No free lunch.

• Author: Peterson, Peter G.
• Position: A Fistful of Dollars - United States' economic challenges

ON THE military side of things, the United States is unquestionably the world's pre-eminent power and will retain that position for the foreseeable future. However, as someone once said, when economics gets important enough, it becomes political.

And, over the longer term, I have never seen a time--and I've been around for a long time--in which this many daunting, long-term economic challenges-very large elephants, if you will, that one could characterize as romping in our economic boudoir--that we pretend not to see and hope others are not rude enough to mention.

It seems to me quite obvious that these daunting, long-term challenges are undeniable, unsustainable but, in the current political context, untouchable. Unlike times past in American history, we want it all. We want it now. And, we don't seem to want to give up or pay for anything. Shared sacrifice is considered politically incorrect, if not terminal.

I give you four examples: First, the entitlement explosion. Given an aggravated sense of societal "short-termitis", these fiscal cancers, which will soon metastasize at an extraordinary rate, are, as I said, denied. We are anesthetized to this coming explosion by soporific-like, fictional "trust funds" that will allegedly keep Social Security and Medicare "solvent" for years.

Contrary to the trust-fund oxymoron, these trust funds should not be trusted and are not funded. Indeed, the unfunded liabilities, in today's dollars, have been variously estimated at about $40 trillion, or three times the GDP of the entire country.

Or, if you prefer to think in terms of projected tax increases on our future economy and your children and mine, official estimates project a doubling of payroll taxes from about 15 percent to 30 percent of pay to cover Social Security and Medicare. Does anybody seriously believe that this economy, not to mention the American public, can absorb and fund these kinds of unprecedented taxes and debts to finance not investment, but as pure a consumption expenditure as any I can think of?

The second is our unprecedented current account deficits. These are now at record levels, nearing 7 percent of GDP--twice the previous record in the 1980s, when the dollar fell by roughly 50 percent against the major currencies over a three-year period.

And what of the cumulative effects of such unprecedented current account deficits? Bill Cline, a leading expert at the Peterson Institute for International Economics, (some would say that...