America in Decline? I Don’t Think So

When people say the last 25 years have felt exhausting, destabilizing, and chaotic, they are not imagining things.

Jobs disappeared and did not come back in the same places. Terrorism shattered a sense of safety. Long wars dragged on with unclear purpose. The financial crisis wiped out savings and home equity. Political divisions deepened. A pandemic upended work, school, and trust in institutions. Housing became unaffordable for many young families. Healthcare costs rose. For many Americans, the first quarter of the 21st century has felt relentlessly hard.

So before making any broader claim, it is important to say this clearly. This is not an argument that the last 25 years have been easy, fair, or well-managed, or that frustration is misplaced. Those experiences are real. They deserve to be taken seriously.

America’s Bumpy 25 Years

In a recent Wall Street Journal essay, “America’s 25 Years of Decline,” William A. Galston argues that the first 25 years of the 21st century represent a sustained period of American decline compared with the end of the 20th century.

He contrasts today’s environment with the late 1990s, when the U.S. enjoyed strong economic growth, rising real incomes, budget surpluses, uncontested global leadership, and bipartisan cooperation on major policy issues. Galston points to China’s entry into the World Trade Organization and the resulting loss of manufacturing jobs, the prolonged wars following 9/11, the deterioration of fiscal discipline, the global financial crisis, rising political polarization, and pandemic-era policy failures as evidence of misgovernment by leaders of both parties.

Many readers will find this account compelling, especially given how disruptive the last quarter-century has felt.

The “Decline” Narrative

Acknowledging all of that does not require concluding that America is in decline.

The danger of the decline narrative is not that it identifies problems. It is the implication of inevitability, the suggestion that dysfunction is permanent, institutions are beyond repair, and the future is bleak. History suggests otherwise.

What follows is not a denial of the challenges we have experienced since the beginning of the 21st century. It is an attempt to place the last 25 years in fair historical context, and to separate genuine failures from a broader story of adaptation, resilience, and unfinished progress.

A High-Water Mark Is Not a Baseline

The late 1990s were extraordinary, not normal. Post-Cold War dominance, favorable demographics, rapid productivity gains, low inflation, fiscal surpluses, and bipartisan cooperation rarely coincide for long. Treating that moment as a baseline for comparison risks mistaking a momentary period of tranquility for a trend.

The real question is not whether the last 25 years were harder than the final years of the 20th century. They clearly were. The question is whether America’s capacity to adapt, innovate, and recover has fundamentally eroded. The evidence suggests it has not.

Trade, China, and a Failure of Policy, Not of Capacity

China’s WTO entry contributed to a profound dislocation in U.S. manufacturing communities. Millions of jobs were lost. Adjustment assistance was inadequate. The social and political consequences were severe. That was a real failure.

But it is also true that over the same period the U.S. economy expanded substantially in real terms, consumer purchasing power rose as goods became cheaper, and employment shifted toward services, healthcare, technology, and advanced manufacturing.

The core failure was not openness itself, but the absence of a serious transition strategy. The good news is that we are finally starting to experiment with one: large-scale industrial policy that ties trade and technology to domestic production and jobs, place-based programs that invest in people where they actually live, and a labor market that, for a brief period, delivered the fastest real wage gains at the bottom in decades. None of that solves the distribution problem on its own, but it is the first time in a generation that U.S. policy has even tried to marry openness with a fairer sharing of the adjustment costs.

The Great Financial Crisis: A Failure, Followed by Reform and Recovery

The 2008 financial crisis was a profound shock to the global economy and to public confidence. Excessive leverage, opaque risk-taking, and regulatory blind spots converged into a systemic failure that wiped out household wealth, destroyed jobs, and left lasting scars. Trust in financial institutions and markets was badly damaged, and for many Americans the recovery felt slow and incomplete.

Those failures matter, but so does what happened next. In response to the crisis, the U.S. undertook one of the most significant overhauls of its financial system since the Great Depression. Major banks were recapitalized. Capital and liquidity requirements were substantially increased. Regular stress testing was introduced to ensure that large institutions could withstand severe economic shocks. Risk oversight was strengthened, leverage was reduced, and the most fragile parts of the system were forced to shrink or disappear.

The results were not perfect, but they were meaningful. When subsequent shocks arrived, from the European debt crisis to the pandemic, the U.S. financial system proved far more resilient than it had been in 2008. The U.S. economy also recovered faster than most other advanced economies, returning to growth and job creation sooner than many of its peers.

A system that confronts its own failures, reforms itself, and emerges more resilient is not one in decline. It is one that learns, often slowly, imperfectly, and painfully, but learns nonetheless.

War, Strategy, and the Difference Between Error and Exhaustion

Americans are tired of war, but that fatigue does not signal strategic collapse. The post-9/11 conflicts revealed serious errors in judgment and resource allocation, lessons worth heeding. Yet exhaustion is a different condition from decline.

The United States still fields the world’s most capable military, anchors the deepest alliance system, and remains central to global security. China’s rapid modernization is real and concerning, but declining powers do not maintain trillion-dollar defense budgets or provoke competitors to dedicate their entire national strategies to counterbalancing them. That is the anxiety of contested primacy, not the fade of irrelevance.

Several structural advantages remain durable. The U.S. defense budget still far exceeds China’s. American carrier strike groups, global basing networks, and interoperable alliances project power China cannot yet match, despite its regional military buildup. NATO is committing to higher defense spending, and Indo-Pacific partners such as Japan, Australia, and India are adding capabilities rather than free-riding. These are not signs of alliance decay.

