Stimulus, recovery, patriotism and America’s shining city, Joe Biden style

“We shall be as a city upon a hill. The eyes of all people are upon us.” —John Winthrop

Joe Biden is buying none of this America-as-an-empire-in-terminal-decline meme.  The Washington Post’s E.J. Dionne caught up with the Vice President on Tuesday to discuss the Obama Administration’s economic recovery plan.  Where he got most heated was in defending America against its internal critics. Here’s how Dionne puts it:

Late in the conversation, I asked Biden about the surprise applause line in President Obama’s State of the Union speech — "I do not accept second place for the United States of America." Will we hear more on the America-as-No.-1 theme?

What followed was a torrent, in red, white and blue.

"From me you’re going to hear more," he replied emphatically. "I want to tell you something, because if we cede the ground to those who suggest that — I don’t mean foreigners, I mean domestic critics — that somehow, we are destined to fulfill [historian Paul] Kennedy’s prophecy that we are going to be a great nation that has failed because we lost control of our economy and overextended, then we might as well throw it in now, for God’s sake. I mean it’s ridiculous."

On he went: "Give me a break. So many people have bet on our demise that it absolutely drives me crazy. . . . There’s sort of an attitude that is both politically directed by our Republican friends but also believed by a fair number of people that we just can’t make this transition in the 21st century.

"We will continue to be the most significant and dominant influence in the world as long as our economy is strong, growing and responsive to 21st-century needs. And they relate to education, they relate to energy, and they relate to health care."

Biden, more self-aware than people give him credit for, realized what he had just done. "I’ve sort of gotten off the Recovery Act," he said with a rueful smile.

Yet by the end of the interview, I realized he had bumped into the hidden political issue of the 2010 elections. Beneath the predictable back-and-forth between Obama and his Republican adversaries over government spending lies a substantively important difference over how the United States can maintain its global leadership.

For Republicans, American power is rooted largely in military might and showing a tough and resolute face to the world. They would rely on tax cuts as the one and only spur to economic growth.

Obama, Biden and the Democrats, on the other hand, believe that American power depends ultimately on the American economy, and that government has an essential role to play in fostering the next generation of growth.

Notice that when Obama spoke about keeping America in first place, he said not a word about the military. He referred instead to the efforts of our competitors in the public sphere of the economy, and of our past complacency.

Off-message, Biden recasts the Obama agenda, E.J. Dionne, Washington Post, 4 Feb 2010

This is an extremely important subject as it concerns economics, finance and markets because right now politics and political ideology is the dominant force driving the global economy. From an American perspective, I see Dionne giving voice to two competing but conflicting visions of both what drives American influence globally and how we should escape this economic downturn. The one is hard power based on the military and coercion, the other is softer power based on moral authority, innovation and cultural influences.

Question to you:

  1. Is this the dichotomy you see? 
  2. If so, which is the ultimate source of economic power?
  3. And is America a country in decline?

My answers to those questions are this:

To question number one, I say yes. This is a valid way of parsing how different groups see the source of America’s global influence.

Hard or soft power?

Those of a Kissinger realpolitik ilk see hard, coercive power as the driving force of American power.  Many others point to the export of American ideas via Hollywood or via foreign students in U.S. colleges and universities.

In the last Administration, the foreign policy gurus of President George W. Bush’s Administration were an interesting blend of the two schools of thought. They clearly saw military force as necessary but viewed America’s ultimate appeal as one of moral authority.’s review of James Mann’s book “The Rise of the Vulcans” gets to the military aspect of this:

While campaigning for president in 2000, George W. Bush downplayed his lack of foreign policy experience by emphasizing that he would surround himself with a highly talented and experienced group of political veterans. This core group, consisting of Donald Rumsfeld, Dick Cheney, Colin Powell, Paul Wolfowitz, Richard Armitage, and Condoleezza Rice, has a long history together dating back 30 years in some cases. Dubbing themselves the Vulcans, they have largely determined the direction and focus of the Bush presidency. In this remarkably researched and fascinating book, Mann traces their careers and the development of their ideas in order to understand how and why American foreign policy got to where it is today.

