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Is the United States in decline?

Now is certainly not the first time Americans have pondered this question. During the Cold War, people in this country worried over whether the Soviet Union—with its determined, driven ideology of Marxism-Leninism, and perceived military, technological and economic dominance—would overtake America as the world’s superior superpower. Then, in the 1980s and 1990s, Americans looked on in awe and envy at Japan’s dramatic economic growth and dynamism.

Of course, the Soviet Union ultimately disintegrated and Japan is currently stuck in a perpetual state of debt and stagnation with a rapidly aging population. And America just plowed on ahead.

Yet now, some say, things are different. Growth has stalled. Debt in both the private and public sector are far too high. The unemployment rate refuses to fall. The political system seems dysfunctional. Our society appears to be polarized and divided. We have lost confidence in government, markets and ourselves. Arguably, the Tea Party Movement on the right and the Occupy Wall Street movement on the left are manifestations of the frustration with these problems.

I am still relatively optimistic though. America has endured worse crises from the Civil War to the Great Depression. In addition, the American people are still among the most hard-working, productive, well-educated, entrepreneurial and innovative in the world.

Furthermore, our economic problems are in fact solvable if leaders on both sides can get their act together and pass the right policies. Specifically, this country needs tax reform that will lower individual and corporate tax rates in exchange for the elimination of credits, deductions and loopholes, with the exception of, say, the charitable-giving deduction. It needs comprehensive entitlement reform that increases the retirement age for Social Security for future beneficiaries; changes the fee-for-service structure that incentivizes redundant health care procedures and allows for additional private-sector competition for Medicare; and blocks grants for Medicaid.

Also, government should eliminate regulations that do not meet the test of an objective cost-benefit analysis; increase investments in things like research, development, and infrastructure and at the same time decrease unnecessary spending in other discretionary areas.

Another reason why the United States will not lose its status as the world’s preeminent power is because of the quality of the competition.

For instance, Europe is in a state of utter disarray, plagued by sovereign debt crises; weak leadership; startlingly high unemployment rates in places like Spain; unfavorable demographic trends; populations that are overly dependent on government and entitlement programs; and social and cultural tensions, particularly in relation to immigrants. Furthermore, the notion that several dozen completely different countries with disparate nationalities, societies, histories and economic systems could start using the same currency and fuse into one entity known as the European Union is ludicrous. I suppose, however, it is too late now to reverse that mistake.

China, our new main rival, is also challenged by a plethora of problems. With its repressive one-child policy, it faces an imminent demographic crisis in which a relatively small working-age population supports everyone else who cannot help themselves. Its belligerent, militaristic and aggressive foreign policy has provoked tensions with nearly all of its neighbors, with the exception of North Korea. The communist regime must confront intermittent social and ethnic unrest internally as well as the challenge of acquiring legitimacy from non-democratic sources. Additionally, China may very well be hit by a housing bubble within the coming years and its economic growth could stall.

In contrast to these cases, the United States is in a far better position. I am not inclined to believe the doubters and the persistently pessimistic prognosticators of our decline. Ultimately, we can recover and improve our current situation.