Niall Ferguson thinks its possible:
As interest payments eat into the budget, something has to give—and that something is nearly always defense expenditure. According to the CBO, a significant decline in the relative share of national security in the federal budget is already baked into the cake. On the Pentagon's present plan, defense spending is set to fall from above 4 percent now to 3.2 percent of GDP in 2015 and to 2.6 percent of GDP by 2028.
Unfortunately, Ferguson never really explains why this is a problem. Obviously, if China declares war on the U.S. in 2027 and we insist on spending 2.6 percent of GDP in our defense in 2028, that's going to be a huge problem. But otherwise? Not so much.
In and of itself, defense spending as percentage of GDP doesn't strike me as a particularly good barometer of imperial health. The U.S. spends vastly more on its defense than any potential competitor. When you look at the world's top defense spenders, almost all of them are American allies. Moreover, while there is certainly a need to keep a healthy lead against nations like China and Russia, we could probably do so and cut our defense spending. Consider the not-insignificant sums invested in policing Baghdad and Kabul and the security subsidies we provide for South Korea, Japan, and Germany.
In other words, there is not (or shouldn't be) a tension between maintaining a superior military force within a tighter budget, provided you're willing to focus your investments in a prioritized fashion and not embark on costly nation building exercises. Of course, when you read Ferguson's piece you learn (or relearn) that Washington can't, in fact, exercise any fiscal discipline. And that has consequences:
The precedents are certainly there. Habsburg Spain defaulted on all or part of its debt 14 times between 1557 and 1696 and also succumbed to inflation due to a surfeit of New World silver. Prerevolutionary France was spending 62 percent of royal revenue on debt service by 1788. The Ottoman Empire went the same way: interest payments and amortization rose from 15 percent of the budget in 1860 to 50 percent in 1875. And don't forget the last great English-speaking empire. By the interwar years, interest payments were consuming 44 percent of the British budget, making it intensely difficult to rearm in the face of a new German threat.
Call it the fatal arithmetic of imperial decline. Without radical fiscal reform, it could apply to America next.
There is an important insight: empires almost always collapse because of internal mismanagement. Either that mismanagement dethrones them outright or, more commonly, makes them much more vulnerable to challengers. This is why worries about Iran, North Korea, Venezuela, et. al. miss the point. The damage they can do to the U.S. is nothing next to the damage we have done - and continue to do - to ourselves.