Special Report

Free Money

Fiscal irresponsibility is politically attractive, but it is equivalent to believing in something for nothing. Basing the policy of the world's dominant economy on the hope that the normal rules of fiscal prudence do not apply is an exceedingly dangerous idea.

Large and sustained deficits in the United States threaten not only U.S. prosperity but the world's economic health as well. Massive public borrowing in the United States is already absorbing other nations' savings to finance the world's richest country. And it may soon raise interest rates around the world and slow global growth. U.S. profligacy could even invite an international financial crisis that would bring enormous human costs everywhere.

Small countries cannot afford to behave irresponsibly for very long; their currencies lose value and their governments cannot borrow money. But investors give the United States more leeway. Its debt -- the famed U.S. Treasury bonds -- is still regarded as a very safe place to park money. The persistent appeal of U.S. bonds is leading politicians in the United States to believe that the ordinary rules of global finance don't apply to them. When they realize that rules are rules, it may be too late; the world could be caught in a financial crisis that has escalated beyond control.

Sermons on fiscal rectitude often fall on deaf ears in the United States. Everyone likes a free lunch if they can get it. Raising taxes and cutting spending are always painful, and political leaders have to be convinced that the pain is worth it. But a glance at the recent past should wake the slumbering body politic.

In the early 1980s, the Reagan administration cut income tax rates and increased defense outlays without restraining other spending. Supporters of those tax cuts predicted they would stimulate economic growth so powerfully that deficits would vanish. They claimed that deficits did not matter because government borrowing did not raise interest rates. They were wrong on both counts, and the free lunch proved expensive. Fortunately, the costs of high deficits in the 1980s evoked a bipartisan response in the United States. Politicians in both parties voted for tax increases and forced themselves to restrain spending growth. Fiscal responsibility and a strong economy turned the deficits into surpluses by the end of the 1990s.

Irresponsibility is back. Once again, a U.S. administration is touting huge tax cuts as stimulants to economic growth and massively increasing military spending. Once again, deficits initially blamed on recession persist even as the economy recovers. If the United States does not quickly change course, deficits will remain around 3.5 percent of gross domestic product for the next decade and then escalate rapidly as an aging society forces more spending for social security and health care.

In many ways, the current deficits are even more dangerous than those of the 1980s. The retirement of the baby boom generation is two decades closer. Moreover, the United States has shifted from being the world's largest creditor to being the world's largest debtor, and a far more substantial portion of U.S. public debt is held by foreigners, especially Asian central banks. This dependence makes the United States vulnerable to the shifting moods of international investors. A day may come when wary foreign investors demand high interest rates as compensation for holding their assets in U.S. dollars. Worst of all, the political will to deal with deficits has evaporated. The spending rules adopted in the 1990s have lapsed, and the bipartisan coalition to restore fiscal discipline has splintered.

The most likely scenario is continuing deficits financed largely by borrowing from the rest of the world. The principal victims of this fiscal irresponsibility will be Americans, who will suffer higher interest rates, slower growth, more of their tax money going to debt service, and higher inflation. The larger debt will be passed on to future taxpayers, who will simultaneously have to grapple with the burdens of a rapidly aging population. Eventually, the government will raise taxes and cut spending by more than would have been necessary if action were taken earlier. The weakness in the United States will almost inevitably sap the strength of the world economy.

That's the best case. An even darker possibility is that investors (including many Americans) will lose confidence in the ability of the United States to handle its fiscal affairs and will move their funds elsewhere. Such a massive migration of capital would precipitate a plunge in the dollar and generate a spike in interest rates and inflation in the United States. This tsunami in the world's largest economy would disrupt international markets and devastate many developing countries.

Avoiding possible disaster, or even the more likely slow erosion of prosperity, will test U.S. political leadership. Will elected officials recognize that common-sense rules of fiscal responsibility apply to the United States as well as to other countries? Will they make the tough choices needed to restore fiscal sanity to the world's most important economy?

Special Report

Religious Intolerance

Sometimes old ideas are the most dangerous, and few ideas are older than those that undergird religious intolerance. Lamentably, these ideas are acquiring new life. In 2002, Hindus in Gujarat, India, killed several hundred Muslims, with the collaboration of public officials and the police. Europe has recently seen a frightening rebirth of anti-Semitism, while the appeal of radical forms of Islam appears to be increasing in the Muslim world. Prejudice against Muslims and a tendency to equate Islam with terrorism are too prominent in the United States. On and on it goes. Intolerance breeds intolerance, as expressions of hatred fuel existing insecurities and permit people to see their own aggression as legitimate self-defense.

Two ideas typically foster religious intolerance and disrespect. The first is that one's own religion is the only true religion and that other religions are false or morally incorrect. But people possessed of this view can also believe that others deserve respect for their committed beliefs, so long as they do no harm. Much more dangerous is the second idea, that the state and private citizens should coerce people into adhering to the "correct" religious approach. It's an idea that is catching on, even in many modern democracies. France's reluctance to tolerate religious symbols in schools and the Hindu right wing's repeated claims that minorities in India must become part of Hindu culture are disturbing recent examples. The resurgence of this kind of thinking poses a profound threat to liberal societies, which are based on ideas of liberty and equality.

The appeal of religious intolerance is easy to understand. From an early age, humans are aware of helplessness toward things of the highest importance, such as food, love, and life itself. Religion helps people cope with loss and the fear of death; it teaches moral principles and motivates people to follow them. But precisely because religions are such powerful sources of morality and community, they all too easily become vehicles for the flight from helplessness, which so often manifests itself in oppression and the imposition of hierarchy. In today's accelerating world, people confront ethnic and religious differences in new and frightening ways. By clinging to a religion they believe to be the right one, surrounding themselves with co-religionists, and then subordinating others who do not accept that religion, people can forget for a time their weakness and mortality.

Good laws are not enough to combat this fundamentally emotional and social problem. Modern liberal societies have long understood the importance of legal and constitutional norms expressing a commitment to religious liberty and to the equality of citizens of different religions. But, though codification is essential, constitutions and laws do not implement themselves, and public norms are impotent without educational and cultural reinforcement.

We need, then, to think harder about how rhetoric (as well as poetry, music, and art) can support pluralism and toleration. The leaders of the U.S. civil rights movement understood the need for this kind of support; the speeches of Martin Luther King Jr. illustrate how rhetoric can help people imagine equality and see difference as a source of richness rather than fear. During the recent electoral campaign in India, leaders of the Congress Party, especially Sonia Gandhi, effectively conveyed the image of an inherently pluralistic India. (The words of India's national anthem, written by pluralist poet Rabindranath Tagore, also celebrate India's regional and ethnic differences.) The current U.S. administration has made useful statements about the importance of not demonizing Islam, but the rhetoric of certain key officials has also highlighted Christian religion in ways that undermine tolerance. Attorney General John Ashcroft, for example, regularly asks his staff to sing Christian songs. And while he was a sitting U.S. senator, Ashcroft characterized America as "a culture that has no king but Jesus."

For centuries, liberal thinkers have focused on legal and constitutional avenues to tolerance, neglecting the public cultivation of emotion and imagination. But liberals ignore public rhetoric at their peril. All modern states and their leaders convey visions of religious equality or inequality through their choices of language and image. Writing to the Quaker community in 1789, then President George Washington said, "The conscientious scruples of all men should be treated with great delicacy and tenderness." Such delicacy is now in short supply. If leaders do not think carefully about how to use public language to foster respect, human equality will remain vulnerable.