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This Special Report looks at the long-run prospects for the international economic position of the United States, with particular focus on the likely evolution of the current account deficit and prospective foreign financing for it. Its goal is to provide a framework for the development of US fiscal and other economic policies, especially including responses to the global financial and economic crisis. The central message is that the long-run outlook is extremely worrisome and potentially very costly-in foreign policy/national security as well as economic terms. As the country (and the world) emerges from the global crisis, and even in fashioning policy responses to the crisis itself, it will be essential to keep these long-run considerations firmly in mind. This will require early and decisive policy actions, perhaps even in tandem with the near-term stimulus and other initiatives, to address the ever-escalating costs of the major entitlement programs, Social Security and especially Medicare/Medicaid, and thus the country's overall fiscal position.
1 Introduction: The Global Crisis and the International Economic Position of the United States C. Fred Bergsten 1
2 Long-Term Fiscal Imbalances, US External Liabilities, and Future Living Standards William R. Cline 11
3 International Capital Flows and the Sustainability of the US Current Account Deficit Catherine L. Mann 35
4 National Security Risks from Accumulation of Foreign Debt Adam S. Posen 65
Appendix A Conference Attendees 73
About the Contributors 75