Americans produce the highest technology equipment in the world. Our machining base is structurally sound, but its all making weapons, so you don't hear about it.
It's true that China benefitted immensely from outsourcing, but they took the jobs Americans didn't want. It's the same with immigration today - folks cross the Rio Grande to do chores that Americans won't, or others fly in and work for nothing in academia while they wait for their PhD.
> The problem imo is the slow deterioration of institutional knowledge that offloading the mental task of wisdom gathering to AI is causing.
Have you considered the institutional knowledge could actually be actively preserved and distributed with AI? The kind of tacit knowledge that is situated and not readily preserved in a book might be absorbed by thinking machines and proliferated to the next person who needs it. The caveats would be trade secrets, skill differentiators, that people might not be willing to discuss, and manufacturing secrets of national importance. Maybe you can think of others.