects a stubborn undervaluation of the country’s resilience, fundamental strengths, and ability to overcome adversity.

Ironically, while much of the current focus has been on the impact of financial and economic crises, a lagging recovery, serious problems of debt and deficit, and competition with a dynamic and rising China, the United States actually continues to possess far greater material strengths than commonly assumed. In any case, decline is not destined by some ineluctable cycle of history. Instead, America’s future is a matter of will and willpower, in the sense of crucial choices to be made about policy and strategy. Willpower in particular involves leadership and well-informed decision making. If the right choices are made in the years ahead, the robustness of American society coupled with its unique capacities for adaptation and adjustment should once again prove decisive.

Despite a lagging recovery from the worst financial and real estate crises in eighty years, the United States still accounts for some twenty-one percent of world GDP (based on market exchange rates, the IMF’s preferred indicator for international comparisons). The rate is only modestly lower than its twenty-six percent of 1980 and, as of 2012, is twice the size of China’s.

These figures not only reflect limited erosion in the relative standing of the United States compared to that of other countries, but also attest to America’s status as the world’s largest economy by a substantial margin. Moreover, America’s GDP per capita is more than eight times greater than China’s. In addition, the United States has the deepest capital markets, benefits from the dollar’s role as the world’s predominant reserve currency, and, despite a large trade deficit, is the world’s third largest exporter of goods and services, as well as the largest importer.

Additional factors underpin the American advantage, including enormous natural resources and a vast land area far less densely populated than the territory of its major competitors. It is the third largest producer of oil after Saudi Arabia and Russia, and thanks to dramatic advances in technology it is experiencing a renaissance in the production of shale gas and tight oil. In addition, it is one of the world’s leading agricultural producers. It enjoys a higher fertility rate among women than any other major country except India, it remains by far the most popular destination for immigrants, and it continues to benefit from a growing population and work force.

While other countries seek to develop their own high-tech sectors, Silicon Valley remains unique—a world center for flourishing clusters of technological innovation and development. In addition, the United States remains well positioned to advance in cutting-edge areas of technology, including medicine, biotechnology, gene therapy, nanotechnology, and clean energy.

Nonmaterial factors are also central to America’s strength. The society’s resilience and adaptability are unusual for a large country, as are its economic competitiveness and entrepreneurship. The United States, thanks to its unmatched research universities, enrolls a higher proportion of the world’s international students than any other country, with some two-thirds of graduate students who study abroad doing so in the United States.

Democracy, the rule of law, liberty, and popular sovereignty constitute fundamental strengths. There is no doubt that the democratic process is often messy and raucous, but it makes the political system responsive to a huge and heterogeneous public. It is well to keep in mind that America’s main peer competitor, China, lacks these vital features. There, the gap between rulers and the ruled could become increasingly untenable for a wealthier, more educated population with access to information and social media and increasingly aware of its own lack of political and civil liberties, not to mention the absence of accountability on the part of those who control political power. Indeed, China may be experiencing as many as one hundred and eighty thousand political, civil, or labor disturbances per year, and without major changes, which the current leadership is unlikely to countenance, social unrest will only continue to grow.  

The basic strengths of America are real, but not immutable. American status does not maintain itself; the actions required to reduce or counteract the risks of decline are numerous and complex. The most critical areas of concern include debt, the deficit, and entitlements, along with health-care and tax reforms, as well as changes in immigration policy and measures to lessen dependence on imported oil.

Among these, debt, the deficit, and entitlements stand out. Failure to solve the problems intrinsic to these issues would likely produce the kind of decline that pessimists have been predicting. The gap between what the federal government spends—more than twenty-four percent of GDP—and what it takes in—less than seventeen percent—is unsustainable. We are in the fourth year of trillion-dollar deficits and, with an aging population and the retirement of the Baby Boom generation, these trends could worsen. To enact essential reforms, Congress and the president ultimately will have to overcome political gridlock. For Democrats, this means acquiescing on serious cuts and cost containment measures for government spending and entitlement programs, including Medicare, Medicaid, and Social Security. For Republicans, this requires acceptance of measures to increase government revenues as part of tax reform. In addition, there are likely to be constraints on defense spending and veterans’ benefits.

