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trade, outsourcing
and similar factors
– the overall economy continues to look good
for a great many people. But it is worth asking,
as Federal Reserve Chairman Ben Bernanke did
earlier this year, is this the “calm before the storm?”
Are we making decisions today that will leave our
“posterity” with a large debt that will undermine
our economy and our security?
President Bush spoke eloquently when he
said he “came to this offi ce to confront problems
directly and forcefully, not to pass them to future
presidents or future generations.” Yet without
some serious change in Washington he will,
doubtless to his regret, leave offi ce having done
exactly what he said he did not want to do.
Unless there is extensive reform of
entitlement programs – Social Security and
Medicare primarily – they will mushroom in
the next decade and beyond and suck money
from the rest of the budget, including defense,
and require either a large hike in taxes or a big
rise in federal borrowing and thus the nation’s
debt. That will in turn mean an even greater
dependence on foreign capital, given the very
low savings rate in this country, and many unmet
military and homeland security needs – some of
which have been postponed because of the cost
of the war in Iraq or by insuffi cient budgetary
resources due to money being spent on lesser
national priorities.
The country must fi nd a way of keeping
faith with its elderly, and those who need
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medical help, in a fi nancially sustainable way.
Even if the defense budget were zero, this would
be required. But given the costs of our national
security requirements to wage the long war
against terrorism it is particularly important.
This all comes to bear on the future
business environment. Today, with a strong
economy, tax cuts, low infl ation and strong
infl ows of foreign capital, many in business
have the wind at their back. But picture an
economy in which the defi cits rise as Social
Security, Medicare, Medicaid and interest
payments on the nation’s debt increase
dramatically. Add to this a situation in which
national security needs are not adequately
met, leaving the country more vulnerable
to terrorism or unable to robustly defend its
interests abroad. Factor in the need to raise
taxes or interest rates as the defi cit rises,
and in this circumstance
to attract ever greater
fl ows of foreign capital on
reasonable terms – and it is
no longer a rosy picture.
The silver lining is that all of this can
be avoided. But there are no easy or soft
answers. Hoping that growth will solve all
these problems will simply encourage the
country and its leaders to avoid making the
tough choices.
The current campaign period is critical
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Can candidates use it
to educate Americans
about the need for tough choices to address these
issues? Are they willing to advance ideas that
will enable them to move decisively if they are
elected? Great leaders have responded to great
challenges in the past; to leave a better world for
our posterity we need them again.
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