There is a warning that the United States has lost its "military edge" to a "dangerous degree" to the point where it "might struggle to win, or perhaps lose, a war against China or Russia".
The bipartisan National Defense Strategy Commission says Washington is not investing or moving fast enough to keep pace with Beijing and Moscow.
The commission made up of former top Republican and Democratic officials selected by Congress warned that the wellbeing of the United States is at "greater risk than at any time in decades".
It also points to threats posed by North Korea and Iran and the weapons and tactics developed by those nations.
The report comes as a survey by the International Institute for Strategic Studies says nations such as Russia and China have been testing settled states' tolerances in the West for different forms of aggression.
The United States currently has more than 1.3 million active personnel, compared to two million in China and 900,000 in Russia.
Meanwhile, the US has 11 aircraft carriers, while both China and Russia have only one aircraft carrier each.
Russia's carrier, Admiral Kuznetsov, was damaged last month when a crane fell on to it, which officials have reportedly said makes a refit of the ship "impossible".