A central element for any agreement that really makes a critical difference is the issue of health care. It is both the most important and the most difficult of the entitlement issues, and it stands out as the most common target for cost control. Whereas defense spending this year amounts to 4.7 percent of GDP and is on a downward path toward 3.5 percent as spending on Iraq and Afghanistan declines, health care’s share of the national income has been climbing relentlessly. In 2011 it amounted to more than 17.3 percent of GDP, almost half of that in the public sector, and it is on an upward trajectory. It would be consistent with the American past if the increasing severity of these financial constraints finally provided sufficient urgency for action.

Beyond the major areas of health-care and entitlement reform, other challenges loom. For the economy as a whole, reducing uncertainty and fostering a climate conducive to investment and economic growth are vital. This is especially relevant for tax reform and rationalization of the corporate tax. The United States has the second-highest corporate taxes in the world, after Taiwan, but because of the complexity of the tax structure and loopholes in the law, some corporations pay little or no tax, while for others the tax structure creates incentives for investment abroad rather than at home.

Excessive bureaucracy and government regulation are closely connected. Some degree of regulation is desirable and necessary in a modern economy, but excesses in bureaucratic structures, tedious permitting processes, arbitrary application of labor, employment, and environmental law, and overlapping federal, state, and local jurisdictions have become legendary.

Another major area for domestic reform concerns energy consumption. Here too, political clichés need to be heavily pruned. Complete energy independence may not be necessary or possible for the US, but the reduction of America’s dependence on imported oil and its vulnerability to oil price and supply disruptions is essential. What is required is a diverse, robust energy mix that includes better efficiency at home coupled with substantially increased domestic energy production, especially of oil and natural gas, along with the safe use of nuclear power. Renewable energy resources, such as wind and solar power, have a useful place in this energy mix, but compared with the vast quantities of energy required to sustain modern American life, their overall impact will remain modest, at least for the medium term. The challenge is to focus on what is practical and effective, rather than on what is fashionable or politically expedient.

Natural gas offers immense promise and as a result of the recent surge in the exploration and production of deep, or shale, gas reserves, its use for electricity generation has dramatically expanded. Similar production techniques are rapidly increasing the production of oil. As a consequence, America’s dependence on imported oil has already declined from a high of more than sixty percent in 2005 to forty-two percent in 2012. Despite environmental concerns, these gas and oil resources can be exploited safely and effectively and can be a major source of jobs and economic competitiveness.

Immigration reform would be another valuable item on any serious agenda of needed domestic change, and, as with other key policy proposals, it is a subject that triggers sharp partisan disagreements. Historically, immigrants have contributed greatly to American society. They have been a source of entrepreneurship, vibrancy, and cultural enrichment, and their presence has helped to keep the United States growing and dynamic. In recent decades, for instance, immigrants from China and India have played a major role in the successes of Silicon Valley, where more than half the current workforce is from abroad.

Constructive ideas for dealing with these issues have included expanding the number of H1-B visas for skilled immigrants, offering green-card status to anyone who successfully completes an advanced degree at a US university, and granting residency or citizenship to those who serve honorably in the armed forces. Whatever the exact fix, it should be acknowledged that existing policies remain seriously dysfunctional. They create frustrating bureaucratic obstacles for the skilled and entrepreneurial migrants most valuable to American society. America needs reforms that will be effective in deterring illegal entrants, provide temporary visas for agricultural and other workers, and favor those best equipped to contribute to and flourish in a modern economy. Eventually, steps will need to be taken to regularize the status of many of the estimated twelve million illegals, who, along with their often US-born children, are unlikely to be deported after long stays in the United States. Such measures are overdue, yet it is by no means clear that they can be managed politically, especially when some participants are prone to elide the distinction between legal and illegal immigration and to criticize as “anti-immigrant” those measures that seek to address the problems of illegals and borders.

Almost every deliberation about foreign policy sooner or later gives rise to calls for the US to renew or enhance its reliance on international institutions and multilateralism as the preferred means for addressing problems and threats. However, while the world may now be more multipolar, it is arguably less multilateral. The number and relevance of actors and chessboards on which world politics, economics, and conflict play out has increased, but there is little sign that the world is becoming better able to manage or mitigate these disputes. This deficit is evident in the shortcomings of international and regional institutions and sometimes reckless behavior of rising powers. Nonetheless, some liberal internationalist thinkers remain insistent that the US must trade its own unilateral power for the empowerment of new forms of collaboration and global governance.

