Setting National Priorities: The New Environment

The environment in which the debate over national priorities takes place has changed markedly over the past decade. The Cold War has ended, fortunately with a whimper not a bang, allowing the United States to scale back its military forces substantially and begin to redefine its relations with other nations. The pall that large and seemingly intractable budget deficits have cast on public sector initiatives as well as efforts to reduce tax burdens has lifted. After 28 years of uninterrupted red ink, the federal budget registered a surplus in fiscal 1998, and projections suggest that surpluses will continue for more than a decade if current tax and spending policies are not changed dramatically. While economic weakness abroad has created great uncertainty, the nation’s economy remains unusually unusually strong and resilient. The fraction of the adult population employed is at a record level, wages are growing across the income spectrum, and inflationary pressures continue to be remarkably subdued.