I think it depends a little on what exactly is being compared.
My bet would be that the Federation is the strongest of the four powers (Federation, Klingons, Romulans, Cardassians)... but that they don't fulfil more than a fraction of their military potential, and therefore Starfleet isn't necessarily the strongest.
Here's my thinking. The Klingons have a very militarised culture. They must have a non-military section of their economy of course (who cleans the telephones?!), but it seems to me that the Klingons permanently run their economy more or less on a war footing.
The Romulans and Cardassians aren't all that different. Both of them seems to put considerable emphasis on the military.
The Federation, by contrast, doesn't seem to emphasise Starfleet nearly as much.
Also, consider that Starfleet don't build warships. A Galaxy class is not a warship; it's more like an oceanographic research vessel with some missiles bolted on. So the military capability of any given Starfleet ship is a fraction of what it otherwise could be.
And yet, it's at leach a match one-on-one for a Vor'Cha or D'Deridex, and more than a match for a Galor.
This is backed up by the Defiant. The first real warship Starfleet built, the defiant is tiny compared to most ships around. Much smaller than a Vor'Cha, D'Deridex, Galor, Galaxy, Nebula, or anything else.
Yet it easily defeated Jem'Hadar bug ships, which a Galaxy class couldn't do. Tom Riker confidently expected it to be able to take on three Galors. It beat a vastly uprated Excelsior when it was studiously trying NOT to damage the Excelsior too badly.
And if the little Defiant could do all that, can you even imagine what a ship the size of a Galaxy class but built to the same "combat over all" principle would be like?
So two conclusions to all that.
1) The Federation could, probably, greatly expand the size of Starfleet if they were willing to sacrifice a chunk of the civilian economy to do so.
2) If the Federation began to produce pure warships, they would probably greatly outclass the warships of any other major power.
So how powerful the Federation actually are is really a function of how powerful they choose to be at any given time. And most of the time, they don't choose to be particularly powerful.
It's actually quite analogous to the USA just before World War II. One could look at their military and say it's not all that big, it's not all that modern... we can beat that. But a wise man would look at their gigantic population, huge natural resources, and simply colossal industrial capacity and say "dude, if we push these people to it they'll build a military to shake the world."
And like the US in the first year or so of war, the Federation's main problem when facing the other powers is that you largely fight a war with what you have to hand, at least to begin with. It's one thing to say that the Federation probably could build an overwhelming force, but it would take time to do it. And in the meanwhile, you fight with what you have - a fleet sized for peacetime and designed for diplomacy and exploration.
But bear in mind... even with that force, Earth fought the Romulans, alone, and fought them to a standstill. The Federation fought the Klingons before TOS, and fought them to a standstill. The Federation fought the Cardassians before TNG, and fought them to a standstill too.
And in Star Trek VI, everybody expected that in war with the Klingons, the Klingons would lose. Badly. Even the Klingons said as much.
The only thing to really argue against that is the fact that in Yesterday's Enterprise we find that the Klingons were winning the war. But I don't put that much store in that; anything can happen in an alternate reality, after all. But I'm fine with saying that at that particular time the Federation had cut back on their military capability to such a point that the Klingons were able to overwhelm them before they could turn it around.