Stephen S. Cohen & J. Bradford DeLong's "The End of Influence: What Happens When Other Countries Have the Money"

This is a short quick read -- 150 pages -- reviewing America's decline and the prospects in store. It covers how America held sway because it had "the money", i.e. it was the dominant economy with a surplus of cash because it had a positive balance of trade. It reviews how that position has deteriorated into America being the greatest debtor country. Then it carefully reviews the possible scenarios of how the fall from grace will play out. Their assessment: it will be a gentle decline with America gradually losing its "soft power" and having to learn to "play nice" with the new powers-to-be: China and possibly India. They don't foresee a dollar crash with a severe recession like the Asian crisis of 1997. They see the US slowly yielding the world's stage much like the UK ceded it to the US between 1914 and 1945.

Here's a bit to give you a taste. This addresses the symptoms of malaise:

Something very big changed in America between the post-World War II generation and the present time: That particular something was the distribution of the money generated by the growth of the American economy. In the first postwar generation, 1947 to 1973, American labor productivity -- average output per hour worked -- doubled (growing at a rate of about 2.5 percent each year). Median income -- the income of the average American, the American sitting on the fifty-yard line, with half of Americans earning more and half less -- rose at the same reate; it too doubled. As a society, America marched into prosperity in unwavering ranks, everyone advancing at the same rate. And Americans also managed to save about 7 percent of GDP each year.

Over the next thirty-plus years, from 1973 to 2005, productivity grew at a somewhat slower rate. Nevertheless, the awful decades of the 1970s and 1980s were offset by strong growth in the high-tech boom years of the 1990s, and overall labor productivity still increated by two-thirds or so. But the American middle class got almost nothing of that gain. The incomes of those smack in the middle of the American income distribution increased by only 14 percent over thrity years, and almost all of that gain had come in the late Clinton years of 1995-2000. Simultaneously, American savings (incomes minus spending dried up completely; a phenomenon not seen since the Depression.

While the median American male's income stayed flat from 1973 to 2005, the gain went to the top 10 percent, and most of that went to the topmost reaches of the top 10 percent. The ratio of the top 1 peercent to the middle fith went from 10 to 26 times. What caused the change?

The authors enumerate seven causes.

From the concluding chapter, here is a taste of the theme of the book:

After almost a century, the United States no longer has the money. It is gone, and it is not likely to return in the foreseeable future. The American standard of living will decline relative to the rest of the industrialized and industrializing world. For the past ten years, America has been consuming more than it produces and living beyond its means by borrowing. For American households, borrowing will no longer be an easy option.

The United States will lose power and influence. Its government will no longer be able to act the role of the unique multidimensional superpower that pays attention to other governments only when it wishes. Whether this should be rued or applauded by Americans and by other peoples is an open question. Money is the key fact of power. When a great nation becomes a massive debtor, it loses considerable freedom of action, and that is a fact with consequence. The United States will remain a world power and, perhaps, the leading nation; it just will no longer be able to be the boss."

This is a good and timely book. People need to read this to adjust themselves to the post-Bush world, the world in which America will play a much reduced role on the world's stage. The author's don't make the historical comparison, but Bush is the Phillip II of America, the rules with great power machinations that bankrupted the country. As Cohen & DeLong point out, it wasn't done single-handedly by Bush, but Bush's "war of choice" in Iraq and his mania for deregulation were the culmination of a political philosophy that brought the end with a crescendo.