Our current foreign policy debate is not over whether to retreat into isolationism, but over how we should relate to the rest of the world. Polls show that the large majority of Americans do not want to turn inward, but neither do they want to be the world's policeman.
Hard power is exercised through economic sanction or military force.
Soft power is our ability to get what we want through attraction rather than coercion. When other countries want the same outcome we want, then we can get what we want without having to spend as much on coercion. Both dimensions of power are important, and they work best when they reinforce each other. One source of soft power is our values. To the extent that we are seen as a beacon of liberty, human rights and democracy, others are attracted to follow our lead.