Just to clarify: I don't believe the US ever *did* lose its prestige, in terms of being worse off. However, there are some relatively recent developments that will make us less competitive in the long term. I think the four biggest changes for the worse in recent decades are:
1980s - The ramp-up of the war on drugs, which has devastated our inner cities, exacerbated racial tension, and caused civil wars in at least two countries to our south.
1980s - The birth of the foolish belief that tax cuts will either A) produce a free lunch by paying for themselves, or B) "starve the beast" and force Congress to cut spending. Both of these conclusions are at odds with reality, as well as each other.
1990s - The beginning of the Senate "tradition" of filibustering every bill by default, requiring a 60-vote supermajority for everything and making it impossible to make any necessary economic decisions.
2000s - The incredibly self-destructive notion that we need to view terrorism as a problem that can be solved with our military.