7. A Japan-Style American Stagnation
Austerity alone will not, however, do the trick. America is at a moment of huge opportunity. Of the world's developed economies, we are the one showing the most resilience. We are home to a potential bonanza associated with new energy resources and we can borrow to invest in much needed infrastructure upgrades at very low cost (provided we do so wisely). We can make our educational system more effective at training the workers of tomorrow. But this requires more than just speeches and modest gestures. We must make growth a priority and yet do so in ways-such as removing regulatory obstacles, shifting from defense spending to investment spending at home, embracing foreign investment-that avoids the kind of multi-decade downturn that has straightjacketed Japan since the 1990s.
8. Economic Shocks from the Eurozone
While Europe made some progress in recent months toward calming market unease, austerity measures are likely to produce political pushback of a potentially extreme nature in the next couple of years. What's more, global shocks from other international crises, whether a war in Iran or an escalating Middle East conflict, could make the bad situation in Europe worse and compound any geopolitical misfortune with nasty economic consequences. Such political reversals could also renew discussion of breaking up the European Union (which may or may not be a bad thing) and make markets very skittish again (which would be). The United States will have to find a way to remain actively engaged but this may become even more challenging as some of the promising "fixes" of 2012 turn into the setbacks of 2013 and beyond.
9. Shocks From a Warming Climate
It may be too late. We may not be able to reverse the changes to our environment that are making severe storms more common, melting our ice caps, and producing record high temperatures. If that's true, then we face a choice: reactive or proactive adaptation. Right now, we merely react, responding to disasters. But we could strengthen our sea walls, improve our electricity grids, rebuild ports and bridges and roadways. Of course, this should not supplant efforts to rein in carbon emissions-and we should embrace the fact that shifting from coal to gas power will help spur the American domestic energy revolution and create jobs and growth at home. But the bigger point is that great leaders will be measured by how few tragic photo ops their successors feel obligated to stage in the wake of crises.
10. The Next Financial Market Crisis
Here's the bad news: Global markets are rife with more risks today than they were in 2008. There are more too-big-to-fail banks. There are larger and more complex and opaque oceans of derivatives churning. There is still no global regulation. There are still major markets containing big bubbles from Chinese real estate to the price of gold worldwide. In short, there is still the potential for such a massive meltdown that it could make the crisis that ushered in the Obama era look like mere prelude. It is time to get much more serious about U.S. and international oversight and enforcement, investing in the tools and people needed to identify and avoid future upsets.
11. 1960s-Style Social Unrest
It seems a long shot. And indeed, social crisis from the Middle East to China to an increasingly nationalistic and xenophobic Europe is more likely. But American leaders must focus on what they can control. And if inequality continues to grow in the United States; if our underclass, with its skyrocketing high school dropout rates, continues to fall faster and faster behind; if fiscal austerity forces us to shrink social programs and shrinking tax bases crush the ability of cities to tackle their problems (or pay their pensions), America may see unrest evoking that of the 1960s...or worse. We run a great risk if we view what is happening in this country merely as a cyclical slowdown. Any society that pushes the rich and poor farther and farther apart is broken. And we need to address the problem just as we did the racial divides that haunted us in the ‘60s-as a matter of grave national urgency.
12. An Era of Permanent War
Cyberwar is often called "white collar conflict." This is both a blessing and a curse. It is stealthy and may cause less loss of life than traditional armed conflicts. But this makes it more tempting to engage in. And a world in which nations constantly probe and injure one another from afar could turn out to be vastly more dangerous in the long run. Cyberattacks will produce damage that demands retribution. Trust and stability will be undermined. And societies will reel not just from attacks that target infrastructure or markets but also from the civil liberties likely to be constrained in an effort to reduce the likelihood of future intrusions. The next American administration needs to be careful that it does not see such attacks-or the other "limited footprint" tools of war, from drones to special operations-as so "low risk" that it over-utilizes them. Otherwise, we'll be creating more risks than we alleviate.
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