As Mann makes clear, there has never been perfect agreement between all parties, (the relationship between the close duo of Powell and Armitage on one side and Rumsfeld on the other, for instance, has been frosty) but they do share basic values. Whether they came from the armed services, academia, or government bureaucracy, the Vulcans all viewed the Pentagon as the principal institution from which American power should emanate. Their developing philosophy was cemented after the attacks of September 11, 2001 and is best reflected in the decision to invade Iraq. They believe that a powerful military is essential to American interests; that America is ultimately a force for good despite any negative consequences that may arise from American aggression; they are eternally optimistic about American power and dismiss any arguments about over-extension of resources; and they are skeptical about the need to consult allies or form broad global coalitions before acting.

Rise of the Vulcans succeeds on many levels. Mann presents broad themes such as the gradual transition from the Nixon and Kissinger philosophies to the doctrine espoused by Rumsfeld, Cheney, and the rest in clear and logical terms. He also offers minute details and anecdotes about each of the individuals, and the complex relationships between them, that reveal the true personalities behind the politicians. This is essential reading for those seeking to understand the past quarter century and what it means for America’s future.

Shawn Carkonen

The forgoing notwithstanding, it is clear that Bush saw America in Ronald Reagan terms as a democratic ‘the beacon on the hill’ for all else to emulate.  Ronald Reagan’s speech announcing his candidacy for President in 1979 bears remembering:

A troubled and afflicted mankind looks to us, pleading for us to keep our rendezvous with destiny; that we will uphold the principles of self-reliance, self-discipline, morality, and, above all, responsible liberty for every individual that we will become that shining city on a hill.


Testament to this view of America’s ‘moral authority’ are George W. Bush’s pre-presidency speech at the Reagan Library in 1999. Here are sample quotes via Wikiquote:

  • In the defense of our nation, a president must be a clear-eyed realist. There are limits to the smiles and scowls of diplomacy. Armies and missiles are not stopped by stiff notes of condemnation. They are held in check by strength and purpose and the promise of swift punishment.
  • The most powerful force in the world is not a weapon or a nation but a truth: that we are spiritual beings, and that freedom is "the soul’s right to breathe."
  • American foreign policy must be more than the management of crisis. It must have a great and guiding goal: to turn this time of American influence into generations of democratic peace.
  • Some have tried to pose a choice between American ideals and American interests — between who we are and how we act. But the choice is false. America, by decision and destiny, promotes political freedom — and gains the most when democracy advances. America believes in free markets and free trade — and benefits most when markets are opened. America is a peaceful power — and gains the greatest dividend from democratic stability. Precisely because we have no territorial objectives, our gains are not measured in the losses of others. They are counted in the conflicts we avert, the prosperity we share and the peace we extend.
  • The case for trade is not just monetary, but moral. Economic freedom creates habits of liberty. And habits of liberty create expectations of democracy.
  • We are no longer fighting a great enemy, we are asserting a great principle: that the talents and dreams of average people — their warm human hopes and loves — should be rewarded by freedom and protected by peace. We are defending the nobility of normal lives, lived in obedience to God and conscience, not to government.
  • America has never been an empire. We may be the only great power in history that had the chance, and refused — preferring greatness to power and justice to glory.

Obama and the beacon on the hill

I don’t see these quotes as far removed from the ideological core of the Obama Administration.  This is what Joe Biden was saying. And judging from prior statements by Barack Obama himself, I understand him to share this world view. The difference between Bush and Obama goes more to style than substance – compromise over diktat and recognition of beacon-on-hill failings over statements only of beacon-on-hill authority

For example, here are a few quotes from Obama via Wikiquote:

