Thanks to three factors - Reagan's supply-side economics, three decades of the gospel of deregulation, and the idea that all government is corrupt and somehow inherently evil, America's manufacturing sector is a shell of what it once was. This is not news, this is a fait accompli. America will never again be the economic powerhouse it once was.
So what do we do now? First of all, we don't give power back to those who got us into this economic mess in the first place. The majority of economists - including Alan Greenspan and Paul Volcker - agree that the Bush tax cuts for the wealthy need to go away. The majority of economists agree that the Obama stimulus was, if anything, too modest, too small to get the job done. Of course, the fact that the majority of professional economists agree on these matters is all that the Republicans need to know in order for them to oppose the economists. Why? Because the economists are the professionals, and Republicans certainly seem to distrust professionals. The proof lies in their opposition to the idea of global warming caused by human civilization despite the fact that 97% of climatologists know that it's very real, and in that many in the religious right oppose the teaching of evolution despite what any child knows after having been to a museum of natural history.
Second, we need to remember that we are not the first country that has had to adjust to a significant reduction of its manufacturing base. England has already traveled this road, from being the world's preeminent industrial economy in the late 1800's to its present state. How did England adjust? I suspect most economists would agree that they finally realized that they could not compete with the American economic colossus, so they concentrated instead where they still had the advantage: high finance. This is why the LIBOR, the London Interbank Offering Rate, is perhaps the single most influential factor in the determination of credit offering rates in the West. Of course England's financial sector probably cannot compare to what Wall Street has become, but the efforts and opinions of London's finance industry still matter significantly in the world. England has already blazed the trail of how to adapt to diminishing influence while maintaining dignity, and we should bear their example in mind.