America has a great opportunity to change the world. Will it do it?

American power is also economic. The GDP of the United States, more than $11 trillion, is more than 20 percent of world output, equal to the total annual output of goods and services of all twenty-five countries of the European Union (EU) combined, or to that of Japan, Germany, the United Kingdom, France, and China. Global economic performance is tightly linked to American economic performance. Access to the American market is essential; the United States, with just under 5 percent of the world’s population, imports 18 percent of what the rest of the world exports. American investment is often a principal driver of economic development elsewhere. The dollar remains the closest thing that there is to an international currency.

U.S. political weight is no less significant. When the United Nations was conceived in the 1940s, the United States was one of five permanent members of the Security Council accorded veto power. The United States was first among equals then and remains so today. In situations ranging from the Middle East and North Korea to Colombia and Sudan, the United States is the proverbial 800-pound gorilla, whether it is in the room or not. What the United States chooses to do, what it chooses not to do, can and often does have profound consequences. This political influence is reinforced by American cultural reach: the influence of American universities, Hollywood and American television, U.S.-based media, and ideas generated throughout American society. The United States is both a model and an agent of global change.

All this power does not guarantee an age of perpetual peace or mean that history is ended or that we are secure. It is possible that traditional challenges to American dominance will emerge. One of the challenges for U.S. foreign policy is to ensure that great power competition does not revive on the scale of previous eras. Unfortunately, the first fifteen years of the post-Cold War era do not provide much reason for optimism on this score. Unless there are significant changes to U.S. foreign policy, we will almost certainly see a return to a world defined by balance of power politics, one in which the United States and other major powers will find themselves distracted by one another and unable to devote their resources to taking on what are in fact the real challenges of the day, those stemming from globalization and from a number of medium-sized and weak states.

U.S. strength, as considerable as it is and is likely to remain, is not unlimited. The number of active duty U.S. military personnel is approximately 1.4 million, down from just over 2 million at the end of the Cold War. Although some of this reduction can be attributed to improvements in technology and tactics, which in turn make possible reducing the number of troops without reducing overall combat effectiveness, the fact remains that quality cannot always substitute fully for quantity. Some tasks (in particular those that do not involve combat on open battlefields such as post-conflict stability operations) require a great deal of manpower. The result is that the United States would be hard pressed to respond to a full-fledged crisis on the Korean Peninsula without reducing its commitment to Iraq — or to try to replicate anywhere else what it is doing in Iraq or to intervene on a large scale in some humanitarian crisis such as in Darfur.

The United States is also stretched financially. The U.S. government, which could boast a sizable budget surplus only a few years ago, now runs a fiscal deficit of more than $400 billion a year, a result of lower taxes, slower than hoped for economic growth, and an enormous increase in spending on both entitlements (mostly retirement and health-related) and discretionary items, that is, everything else, from homeland security and defense to education and roads. It is impossible to avoid questions of how American society will take care of its own as baby boomers retire and as life expectancy continues to increase. Making matters worse is the simultaneous mushrooming of the current account (essentially trade) deficit, which is now more than $600 billion a year, a figure approaching 6 percent of GDP. The American economy increasingly depends on the willingness of foreign governments and institutions to hold on to vast pools of dollars. The current situation may well endure for some time, given that it suits the immediate interests of all parties, but it cannot and will not endure indefinitely. (To paraphrase the economist Herb Stein, “[T]hat which cannot go on indefinitely, won’t.”) It is only a matter of time before foreigners grow wary (not to mention weary) of continuing to accumulate dollars, and when they do they will elect to sell some of those dollars they possess or slow their rate of accumulating additional ones. As this happens, the only question is whether the adjustment in the dollar’s value downward is gradual and manageable or quick and extremely painful in its effects.

To be sure, the United States could adopt policies that would increase its military capability or reduce its economic vulnerability. The United States could afford to increase military spending without jeopardizing the American economy. The United States spent a much higher percentage of its GDP on defense during World War II, for instance. But additional large increases in defense spending would increase the scale of the deficit and crowd out federal spending for more popular programs. Similarly, the United States could increase taxes, or decrease discretionary spending or what it spends on entitlements or both, but significant changes are politically unrealistic. A draft would likely be opposed by a majority of the American people, and already there are signs of popular resistance to heavy dependence upon and use of reserve forces.

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