  • I don’t oppose all wars. What I am opposed to is a dumb war. What I am opposed to is a rash war. What I am opposed to is the cynical attempt by Richard Perle and Paul Wolfowitz and other armchair, weekend warriors in this administration to shove their own ideological agendas down our throats, irrespective of the costs in lives lost and in hardships borne. What I am opposed to is the attempt by political hacks like Karl Rove to distract us from a rise in the uninsured, a rise in the poverty rate, a drop in the median income, to distract us from corporate scandals and a stock market that has just gone through the worst month since the Great Depression. That’s what I’m opposed to. A dumb war. A rash war. A war based not on reason but on passion, not on principle but on politics. –Remarks of Illinois State Sen. Barack Obama Against Going to War with Iraq (2 October 2002); referencing the positions of former Pentagon policy adviser Richard Perle, Deputy Defense Secretary Paul Wolfowitz, and chief Bush political adviser Karl Rove.
  • On Iraq, on paper, there’s not as much difference, I think, between the Bush administration and a Kerry administration as there would have been a year ago. There’s not much of a difference between my position and George Bush’s position at this stage.  -"Obama’s a Star Who Doesn’t Follow the Script" by John Kass in The Chicago Tribune (27 July 2004)
  • My parents shared not only an improbable love, they shared an abiding faith in the possibilities of this nation. They would give me an African name, Barack, or blessed, believing that in a tolerant America your name is no barrier to success. They imagined me going to the best schools in the land, even though they weren’t rich, because in a generous America you don’t have to be rich to achieve your potential.
  • Tonight, we gather to affirm the greatness of our nation—not because of the height of our skyscrapers, or the power of our military, or the size of our economy. Our pride is based on a very simple premise, summed up in a declaration made over two hundred years ago: "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain inalienable rights, that among these are life, liberty and the pursuit of happiness." That is the true genius of America—a faith in simple dreams, an insistence on small miracles.

The point being both Bush and Obama are trying to blend the soft power and hard power views – with Bush taking a more uncompromising approach. Behind this is still the viewpoint that America is a ‘great nation’ for others to emulate.

Economic power

As I see it, economic might is where America derives its true power.  The key takeaway from Kennedy’s book for me was that nations rise as a result of economic dynamism and fall by overextending themselves because they fail to recognize the limits of their economic wealth.  What Kennedy was saying invariably happens to any great economic power is that they confront a competitive situation in which their relative economic wealth is challenged.  As a result, the country turns to increasingly coercive means to project power and authority – all of which require economic resources to be diverted away from other enterprises and projects. At some point, this diversion because so great that economic dynamism is diminished and the country falls into relative decline.

So despite what Vice President Biden is asserting, I see this as very much what is happening in the United States.  The fact is America has a military budget in excess of all other nations combined.  It has permanent military encampment in 150 different countries.  And don’t fool yourself that this is to ‘protect’ others. It is a show of force pain and simple.

Moreover, the move into financial services from where 2% of profits were contributed by the financial sector a generation ago to where financial services generated 40% of profits pre-crisis is a sign that the United States is misallocating resources in a bid to achieve a desired standard of living that cannot be maintained with the present resource allocation where we spend excessive amounts on healthcare and military spending, have outsourced manufacturing and replaced it with the financial insurance and real estate (FIRE) sector.


So, yes, there is a FIRE in the belly of Americans like Joe Biden. But it is burning us out from the inside. America is a great power in decline. The fact that health care reform has been an enormous bust, that substantive financial reform has been a major bust and that military spending remains untouched should tell you that we are not changing course.

From an economic perspective, this will mean Japanese-like stagnation at best.  From an investment perspective, this is not a good scenario for stocks although, it may be for bonds. In terms of foreign policy, faced with these problems, we should expect America to become muscular in its approach to both economic/trade disputes and military disputes.  I fully anticipate rising tension between the U.S. and Iran as well as between the U.S. and China as these are the two countries now presenting the greatest challenge in each realm.

Meanwhile those of us who are ‘tearing down’ America are Cassandras merely pointing out the destructive path America is on.  We are demanding our leaders to take corrective action. Therefore, while Kennedy’s book gives a fatalistic vision in which these modern-day Cassandras are ignored like the original Greek Cassandra, we wouldn’t be warning you unless we actually had hope you would listen.