Yet evidence for the viability of these emerging forms of cooperation is not easy to discern. The BRICS (Brazil, Russia, India, China, South Africa) and others mostly have been conspicuous in their reluctance to cooperate. This has been apparent not only in Libya, despite UN authorization of all “necessary action” to protect civilians, but in other realms as well. These include human rights, humanitarian intervention, ethnic cleansing, the environment, enforcement of nuclear nonproliferation agreements, the rule of law, free trade regimes, and even in China’s deliberate undervaluation of the yuan in direct contravention of IMF and WTO rules to which Beijing is supposedly bound.

Given these international realities, America’s strengths constitute a crucial element of stability. Despite a degree of erosion in its relative power compared to a generation ago, the United States remains the world’s principal provider of collective goods. Other nations are no more able to take on this role than are the international organizations with their frequently inadequate and often lamentable performance in responding to 
common problems.

The evolution of the Obama administration’s foreign policy provides some evidence of these realities. Barack Obama came to office in January 2009 committed to offering America’s adversaries an “extended hand.” The idea seemed to be that if only the new president could assure adversaries and allies that he—and thus America—meant well, threats or problems could be mitigated or overcome altogether.

In practice, however, emphasis on interdependence, good intentions, and the belief that “the interests of nations and peoples are shared” did not go very far with Vladimir Putin, Mahmoud Ahmadinejad, Bashar al-Assad, or Hugo Chávez. In a quest to bridge differences, the Obama administration at times underemphasized the distinction between adversaries and allies. For example, Obama’s June 2009 Cairo speech suggested that the thorny problems of the Middle East had their origin in the West and downplayed local responsibility for social and economic stagnation, authoritarianism, corruption, and repression. By the end of the following year, the shortcomings of this view would become obvious with the eruption of the Arab Spring.

International institutions, alliances, and balances of power have important uses, but none are by themselves a sufficient substitute for America’s unique role. The consequence of a major retrenchment or outright disengagement by the United States would be a serious weakening in the current world order, which liberal internationalists seek to expand, as well as greater threats to our own national security that realist advocates of withdrawal from international responsibility claim to prioritize. Ironically, the centrality of the US role may be better appreciated abroad than here at home. In the same Gallup survey that found the United States by far the most popular destination for would-be foreign migrants, respondents in more than one hundred countries expressed much higher approval of US leadership than for six other major powers, including, in order, Germany, France, Japan, the UK, China, and Russia.

The American role remains—in the oft-used word—indispensable. With its hard-power resources, it is the ultimate guarantor against aggressive and nihilistic movements and regimes. But no foreign policy can be sustained if it lacks sufficient backing. Preserving a solid domestic base of support remains the sine qua non for sustaining a leading world role. This includes the interplay of material and ideational elements. The material dimension requires a strong and dynamic economy at home, as well as the requisite technological and military strength. Essential foreign commitments need to be maintained while avoiding overextension. The ideational component entails leadership and the appreciation and expression of American interests, security, and national purpose. This requires not only the effective use of traditional diplomacy, but public diplomacy as well. Information-age ideas about the world as a global village (as in the Clinton era) or focus on social media (as during the Obama presidency) are all well and good, but they do not provide effective substitutes for focused and well-conceived programs to convey American values and purpose at home as well as abroad.

Absent some extraordinary “black swan” event, America’s history and fundamental strengths are likely to be a more reliable guide to its future than the pessimistic assessments that currently dominate the national dialogue. This is not to disparage the thoughtful articulations of concern that have appeared during the past decade, but to note again that even some of the most astute observers have underestimated both the resilience and sense of purpose of the United States. Moreover, public and elite reactions to the September 11th attacks and, nearly a decade later, the expressions of national satisfaction in the killing of Osama bin Laden suggest the reservoirs of national solidarity that exist, whatever the dysfunctional elements of partisanship and animosity in national political life.

Crisis can be a stimulus to change as well as a warning sign of potential failure, and it is often the case that major problems are not grappled with effectively until they become acute. The debt, deficit, and entitlement issues that currently cloud the American future could well fit this pattern. These problems are by no means insurmountable, despite the formidable political obstacles standing in the way of their resolution. In foreign affairs, the dangers from nuclear proliferation and terrorism are serious, and the rise of regional powers makes it more difficult for the United States to gain agreement on approaches to common problems. Other than China, however, there is no real peer competitor on the horizon.

Our staying power is in our own hands. Whether we maintain it is not a matter of large historical forces beyond our control, but a question of choices, policies, and resolve.