American Debt Threatens Status as World Power
In our "Where America Stands" series, CBS News is looking at a broad spectrum of issues facing the country in the new decade.
From the surface of the moon, to the factory floor - America's prosperity and power dominated much of the 20th century. But, asCBS News Chief Foreign Affairs correspondent Lara Logan reports, the world has changed.
"The mystique of American power I think is gone," said Aaron David Miller of the Woodrow Wilson International Center for Scholars.
The United States is no longer the sole power towering over the post-Cold War era.
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"It's not so much we're declining, other countries are coming up," said James Baker, Former U.S. treasury secretary, and U.S. secretary of state.
The report card shows America's foundation is in peril. Most alarming? Deficits are projected to average over $900 billion a year through 2020. The average? $976 billion.
The nation's debt is the largest in history: $12 trillion and counting. That's over $80,000 for every American worker.
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China is now the largest holder of U.S. debt. It's also the largest exporter and within the next five to seven years, it's expected to surpass the U.S. as the largest manufacturer in the world.
The Problem:
The problem for America is that its greatness has always been rooted in its economic dominance.
"We're in a real pickle," said Baker. "We will not be as important on the world scene if we continue to be a tremendously large debtor nation."
That debt has forced the U.S. to keep borrowing from foreign countries.
"Can the world's greatest power remain the world's greatest power and also be the world's greatest borrower?" Miller asked. "I don't think so."
Aaron David Miller served as an advisor to six secretaries of state and has witnessed a decline in American diplomatic power.
"We can't morally preach anymore about the virtues of American-style capitalism when we can't fix our own dysfunctional broken house."
And seemingly can't win two wars, Miller says, that have already cost over $1 trillion.
"We can't fix these places and yet we can't walk away from them," Miller said. "For a great power, that's the worst place to be."
Solutions:
The solution is to accept that many nations now have a seat at the table and can influence world outcomes.
Atlantic Magazine's James Fallowsjust returned after living in China for three years. "It was easier long ago to say well you have a couple big powers. Now you have a lot of big powers."
"China has a very, very long way to go before they have the dimensions of a national power that the U.S. does - maybe never," Fallows said.
Is American power on the decline?
"Not really, things are changing," Fallows replied. "Other countries are getting relatively stronger but it doesn't necessarily mean that the U.S. will decline in any way that really matters."
Fallows believes the changing world order will be a catalyst for an American comeback - much as fear of Soviet domination in the Sputnik era galvanized American education.
"The fact that the U.S. success will eventually end doesn't mean it has to end now - or 10 years from now - or 100 years from now if we do the right things," Fallow said.
What about that Chinese owned debt?
"If the U.S. dollar plummets in value - we suffer and so do the Chinese," Fallow said.
"Their debt is worth nothing then?" Logan asked.
"Yes, exactly," Fallows said.
Baker believes America's absolute power is still intact, for now.
"When I was treasury secretary everybody was writing that Japan Inc. was going to take over the world," Baker said. "America was in permanent decline."
We're in the same situation now with people talking about America's decline.
"I don't think it's going to happen provided - one big proviso - that we deal with this debt bomb," Baker said.
If we don't, Baker said, "Then it might happen."
The U.S. still remains the most important single power in the world. But in the time it took to watch this report, the national debt grew by nearly $18 million.
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