But, for now, it seems the status quo will continue.

  1. Lucretius says


    Your argument seems to suggest that a proper allocation of resources in the US necessarily warrants a reduction in military spending (23% of Federal spending in FY2009). Although I think the Afghanistan war effort is largely a waste, and the Iraq war was unnecessary, I don’t think “military overstretch” is the lynchpin of our current resource misallocation. Even if you hold military spending constant, sensible reform of the entitlement programs (Soc Sec, Medicare/Medicaid were 40% of federal spending in FY2009) would dramatically transform the fiscal situation.

    Social Security is an easy fix. All we have to do is ask the question: for what purpose was the program originally intended? Answer: to reduce poverty among the elderly. It was never meant to be a public pension plan, as it effectively is now. The social security tax should be made more progressive, with the affluent paying a higher tax and receiving a smaller benefit. Bill Gates and Warren Buffett don’t need a social security check. A restructuring of the tax/benefit breakdown would easily make the program sustainable at a much lower annual cost. As for Medicare/Medicaid, it is utterly wasteful, and needs to be restructured to introduce some market discipline into the way medicare/medicaid recipients are billed for healthcare services. As you duly noted, the reform of these entitlements seems hopeless, given the current pathetic state of our politics.

    As far as resource allocation in the private sector, the success of the dollar reserve currency regime has had the unintended consquence of facilitating the disproportionate growth of the FIRE sector of our economy over the past quarter century (not to mention “Washington Consensus” economic policies and regulations, but I digress….). Here again, though, I don’t see how a reduction in military spending would create the incentives needed to foster much needed growth in US manufacturing and a reduction of financial activities as a source of economic output.

    While I accept the thesis that the military vs. economy meme is a valid way of parsing differing views on American power, this need not lead to the conclusion that addressing our economic problems requires us to reduce our military footprint.

  2. Matt Stiles says

    I don’t buy the meme that the American empire is in “terminal decline,” even though that is considered common logic among nearly every non-American on the planet (and a majority of Americans as well).

    Even with the massive financial black hole, military overreach, and a growing central command on the economy, America still retains the largest supply of fixed productive capacity and human capital in the world. That is where their power comes from. And it would take a great deal of this capital falling into disrepair in order for its position of global hegemony to come into question. This would take decades.

    If deleveraging is prohibited as it has been in Japan, a greater and greater portion of incomes will be directed toward debt servicing, thus disabling the ability to maintain this productive and human capital. In that case, yes, the American Empire is in jeopardy.

    But I happen to believe that the economy will deleverage whether it is attempted to be prevented or not…

    1. Edward Harrison says

      Stiles, I think we agree then that an American decline is not ‘terminal’ or ‘axiomatic.’ And even when talking about decline, we have to distinguish between absolute and relative. The Spanish, British and Dutch are doing quite fine.

      Nevertheless, America is only 5% of the world’s population. There is no reason to think that it can continue to consume 25% of the world’s resources in the future. I think a relative decline is definitely coming and the sooner the better to prevent the sort of status angst that leads to a more severe decline.

      1. Marshall Auerback says

        In a message dated 2/6/2010 05:10:01 Mountain Standard Time,

        Stiles, I think we agree then that an American decline is not ‘terminal’
        or ‘axiomatic.’ And even when talking about decline, we have to distinguish
        between absolute and relative. The Spanish, British and Dutch are doing
        quite fine.

        Nevertheless, America is only 5% of the world’s population. There is no
        reason to think that it can continue to consume 25% of the world’s resources
        in the future. I think a relative decline is definitely coming and the
        sooner the better to prevent the sort of status angst that leads to a more
        severe decline.

        Italy has been dealing with relative and economic decline for over 1500
        years and the Italians seem to live very well! Americans should enjoy losing
        their hegemonic status. It’s a happier place for everybody.

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