I wish I had more to contribute but I feel like a lot of the terrain has already been covered. I'll do my best to say something worthwhile now...
First, does anyone here actually have any expertise in economics, philosophy of economics, or history of economics? Or is everyone just talking out of their ass?
Second, can we trace the success of the US (or the demise of the USSR) back to a particular economic system? I would say absolutely not because of the sheer number of moving parts in these questions. On top of that, I would also deny that you can extrapolate from such limited cases to speak on socialism and capitalism at large.
An earlier comment suggested that the US isn't failing to advance; it's that the other countries are catching up. I disagree with that statement (starting, at the very least, from a perspective that the US is more focused on BS financial instruments now than they are on production and innovation). I also find it interesting that you have just acknowledged that there must be other ways of achieving a successful economy; otherwise, how have these countries caught up to the US? You can't say it's because they have employed a US-style view of Capitalism and the role of government, because typically they have not.
I guess what burns me the most out of everything is those who are absolutely certain that a welfare state, whether expansive or not, is superfluous or damaging in some way. I believe that is a value statement and not at all something demonstrated empirically. It might be the case, but I just wonder where your moral compass is at when everyone who fails is considered a loser, or lazy, or mentally incompetent. I feel that reflects a very naive view of sociology, psychology and, more importantly, causality as a whole.
If your goal is to take care of yourself only, then we are having a very different discussion. However, I'm after how to produce a broadly "happy" and co-operative populace, and it's not clear that throwing all the blame at the foot of a person who is but a single cog in the system is the way to go about that.
Part of this also is about what you think can make a person happy. I think we have seen pretty convincingly that the sort of consumer goods that capitalism can produce don't do a damned thing to make people happy. This goes back to the question earlier about having a bigger house. I honestly could give two shits about what size my house is, and I have no problem questioning the moral integrity of any person who does care beyond its bare utility. When you look at all the suffering in the world, how can you sleep at night knowing that you just bought a 60" LED screen to watch tonight's episode of Big Brother.
Some will reply: "How is that any of your business?" to which I reply, again: "No man is on an island. Nothing happens in a vacuum. Whether you care to acknowledge it or not, we are all bound together, at least loosely, and I absolutely have a right to consider you a moral monster if you allow others to suffer under the assumption that you and they deserve your respective 'just desserts.'"
Lastly, drop Nietzsche. Maybe that's your problem: you read too much from an insufficiently rigorous egomaniac who couldn't for a moment empathize with "the common man."