I no longer worry about cultural decline. It is my considered judgment that the world already ended, right around mid-2000. We live in a postapocalyptic hellscape now. There's nothing that, say, reality TV or Glee can throw at us to make me say "the world is going to hell in a handbasket." It already went. I find this tremendously liberating. Any day at the end of which I can say "the zombies didn't eat my brain today" counts as a win, even if that day also saw the release of Transformers vs. the Human Centipede.
As Todd Seavey has long noted, the matrix inside 1999's The Matrix seemed to be set in the then-current day. In other words, when Agent Smith told Morpheus that the matrix was set in "the peak of [human] civilization" it seemed to be 1999 that he was talking about. And then it all went so terribly wrong...
On the non-cultural side, by the end of the 90s the internet bubble combined with some longer-term social trends to really make American society feel brighter than it ever had before. Unemployment was at a generation-long low; US median income was, IIRC, the highest it has ever been in any large country. (That is, in inflation-adjusted terms that peak still hasn't been matched in the US, though places like Singapore have surpassed it.) Crime had been falling for the whole decade and people were coming to realize that American big cities had generally become very safe; and population was flowing back into them. Teen pregnancy down, welfare down, massive unexpected budget surpluses creating competing fantasies of what to be done with it all, productivity growth up, etc. The bubble popped in the first quarter of 2000, but it took a while for the consequences to fully reverberate through the whole economy. The contrast in mood from, say, December 1999 to mid-2001 even before 9/11, was, as I remember it, just huge-- and then 9/11 began a chain of dominoes for a much darker decade-- two wars, Abu Ghraib and Guantanamo, and then the financial collapse. In Europe, the end of the Kosovo war brought the violence of the long breakup of Yugoslavia to a close, Russia wasn't yet resurgent, and I think there were as good of grounds for optimism as there had ever been: a peaceful and united Europe looked to be at hand. So, as with memories of the 1890s and 1920s, memories of the culture of the 1990s are partly also memories of the decade in a broader social, political, and economic way. The popping of the bubble and the election of George W. Bush do seem like a good way to date the end of an Era of Good Feelings.
That said, my view of television is that the 2000s saw possibly the best scripted television ever-- with tiny niche audiences that were generally sustainable on pay cable, mostly not on the networks. The Wire and The Sopranos did fine on pay cable. Arrested Development and Firefly did not, on networks. But the tidal wave of reality TV awfulness that hit starting in mid-2000 lowered the quality of what the average watcher was watching at any given time precipitously-- I'm willing to say to its lowest point ever, lower than in the Three's Company era or the Beverly Hillbillies era of dumb sitcoms.
And that's the kind of consideration I have in mind overall. It's not that there aren't gems after 2000. Human creativity and genius don't disappear. In the most barbaric times of the Middle Ages the monks were still producing some beautiful manuscripts for an audience that might total dozens over the following centuries. In the 2000s we haven't had the same combination of quality and creativity with broad markets and general cultural impact that we had in the late 90s. Instead, we've had Fear Factor (launched 2001) to set new lows, and American Idol (2002) to celebrate the aspiration to do cover songs of middlebrow hits of bygone days, and eventually Glee to turn American Idol into a middlebrow scripted show.
Plus: Mid-2000 saw Dawn introduced on Buffy the Vampire Slayer; and once we got to the season that started in 2001, that once-great show went far, far off the deep end. Mid-2000 saw Mulder leave the X-Files, and that once-great show went off the deep end. Hell in a handbasket, I tell ya.
In movies, the indie explosion of the 90s was absolutely wonderful for creativity. In 1999, we had The Sixth Sense, Blair Witch, Being John Malkovich, and the first Matrix (in which Agent Smith showed video of what seemed to be real-world 1999 and referred to it as "the peak of your civilization" while interrogating Morpheus). I think those four added up to as robust a sense that anything-is-possible in a commercial artform as I've ever seen-- maybe something like it was true in the early post-studio days of New Hollywood in the 1970s, but I'm too young for that. There was plenty of dreck, of course, with Phantom Menace at the top of the list. But: The Iron Giant, Girl Interrupted, All About My Mother, Run Lola Run, Office Space, Fight Club, The Straight Story, ExistenZ, and even the South Park movie-- it was an absolutely extraordinary last year to the decade that Kevin Smith, Quentin Tarantino, and Harvey Weinstein helped usher into being. Now, it's Michael Bay's world; we just live in it, if you can call that living.
The 2000s have been the golden age of fantasy and comic book movies. That's not a complaint from me; loved the Lord of the Rings, loved the new peaks of the superhero genre from X-Men 2 and Spider-Man 2 through Dark Knight and Avengers. But, along with other franchises good (Harry Potter) and bad (Transformers), they've sucked a lot of the oxygen out of the rest of the movie business. "Anything is possible" now means "what we can make with CGI," not "what kinds of movies we can make."
The Oscars are a separate problem from movies in general-- but if the Best Picture win for A Beautiful Mind in 2001 wasn't a sign of the end of the world, I don't know what would be-- except for the 2005 win for Crash. After those two, I wouldn't even have blinked had the loathesome Avatar won (though of course, like all good people, I'm glad that it didn't.)
I think that by '99 music mass-market was a couple of years past its peak-- the era of Britney, Christina, Backstreet Boys, and N'Sync was upon us. And year-for-year I prefer the music of the 80s. But there was something special in the early/mid 90s, when alternative went mainstream (or the mainstream went alternative), when the barriers between hip-hop and rock started to weaken and grunge provided a new infusion of energy, and the huge commercial rock bands were REM and U2.
Impressionistically-- I'm less confident here-- I think English-language literary fiction has lost a lot of its cultural reach, too. Here the peak is a little bit later: 2001 was when both The Corrections and Atonement came out, and they had really significant cultural reach between them. The rest of the 2000s had gems (Kavalier and Klay, Fortress of Solitude, Oscar Wao, On Beauty, Middlesex, Never Let Me Go, Oryx and Crake) but I'm not sure they ever added up to that 2001 level of impact. Just today [NB: this was written in April 2012] the Pulitzer committee declined to award a prize in fiction for last year; and I'll bet that this is not received as a scandal.
1999's Booker was won by Coetzee's Disgrace-- the most recent great novel by the most recent person to win the Nobel Prize in literature for work in English that was done in recent memory. (Lessing and Pinter were recognized for much older work.) Maybe that's as good a measure as any. Of the other Anglophones at all likely to win it, DeLillo, Rushdie, and Updike did their best work decades ago; only Cormac McCarthy still seems to be producing major work.
Upshot: The late 1990s into very early 2000 were at least a local peak... and then things went to hell. Once one accepts that things went to hell, all surprises are pleasant ones, and one doesn't have to worry that Honey Boo Boo is a harbinger of things getting any worse.