DOJ Accidentally Gives Lawyer Wiretap Transcript
China's vast army means little in the only scenario likely to pit the United States against China in the foreseeable future: a Chinese invasion of Taiwan. To win this war, China would need to maintain aerial and naval superiority over the Strait of Taiwan for long enough to ship a small fraction of their huge army onto the island. America has 10 aircraft carriers, 8 of which are afloat at a time. I think at least 3 or 4 are kept close enough to Taiwan to respond rapidly to a Chinese invasion of Taiwan. China has zero aircraft carriers. While they will be building some, America could probably maintain their significant advantage here, enough to ensure that China cannot bring its huge army to bear on Taiwan. (as long as the Chinese don't use tactical nukes.... that's a pretty serious game though)
My point is that in any situation other than an overland invasion, army size doesn't count for nearly as much as aircraft carrier strength, which America has in spades. America can respond to China's build-up by building more carriers and keeping them deployed close to the Strait of Taiwan, and as long as we keep spending more money on our military than the rest of the world combined, we could probably maintain local superiority over the Chinese in the Strait of Taiwan.
At any rate, as long as Taiwan recognizes that having the full military backing of the world superpower is about the best deal any tiny state under threat by a huge totalitarian power ever got, they should keep quiet under the fuzzy "one state - two systems" doctrine. Also, America is important to the Chinese economy, and the Chinese leaders would be loathe to jeopardize social stability by cutting off their profitable, employment-generating trade with America.
Your points about Bush's slide towards a police state are completely valid though. thank goodness his term ends fairly soon.