That perception is a far more dangerous proposition than its opposite (where you believe the other person's stuff is comprised of silver bullets and magical armor). For instance, during much of the Cold War the USSR's arsenal was thought to be powerful, and it was only later when it was discovered that, while lethal, it was not as good as previously thought (at least how it was previously thought to be).
However, that perception nonetheless had the US develop all sorts of highly superior capabilities - a good example being how the existence of the MiG-25, and its perception in the West as a Soviet super-fighter (rather than a high-speed interceptor that the Soviets made to defeat the US' B-58 Hustler super-sonic bomber that never went into service) led to the development of the F-15, a plane that even today is considered dominant. Or, to use another example, the development of the Seawolf submarine, or the F-22 Raptor. The US continuously kept ahead of all comers.
Now, the US is still ahead, and would remain ahead for at least a decade and a half even if it did absolutely nothing, but the gap is closing. Already several other countries are fielding equipment that approaches the capability of the average held by US equipment, and while the US still holds a key qualitative advantage in certain areas (e.g. the Raptor) there are quantitative deficiencies. In other areas the gap is seriously closing, for instance countries like the UK, China, Russia and India are developing AEGIS-like phased array radars for their ships (that are actually AESA rather than PESA), and in missile technology the level of parity is also arguably equal. Now, it doesn't matter much as long as the countries the US engages are the likes of Iraq and Afghanistan (or, maybe in the future, Iran and Yemen), but some day it may be against a near-peer. If that ever happens, even if the US wins it will be a win that has a butcher's bill that was unnecessary.