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Advanced Economies Must Face Fiscal Reality

When advanced economies were growing rapidly, leaving greater debt burdens to future generations arguably was not a problem, because it was assumed that our children and grandchildren would be richer and thus capable of affording higher taxes. But stagnant productivity growth has made deficit-financed welfare spending indefensible.

STANFORD – Around the world, advanced economies are facing heightened fiscal challenges, owing to the simple fact that most have bloated, financially unsustainable welfare states. As Mario Draghi said over a decade ago, when he was serving as the president of the European Central Bank, “The European social model is already gone.” Equally, America risks falling into the same trap if it doesn’t control spending and rein in public debt.