Flirting With Deficit Disasters
While President Bush has been on the road trying to woo public support for his plan to privatize Social Security, two of the nation's economic gurus have been warning that the country is flirting with financial disaster. It's time for the president to stop focusing on a risky and unpopular scheme for addressing the problems of 2040 and to pay more attention to crises that could unfold during the next few years.</br></br>The difficulties with Bush's plan for private investment accounts have become clear: First, it wouldn't address the solvency of the Social Security system, which Bush rightly warns is a serious problem, and it might actually make that problem worse; and, second, it's unpopular with the folks who just reelected Bush. A Washington Post-ABC News poll released Monday showed that only 35 percent of Americans say they approve of Bush's handling of the issue.</br></br>What's truly unfortunate about Bush's privatization road show is that it has distracted him and the nation from the financial threats that loom just over the horizon. Those dangers were highlighted in frightening analyses made this month by investor Warren Buffett and Federal Reserve Chairman Alan Greenspan. Though the two differ about precisely what may lie ahead, they agree that unless the United States puts its financial house in order, it faces real trouble.</br></br>Buffett's comments came in his annual letter to shareholders of Berkshire Hathaway Inc., released March 5. Every year, Buffett's letter offers blunt economic analysis, and it has become a kind of cult object for his devotees. But this year's version was enough to give you indigestion after devouring the sage's favorite meal of a T- bone steak and double hash browns at Gorat's in Omaha. Indeed, it was downright scary in its comments about the dangers posed by America's trade deficit.</br></br>Buffett has argued since 2003 that this huge trade deficit will eventually bring a sharp decline in the dollar, and he has tried to protect his company's shareholders against that dollar crash by speculating in foreign currencies. But this year, with the trade deficit having ballooned to a record $618 billion in 2004, Buffett's tone is almost apocalyptic.