The U.S. federal budget released Monday was deflating, particularly for those who had seen our current president as a panacea. The budget is stark in its depiction of the fiscal challenge: unless we can hold deficits below a stabilizing threshold -- roughly 3 percent of GDP -- they threaten to spiral out of control.

Having set itself this challenge, the administration abjectly fails to meet it. The nadir of its deficit projections is 3.6 percent of GDP in 2018. After that, the upward spiral begins. The only hope the administration offers is a call for a deficit commission to put forward solutions that it was unable or unwilling to generate on its own.

This fiscal gloom was linked to foreign policy in a prominent piece by David Sanger in the New York Times. He expresses dismay at the long-term budget numbers and argues that this profligacy could erode American power in the world.

There is ample cause for alarm at the budget picture, in particular the administration's plans for extraordinary levels of spending. The question of what this will do to America's potency on the world stage is a bit more subtle.

It may help to put all the anticipated impairments into a more general framework. We can consider three potential sources of national power:

1. Economic and military capability. A strong economy allows a country to produce and pay for many things, among them a cutting-edge military force.

2. Leadership by example, or soft power. A country that seems to embody an attractive ideal will draw followers, in economic as well as cultural matters.

3. Relationships and leverage. There may be other reasons why one country has a special hold over another, such as a colonial history. I toss it in here because of the common suspicion that the creditor-debtor relationship might serve as a similar lever.

For the future prowess of the United States, a key question is whether it is absolute or relative performance in each of these dimensions that matters. In absolute terms, there is no doubt that the economic shocks of the last couple years have diminished the country's economic capabilities and tarnished its image as a paragon of market-led growth. The United States is rapidly accumulating debt obligations, a significant share of which are owed to countries like China and Middle Eastern oil states. 

Yet, at the same time, the world seems to be engaged in an economic "ugly contest," with each significant player revealing steadily more appalling disfigurements. Consider the competition.

Sanger actually holds Japan up as the cautionary tale of how a global high-flier can slip into misery. Today's Washington Post describes the country's "glaciers of trouble." While the United States worries about public debt exceeding 80 percent of GDP, Japan has already blown past 200 percent of GDP and still worries about deflation.

Britain's situation is not quite as bad, but it was recently chided by the IMF for its "disturbing" levels of debt. The Fund helpfully went on to discuss the UK's "very dark" prospects if it did not borrow more.

At the heart of continental Europe, France and Germany have been more cautious in their borrowing, but they have yoked themselves together with more profligate neighbors in the Euro. The Eurozone may be as weak as its weakest member. The entire monetary arrangement could come apart when "PIGS" fly. The most wayward of the eurozone countries, Portugal, Italy, Greece, and Spain, are all teetering near the edge of fiscal crisis. The most acute is in Greece, which is being asked by its European brethren to make truly draconian cuts in its fiscal spending. It is not clear the Greek government can survive with such cuts; it is not clear the Euro can survive without them.

Of course, this tour d'horizon leaves only one major player appearing unscathed: China. The Chinese have apparently maintained high rates of growth throughout the crisis, did not suffer from the bank crashes that plagued the major nations of the West, and are being touted for a new model of authoritarian capitalism.

But the Chinese ship of state has problems both above and below the waterline. In full view, there is the fact that China is still a poor country - a point the Chinese make relentlessly when asked to take on new global obligations. China's per capita income is a fraction of the United States level. It is true that China holds ever-growing piles of foreign debt, but is it really a sign of strength that they have accumulated so many dubious IOUs from around the world? This relationship may pose a greater threat to the lender than the borrower.

Less transparently, there are serious worries about China's own fiscal situation. Its accounts are not transparent and much of its vaunted stimulus has consisted of ordering banks to drastically increase lending. Recent U.S. experience suggests that wanton lending by state-backed financial institutions can end badly. Beyond this worrisome possibility, there is the certainty of China's rapidly aging population. My colleague Nick Eberstadt writes of "demographic demons" stemming from China's One Child Policy that "could shake Chinese civilization to its very foundations."

It is cold comfort to argue that the United States will continue to lead because everyone else is falling apart faster. It does not lessen the serious possibility of a U.S. fiscal crisis in the years to come, but it does appear our misery would have company.