Economic historian Niall Ferguson, writing for Newsweek, believes that the United States may be entering an unprecedented period in its history. After successfully surviving the best that the 20th century had to throw at it, it may be undone from within by its own largess and mismanagement.
The nation which survived the Cold War and rallied after 9/11 may have its global power greatly eradicated by this fiscal crisis.
During the past generation, the U.S. has built itself up as the preeminent world power. In terms of military, economic, and diplomatic power the U.S. reigned supreme. Now however, those positions are being challenged from within.
The U.S. still has the world's most powerful and advanced military, but its economy and its diplomatic leverage have been seriously challenged. In the next two decades or more the rapid and consistent economic growth witnessed in China will likely result in that country catching and surpassing the size and wealth of the U.S.
After spending nearly a century at the top of the economic hierarchy, the U.S. will find itself in the shadow of another for the first time in recent memory. As America's share of the global economy dwindles, so too will its political leverage.
A particularly troubling development for the U.S. is its dependence on foreign loans to maintain its unstable budget. Federal spending continued to rise during the past 20 or so years, despite the fact that taxes were continually slashed. As less and less of the overall economic pie came back to government coffers, Washington found itself in desperate need of financing from Japan, China, and the UK to keep its fiscal house in order.
Now, after years of accumulating American debt obligations, those nations could be a substantial force in driving U.S. policies.
This was evidenced during the Obama campaign when then-Senator Obama called out Beijing for its currency manipulation which puts American workers at an unfair disadvantage. After taking office, the president was forced to repudiate and ignore his previous stance. This decision was made after Chinese pressure came down on the White House, and it chose to accept more funding in exchange for keeping its proverbial mouth shut.
This is not the sort of situation America would have found itself in 50 years ago. In fact, in the post-war boom of the 1950s and 1960s it was the U.S. using its bully pulpit to influence governments around the world. Now, the very practice we championed is being used against us. The U.S. still has the capacity to dictate to smaller nations with small economies, but it can no longer unilaterally form coalitions among the world's elite.
The core of Ferguson's argument in his piece An Empire at Risk is that this nation is already finding its superiority challenged in various ways. If it cannot find a way to stabilize its finances the end result may be a catastrophic collapse stemming from debt defaults and overdue credit obligations.
America is already unable to pay its liabilities. It is mortgaged to the hilt, paying off one round of borrowing with the next and hoping that some future generation will solve the crisis. If the crisis comes before we are ready as seems likely to be the case the resulting tailspin may be one from which we never truly recover.