The Fall of America, Inc.

Promoting democracy—through diplomacy, aid to civil society groups, free media and the like—has never been controversial. The problem now is that by using democracy to justify the Iraq War, the Bush administration suggested to many that "democracy" was a code word for military intervention and regime change. (The chaos that ensued in Iraq didn't exactly help democracy's image either.) The Middle East in particular is a minefield for any U.S. administration, since America supports nondemocratic allies like the Saudis, and refuses to work with groups like Hamas and Hizbullah that came to power through elections. We don't have much credibility when we champion a "freedom agenda."

The American model has also been seriously tarnished by the Bush administration's use of torture. After 9/11 Americans proved distressingly ready to give up constitutional protections for the sake of security. Guantánamo Bay and the hooded prisoner at Abu Ghraib have since replaced the Statue of Liberty as symbols of America in the eyes of many non-Americans.

No matter who wins the presidency a month from now, the shift into a new cycle of American and world politics will have begun. The Democrats are likely to increase their majorities in the House and Senate. A huge amount of populist anger is brewing as the Wall Street meltdown spreads to Main Street. Already there is a growing consensus on the need to re-regulate many parts of the economy.

Globally the United States will not enjoy the hegemonic position it has occupied until now, something underscored by Russia's Aug. 7 invasion of Georgia. America's ability to shape the global economy through trade pacts and the IMF and World Bank will be diminished, as will our financial resources. And in many parts of the world, American ideas, advice and even aid will be less welcome than they are now.

Under such circumstances, which candidate is better positioned to rebrand America? Barack Obama obviously carries the least baggage from the recent past, and his postpartisan style seeks to move beyond today's political divisions. At heart he seems a pragmatist, not an ideologue. But his consensus-forming skills will be sorely tested when he has to make tough choices, bringing not just Republicans but unruly Democrats into the fold. McCain, for his part, has talked like Teddy Roosevelt in recent weeks, railing against Wall Street and calling for SEC chairman Chris Cox's head. He may be the only Republican who can bring his party, kicking and screaming, into a post-Reagan era. But one gets the sense that he hasn't fully made up his mind what kind of Republican he really is, or what principles should define the new America.

American influence can and will eventually be restored. Since the world as a whole is likely to suffer an economic downturn, it is not clear that the Chinese or Russian models will fare appreciably better than the American version. The United States has come back from serious setbacks during the 1930s and 1970s, due to the adaptability of our system and the resilience of our people.

Still, another comeback rests on our ability to make some fundamental changes. First, we must break out of the Reagan-era straitjacket concerning taxes and regulation. Tax cuts feel good but do not necessarily stimulate growth or pay for themselves; given our long-term fiscal situation Americans are going to have to be told honestly that they will have to pay their own way in the future. Deregulation, or the failure of regulators to keep up with fast-moving markets, can become unbelievably costly, as we have seen. The entire American public sector—underfunded, deprofessionalized and demoralized—needs to be rebuilt and be given a new sense of pride. There are certain jobs that only the government can fulfill.