America has a two-party system because two parties broke away early in the formation of the United States and stood out immediately without any additional parties. Both parties have existed for more than 150 years and it is difficult for new parties to enter the system because voters know that those parties are less established and are less likely to have the chance to win a position.
There are advantages to the two-party system, which include moderation, stability and the ease of making a decision. Voters are able to easily make a decision with only two options. The parties are also kept on the moderate side because they have to appeal to "the middle" in order to win. There is also a stability in two-party systems that multiparty systems do not have.
However, there are also many disadvantages to the two-party system, which include the lack of choice and the fact that the system ends up being less democratic due to people feeling as though their vote doesn't matter. People are unable to identify with the party that speaks the most to their values because there are only two sets of values present. Multiparty systems give people additional choices so that they can choose the party that they identify with instead of choosing the party that is "the lesser evil."