Why does the author choose the USA to be the setting of "By the Waters of Babylon"?
There is a sense in which the author is responding to concerns emerging from his own time period. This story was first published in 1937, as the world was clearly drifting towards another major confrontation thanks to the rise to power of Hitler and his aggressive foreign policy of lebensraum, or the securing of "living space" through the annexation of foreign territory. Although Americans initially believed that this was going to be a European conflict, the bombing of Pearl Harbour quickly changed this notion and the USA entered the war.
However, note the way that setting the story in New York heightens the message of the tale to the author's American audience. Having faced the terrors of World War I and the widespread slaughter and carnage that occurred thanks to technological sophistication such as mustard gas and machine guns, Benet seemed to predict that such technology could only heighten mankind's capacity for chaos and disaster. Setting his story in the USA, the most important and powerful nation, seems to suggest that even Americans are not free of the danger of "eating knowledge too fast" and becoming overwhelmed by the very technology that they had helped to create in the first place.