Opinion Extra

Rubin: Restoring America's faded glory

When I look ahead to the next decade, here's the question that haunts me: Can America get its mojo back?

In 2000, the great strength of the United States was not simply its overwhelming military power, but the other qualities that aroused international respect - our "soft power." Much of the world still regarded our free-market economy as one they wanted to copy. Our democratic institutions were admired by many and abhorred by autocratic rulers who feared their people looked to us as a model. Love us or hate us, most of the world admired how well our system worked.

In tandem with our "soft power," our military was viewed as virtually unbeatable - and bolstered by our economic power. This image of unshakable competence gave the United States very real leverage in the world.

That was then. As we enter 2010, America's glow - of economic competence and democratic achievement - has dimmed. Here's what has replaced it: an image of a United States whose free-market capitalism is faltering and whose democratic institutions cannot produce results. No longer are developing nations eager to emulate our economic and political model. (Add to this, in the wake of the long-bungled Iraq war, the growing global perception that America's mighty military cannot cope with low-tech Islamist insurgents.)

That shifting view of America wouldn't matter so much if it rested on flawed perceptions. What makes me worry is that the new foreign view of America the incompetent may prove all too true.

Even after the collapse of the high-tech bubble in the 1990s, our ability to spring back and innovate created the expectation that our economy would always revive. Foreign governments were willing to underwrite our debt because our credit was golden, our currency sound and our ability to repay unquestioned.

That was then.

In the first decade of the 21st century, during a fiscally irresponsible Republican administration, the United States heedlessly ran up foreign debt. Our financial sector - freed from regulation - indulged in gross speculation as if there were no tomorrow. Then came the crash.

The Obama administration, left to pick up the pieces, looks unlikely to produce serious reform of a financial structure ready to resume risky speculation. We are in hock up to our eyeballs to China, on whom we continue to depend to finance our staggering fiscal imbalances. Only God knows what we'll do when interests rates rise, as they ultimately will.

Who would want to emulate such a model? I still believe American ingenuity can rescue us from the path down which we're heading. But when I read that investment banks are reviving the speculative tactics that created the global recession, I wonder about our prospects.

If we can't rectify a financial system that's driving us over a cliff, where are we headed? Never mind that we have a health system twice as expensive and far less effective than those in several European countries.

People around the world used to talk about our innovators who developed incredible new products in their garages. But today, automakers and other once-signature U.S. industries are gasping for life, and banks won't make loans to new small businesses. We're not educating the scientists we need for tomorrow and are hampering the hiring of foreign grad students who have become our scientific mainstay. What's even worse, we're letting China get out in front in developing the green-technology industries that we are counting on to create tens of thousands of jobs.

This new image of the United States as economic bumbler has real consequences for our economic future. The world once looked to the United States to take the lead in international financial institutions, which worked to our advantage. Most international transactions still are conducted in dollars, the world's reserve currency, which saves us untold millions. Now that we cannot seem to put our own house in order (and now that China has emerged stronger from the global economic crisis, in comparison with America's troubles), all that is changing.

I believe the United States is fully capable of staging an economic comeback, even if our role won't be what it once was. However, to rebuild, the country has to face its problems squarely, including those in the financial sector, the health and education systems, and within our political institutions. Instead, we see a Congress where Republicans focus on obstruction and Democrats cannot cohere enough - and sufficiently shake off special interests - to confront crucial problems.

Meantime, President Obama has failed to put his stamp on key legislation. He seems unable to reassure an angry public that knows something is deeply wrong with the country, but feels rudderless. Let's hope our leaders do better in the new year, lest the next decade confirm the image of America as incompetent, in the world's eyes and our own. We need our mojo back.