The US Treasury Secretary, John Snow, is confident that the country's large trade and budget deficits can be brought under control. "They have to come down, and they will come down," he told the New York Times this week. This will be easier to do because of strong US growth and the Bush administration's determination to cut spending in its forthcoming budget, writes Paul Gillespie
The deficits are not particularly worrisome and reflect continuing international interest in investing in the US rather than any sign of global weakness. And deficits aside, he argued, "overwhelmingly, the United States is looked at as the model for success".
This confidence is certainly not shared elsewhere in the world - nor by an increasingly prominent stream of criticism by American critics of the Bush administration who argue that the American dream has lost its appeal and is no longer influencing global economic and political innovation. According to Michael Lind, writing in the Financial Times, while the US was overwhelmingly present at the creation of the post-1945 world order, it is effectively absent from the 21st century one being created now.
The lead story in the current Newsweek is written by the distinguished US scholar of European integration, Andrew Moravcsik of Princeton University, together with a team of its correspondents around the world. It argues forcefully that the American dream is no longer a global one, even though the "delusional" belief that it still is pervaded Bush's inaugural speech and US public opinion.
He quotes last week's BBC poll which showed that while 71 per cent of Americans see the US as a source of good in the world and most believe Bush's re-election is positive for global security, foreigners take an entirely different view. Some 58 per cent of 22,000 people in 21 countries say his election is a threat to world peace, compared to only 26 per cent (mainly in India, the Philippines and Poland) who say it is a good thing.
The New York Times reports that across Europe and Asia officials and analysts worry that Bush's economic team may not be up to tackling the deficits effectively. They are no longer confident that Washington can marshal the effort required to co-ordinate economic growth among the world's most powerful economies. The kind of energy and authority needed to organise a deal like the Plaza accord of September 1985 in which major currencies were realigned on the back of Reagan's deficits is not in evidence. The Treasury is seen as a "vastly diminished institution, with comparatively little influence in the White House", which is much more preoccupied with national security.
This week, French and German finance ministers said the euro has wrongly borne the brunt of the dollar's fall and that the deficits must be tackled. Without an adjustment of China's pegging to the dollar, this trend will continue; what has been striking is the failure of Washington to convince China to float its currency, partly because it needs to maintain Beijing's influence on North Korea to prevent its nuclear weapons creating a wider crisis in the region.
The more general fear is that if no adequate action is taken, China and Japan will stop investing their surpluses in the US, divert some of them to the euro and precipitate a rearrangement in which the dollar would lose its valuable role as a reserve currency, the very material symbol of its erstwhile political hegemony.
The European Union is about to become China's largest trading partner ahead of the US and Japan. In another striking indication of the changing balance of power, it is also about to lift its arms embargo against China, opening up a vast market which would have implications for Japanese, South Korean and Taiwanese security.
Such shifts are what convinces Moravcsik that the American model is no longer hegemonic and has now to compete with European and Asian ones with much greater appeal. His argument cuts right across the usual nostrums about Boston's superiority to Berlin as put regularly in these columns by Dan McLaughlin and other market economists, notably their rubbishing of the EU's Lisbon process of economic reform.
While that certainly has its weaknesses, it is too early to say it has failed ahead of this spring's review (for debate on this subject see the essays in the European Policy Centre's Challenge Europe current online site). The critics fail to take account of the comparable or superior productivity shown by many EU economies, notably northern European social democracies. Airbus is outselling Boeing. The greater provision for public education, health and social protection, and much less inequality in Europe all make its model more appealing that the market-driven US one.
More generally, Moravcsik argues that the US democratic model has lost its universal appeal. EU enlargement has been far more effective in beating back authoritarian nationalism than "the crude power of America" - indeed historians "may come to see this policy as the truly epochal event of our time". Other American writers, such as Jeremy Rifkin and T.R. Read, have recently reached similar conclusions in best-selling books.
Moravcsik's views are all the more interesting since the liberal intergovernmental theory of the EU put forward in his prolific and influential academic writings plays down such issues of political identity. It is different when looked at externally and in a comparative world setting. We are living through a very important shift in international affairs.