I have to say that I am impressed. I was all set to roll my eyes at OP when I saw the title of the thread, but that was actually pretty good.
America was an exceptional nation at one point precisely because of the rights it afforded its citizens as a result of a limited government (which, as you said, lead to greater freedom than any country before America). This freedom allowed for an unprecedented level of success and creativity which lead to the creation of tremendous wealth and prosperity that benefited all Americans of all classes and backgrounds.
The cracks and flaws of America, however, were present from the start, but the tipping point came around 1915 starting with America's involvement in WWI. From that point on, America began to follow a path that strongly deviated away from limited government towards a stronger and much more centralized government. America hit its point of no return after the 60's with tremendous expansions in social programs and entitlements along with the complete abandonment of the gold standard (what was left of it at that point) which took away the only defense against inflation. Now America is a shadow of its former self that is in just as much danger of total economic ruin as Europe is. Its military remains as strong as ever, but that is not and was never what America was about. America was born out of a revolution, but America was never intended to be a nation of force and imperialism (in some ways it has become much like the empire it rebelled against).
Really the ultimate lesson of America is that small government (minarchy) is not sustainable. American started as the smallest of possible governments. This allowed (like I said before) for the creation of a tremendous amount of wealth. With wealth comes criminals and people lacking ethics who want to confiscate that wealth. The smartest of these criminals found their way to government where they slowly but surely began to take that wealth through taxation. They did a superlative job at taking what never belonged to them, and they proceeded to borrow and borrow agains the tremendous success and working power of America all while bribing people for votes through social programs and entitlements that people never needed in the first place. Fast forward 200 years later and you have a nation on the verge of economic collapse being run by snakeoil salesmen who get elected by selling a worthless product (entitlements) that people never needed using the money of the electorate to fund their social programs.
The American dream as it was originally conceived is gone, and in its place we have generations of children going to government schools, getting government jobs, all while receiving government benefits. Where as the dream had once been to work hard and to take risks it is now the desire of young Americans to conform and to live comfortable lives while doing as little work as possible.
So the lesson here is that small government does not work (it eventually transforms into big government) and neither does big government (plenty of examples aside from America that demonstrate this). The only way to reclaim the American Dream and to ensure that it persists is to go for a third option ... which libertarians have been talking about since the days of Spooner and Bastiat.
