Matthew Norman: An empire's shocking decline and fall

The America at which we glance across the ocean today is shrinking before our eyes. It is bamboozled and petrified

Somewhere in a cave, in Pakistan or Afghanistan or wherever, a tall, skeletal man with a long stick and dodgy kidneys must have been laughing on Monday. No one has a clue where Osama bin Laden is, or even if he is at all. We hear little from or about him these days, apart for the odd report of a sighting or claim of his death. But assuming he is alive, we might imagine this conversation two days ago with a minion. I translate very loosely from the original.

"Father to us all, I have news to cheer you up." "Cheer me up, Abdullah? Whatever can you mean?" "Come off it, Ossie, you've been miserable ever since Liverpool equalised against your beloved Arsenal yesterday, thereby handing the title to the Great Satan of Old Trafford." "Ah, well, Eboué was certainly foolish to barge into Lucas. Yet, as Allah is my judge, it was never a penalty."

"Be that as it may, sire, our fortunes prosper elsewhere. The credit agency Standard & Poor's threatens to downgrade America's AAA credit rating unless more drastic steps are taken to cut the deficit." "This is indeed wondrous news, my son. Bring me a mint tea and the dialysis machine, and we'll have a right old knees-up with the lads."

Who could blame him for celebrating? A few months before the tenth anniversary of the 9/11 attacks that set America's corkscrew spin in motion, the S&P's report heightens the sense that this empire is disintegrating faster than any before it.

The warning's economic import may be negligible, because there is no chance of the US, cosseted by what remains the world's reserve currency, and with its economy reviving, defaulting on its loans. No creditor would call in such a loan knowing that a default would cripple the global economy in about 17 seconds.

Yet the psychological impact is immense. Imagine the blow to any residual faith America had in its exceptionalism and supremacy. Imagine the shock, not to mention the awe, to find itself, within 10 years of being vaunted as the planet's hyperpower, at being styled a potential debt-welsher on Graeco-Portuguese lines.

The three interconnected forces that destroy empires – military over-reach, lack of money, and the catastrophic loss of self-confidence that stems from the other two – have coalesced with astonishing speed since the Twin Towers fell. When George W Bush was elected President by five of the nine Supreme Court justices, he took on a country swimming in cash and basking in its post-Cold War hegemony. Eight years later, despite the healthy surplus Bill Clinton left him and a barely broken economic boom, he had doubled the deficit by wasting trillions on imbecile wars and trillions more on tax breaks for the wealthy. He inherited a swaggering empire at the zenith of its financial, military and cultural might, and bequeathed to Barack Obama a traumatised country in precipitous decline.

Obama's wise refusal to dominate a wretchedly confused Nato campaign confirms something unimaginable a few years ago. The President of the United States is no longer the leader of the free world, but a fellow-traveller in a free world without a leader at all.

Proper historians eschew the Boy's Own-style of history that sources dramatic power shifts to individuals, analysing them in terms of sweeping economic patterns. Yet in this case, they might allow themselves one of those "What if?" questions they generally disdain.

What if the hanging chads hadn't hung, or if the Supremes had heeded Diana Ross's dictum that "You Can't Hurry Votes (No, You Just Have To Wait)" by allowing a full Florida recount? With Al Gore in the White House, there would have been an Afghan campaign after 9/11, but no wicked oil grab in Iraq and no obscenely unChristian tax cuts for the rich. Far from doubling, the deficit would have remained stable or shrunk. America would have been nicely placed to withstand the sub-prime and banking crises that led The Idiot, in the dog days of his distempered administration, to say of the economy with wonted gravitas: "This sucker could go down".

Under Gore, the US would not have sacrificed what she saw as her moral authority to impose the Pax Americana, however misguidedly and self-servingly, on the satanic altar of Dick Cheney's neo-con experiment. The US the 44th President inherited from a two-term Gore would have been a startlingly different entity-rich, confident, unsullied by Guantanamo and Abu Ghraib, and still dominating the world by the projection of soft power.

The America at which we glance across the ocean today is shrinking before our eyes. The Chinese, to whom the US is in ever growing multi-trillion hock, own the very pants Obama walks in. Extending far beyond the Birther nonsense, the far right's malevolence has prevented him from reversing the Bush tax cuts – worth $500bn per annum, or half the annual increase in the deficit – for fear of spreading the Fox-propagated belief that he is a Communist sleeper. He regretted this last week on finally cobbling together a deficit-reduction fudge with the Republicans, but regrets butter no Thanksgiving turkeys.

Impotent domestically and internationally, he may be judged kindly by history for preventing the sucker from going down, and for finding that presidential holy grail of universal(ish) health care. But the figurehead of a collapsing empire will never be loved in the homeland, let alone when trying to lead a people divided by much and united only by fear for the future. His approval ratings are sliding again, and he looks vulnerable in the unlikely event of the Republicans nominating a sane and serious challenger next year.

There is only one of those on the horizon. A feeling in my bones whispers that Mitch Daniels, the engagingly unpompous, Harley Davidson-riding, deficit-slashing Governor of Indiana, is an obscure name that won't be obscure for much longer.

In the last year, the number of Americans citing the deficit as the country's major problem has gone from virtually nothing to almost 20 per cent (and that before the S&P warning). If this issue proves decisive in 2012, Daniels could – for all his lack of hair, charisma and willingness to pander to the far right on social policy – do an Obama, and come from nowhere to win. But that's one for another column.

The real biggest issue that faces America today is that America, despite a recovering economy, is broke, dispirited, bamboozled and petrified. It is terrified by the suddenly bleak middle-class future faced even by graduates, by the prospect of losing its supplies of cheap oil from rebellious client kingdoms in the Middle East, and by the staggering speed with which China threatens to supplant it.

Although the links between the Bush and Bin Laden families made a fine film in Michael Moore's hands, they seemed merely a diverting conspiracy theory. Yet it appears that Ossie and Dubya are destined to be conjoined in history after all, as the double act that destroyed the American empire in record time. Only one of them will be laughing about that, of course, and it should be one hell of a tenth anniversary bash, come September, in the cave.