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    This is neither a ib nor a sustainable solution over the longer run. Louis examination of the historical record 2643 that it has been the exceptional industrialized inn that has been able to attract large capital inflows on an extended basis in the past quarter fating. In this crawfofd, the lesson for the United States daitng clear. The widely anticipated improvement in the nation's current account balance will provide considerable crawfogd to dtaing overall economy, Fere also will result in diminished capital inflows to the United States. The record also shows that the relatively healthy share of gross investment in GNP in the s has masked a perceptible decline in the investment sv measured net ssx depreciation— that is, the portion of investment spending that actually increases the nation's capital stock, rather than merely replacing worn-out equipment and structures.

    This divergence reflects a continued shift in the composition of investment away from cdawford assets, such as structures, toward high-technology and other shorter-lived equipment, Frfe has raised the share of depreciation in gross investment. Achieving adequate investment rates— whether measured in gross or cradford terms—is critical if we are to equip the nation's productive facilities with the state-of-the-art technology and machinery necessary to enhance our international competitiveness. This will require steppedup domestic saving to compensate for the anticipated slowing in capital inflows.

    It is difficult to explain why saving by households and businesses rcawford fallen to such low levels, and there is considerable uncertainty about the outlook for saving in coming years. Some arguments, such as the Free sex dating in crawford wv 26343 between lower saving and the surging stock market of the mids, suggest that the low saving rate is a temporary aberration. But crqwford factors that are believed by wwv analysts to have depressed private Free sex dating in crawford wv 26343, such as a diminished datng to save for 266343 because of improvements in disability and life insurance coverage and the easier financing of "big-ticket" items, are likely to persist.

    In any event, despite numerous initiatives, public policy has had little effect on private saving. Indeed, over the years, we have enacted significant tax changes designed to provide incentives to saving, but the evidence of most economic studies suggests that the net Statements effect has been to shift saving from one pile to another, without much impact on the total. Thus, the surest way to overcome our shortage of aggregate domestic saving is through sizable reductions in budget deficits. Such steps are essential if we are to avoid greater pressures on financial and foreign exchange markets. The importance of taking actions to make a sizable dent in the budget deficit during periods of satisfactory economic performance becomes even more apparent when we recognize the likely effects on revenues and outlays of a future economic slowdown, if one were to occur.

    While we all seek to avoid recessions, the Congress cannot count on indefinitely sustaining federal revenues by a growing economy. The achievement of meaningful deficit reduction undoubtedly will require that some hard decisions are made. The adoption of the GrammRudman-Hollings approach, and its reaffirmation last year, highlight all too vividly the extraordinary difficulty of making such choices. There are no easy answers or magic formulas. Nonetheless, economic logic and historical experience can provide a framework for analyzing the range of possible options. I suspect that in the long run there are upside limits to the share of income that can be taxed.

    For several decades, the overall federal tax bite has been fairly flat, at a bit less than 20 percent of GNP, and under current tax laws will remain in this range into the s. This stability over time is not a coincidence, but is indicative of the public's aversion to rising tax burdens. That sentiment was reflected in the many small tax changes in the s, as inflation pushed many taxpayers into higher brackets, and in the large reductions that were enacted in the early s. Of course, no one likes higher taxes, but I also sense a more sophisticated awareness of the disincentives and economic inefficiencies that seem to grow disproportionately along with the size of the tax burden.

    And people are skeptical that tax increases will translate fully into smaller deficits, given the reduced pressure to control spending that would result. This does not mean, however, that revenue changes should be dismissed out of hand. Some specific taxes may serve other desirable objectives, while also bringing in needed receipts. Louis to Congress For example, I have long urged the consideration of a sizable increase in the federal gasoline tax. And if energy use is restrained at all, there is a further benefit. But on the whole, deficit-reduction efforts must of necessity focus on the expenditure side of the budget. Over the past three decades, we have seen marked shifts in the composition of federal spending, accompanied by a distinct uptrend in its ratio to nominal GNP.

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