China, meanwhile, confronts its own vulnerabilities: slowing economic growth, demographic aging, and a military apparatus plagued by corruption and organizational weakness. The real challenge for the United States is not fading into irrelevance. It is managing the shift from assumed primacy to contested leadership, and doing so without overextending again. That requires discipline and strategic clarity, not handwringing over decline.

Deficits and Debt

The disappearance of budget surpluses and the rise in federal debt deserve serious criticism. The federal deficit reached nearly 6 percent of GDP in fiscal 2025, close to double the post-war average, and debt held by the public has climbed to roughly 100 percent of GDP. Entitlement spending reform, particularly Social Security and Medicare, has been deferred for too long and now requires difficult choices about taxation, retirement ages, and benefit structures. These are real problems demanding real solutions, not comforting rhetoric.

But debt must be judged relative to economic capacity, and that capacity has expanded substantially since the surpluses of the early 2000s. Several large, advanced economies operate at comparable or far higher debt levels and continue to borrow at reasonable rates. The U.S. remains within a plausible range for a large, productive, dollar-backed economy that can adjust its fiscal path if policy will permit.

The problem is not that debt is incompatible with sustained growth. It is that, absent entitlement reform, the current fiscal trajectory becomes unsustainable within 10 to 15 years. The window for gradual, manageable adjustment is narrowing, and every year of delay makes the necessary reforms more severe. Entitlement reform is neither impossible nor unprecedented. Countries facing similar demographic headwinds have restructured their systems through a combination of modest revenue increases, gradual retirement-age adjustments, and benefit formulas that protect lower earners. These approaches work. American politics has simply failed, so far, to implement them.

Debt is a constraint. It is not proof of terminal decline. The risk is not mathematical, it is political. With timely reform, the U.S. retains the option of managing its debt burden. It still has the economic fundamentals to make that choice.

Covid: Institutional Failure Meets Scientific Triumph

The pandemic exposed real weaknesses in public health communication and governance. Policy mistakes had real human and economic costs. But one fact remains extraordinary: safe, effective vaccines were developed in under a year, a scientific achievement without precedent. That capability matters far beyond Covid. It reshapes what is possible in medicine, disease prevention, and treatment. Declining societies do not produce breakthroughs at that scale.

American Economic Exceptionalism

The U.S. economy today is far larger and more productive than it was in 2000. Real output has grown substantially, and nominal GDP has climbed from roughly $10 trillion to nearly $30 trillion.

The economy is generating growth even under unfavorable demographic conditions, while productivity has accelerated, driven in part by the deployment of artificial intelligence and other technological innovation. The U.S. continues to lead the world in new AI models, attracts the lion’s share of global AI investment, and sustains Silicon Valley along with hundreds of other innovation clusters where startup formation and venture capital deployment continue at world-leading rates.

Declining nations do not generate sustained productivity growth. They do not continuously redeploy capital into emerging technologies and business models that disrupt incumbents. The U.S. does. At the end of 2025, a large majority of the world’s most valuable and influential companies were headquartered in the United States, spanning technology, healthcare, finance, consumer goods, defense, and energy.

This concentration of corporate leadership reflects deeper structural advantages: deep capital markets, a culture that rewards entrepreneurship, world-class research institutions, a flexible labor market, and a legal framework that supports risk-taking and scale. These advantages did not disappear over the past 25 years. If anything, they became more visible as global competition intensified.

This is what people often mean, imperfectly, when they refer to American exceptionalism. Not the claim that the United States avoids mistakes or hardship, but that it possesses an unusual capacity to generate new firms, new technologies, and new sources of growth even after periods of error or disruption. That capacity does not guarantee good outcomes, and it does not benefit everyone equally. But it does mean the economic foundation for renewal remains firmly in place.

Every Era Felt Messy at the Time

One reason the decline narrative is so persuasive is that every generation experiences its problems up close. From the 1930s onward, each decade faced crises that felt existential in real time: mass unemployment, world war, nuclear standoffs, assassinations, inflation, oil shocks, financial collapse, terrorism, and pandemic.

History only looks orderly in hindsight. The problem is not that the last 25 years were messy. The problem is believing that messiness is new. Every decade feels uniquely dangerous and disappointing when you are living through it. Investors who confuse discomfort with decline tend to make the same mistake in every era: abandoning a realistic, optimistic view at exactly the wrong moment. And yet, over time, societies adapted, living standards generally improved, and long-term investors who stayed disciplined were well rewarded.

The Bottom Line

This is not an argument that everything worked out, that everyone benefited, or that policy failures do not matter. It is an argument that turbulence and transition are not the same as terminal decline.

America’s first 25 years of this century were messy, but so were the decades before them. History rarely feels coherent when you are living through it. The long arc of human progress often continues quietly, beneath the noise, long before it feels safe to believe in again.

The real risk is not acknowledging hardship. It is mistaking hardship for inevitability, and allowing a story of decline to narrow our expectations of what is possible. America’s greatest strength has never been perfection. It has been the ability to adapt, recover, and move forward after getting things wrong. That capacity remains very much alive.

Sources

William A. Galston, “America’s 25 Years of Decline,” The Wall Street Journal. Bureau of Economic Analysis, GDP data. Congressional Budget Office and U.S. Treasury, deficit and debt figures.

Important Disclosures