This unpalatable fact is fuelling ferocious debate on a number of questions. Should the war in Afghanistan be escalated or scaled back? Should the Taliban be brought to the negotiating table? And is it possible to declare a truce with the Afghan militants without providing a new launchpad for al-Qa'ida's war on the West?
Eight years into the conflict, the disparate band of rebel groups known collectively as Taliban is undeniably winning the war.
It now has a permanent presence in 80 per cent of Afghanistan, according to the London-based International Council on Security and Development, with its own civilian administration, courts, economy and taxation system in place.
The Taliban is already operating as a "de facto alternative government" says Amin Saikal, the Afghan-born director of the Centre for Arab and Islamic Studies at the Australian National University, whose brother Mahmoud is a former Karzai government minister.
As Hamid Karzai began his second five-year term as President on Thursday, he said he wanted a decrease in foreign troops, with security completely in Afghan hands within five years. "The people following Mullah Omar have one line of thinking: `We are fighting for our country, we are fighting for our honour, we are fighting for our religion. We see these foreign forces as invaders, and we see the Karzai government as a puppet'," Saikal says.
The Taliban's renaissance is a product of the same hostility to foreign invaders that saw off the British colonialists in the 19th century and ended a decade of Soviet occupation in 1989. Omar's success rests with the historic resonance of his message, says Saikal: "Your country is occupied by infidels. Your forefathers drove them out, now they're coming back and occupying your land, and you as an Afghan and a Muslim have an obligation to stand up against these people."
The Taliban's ascendancy, and the resulting surge in American soldiers returning home in body bags, has propelled a steady shift of opinion on how the next phase of the now discredited war on terror should be waged.
Until recently "counter-insurgency" was the new buzzword and favoured modus operandi. But as the war drags on it becomes ever more apparent that fighting a broad-based insurgency is a costly, difficult and deadly task, with no end in sight.
US President Barack Obama is expected to announce his long-delayed troops commitment before a NATO meeting on December 3. The US commander in Afghanistan Stanley McChrystal wants the President to send up to 40,000 more troops, without which he says the US operation "will likely result in failure' in the next year. Critics argue that such a surge would mean that "permanent war has become the de facto policy of the US", in the words of one commentator.
Support is growing for the alternative favoured by Vice-President Joe Biden and other senior Obama aides: rejecting the surge in favour of a redoubled counter-terrorism effort aimed at rooting out al-Qa'ida and its supporters from their border strongholds.
Marc Sageman, a former CIA mujahidin handler turned counter-terrorism analyst, last month told the US Senate Foreign Relations Committee that a troop boost "may result in moral outrage in young Muslims in the West, who would take it upon themselves to carry out terrorist operations at home in response. So, far from protecting the homeland, the surge may actually endanger it in the short term."