growth in GDP and a level of job creation too low to overcome satisfactorily the job loss associated with corporate and industry restructuring. Saving and investment rates need to be raised to levels that approximate those in the other advanced industrial economies. Reduction of the federal deficit is an important component in increasing net saving. To a first approximation, eliminating the federal deficit solves about half the saving problem. To boost saving further and raise the rate of investment in the long term will require a series of tax and regulatory changes and shifts in corporate practices and managerial incentives.
Realistically, it will require 5 to 10 years to establish a new saving and investment trajectory because of the kinds of large structural changes that are needed. To be acceptable, both economically and politically, they need to be discussed, agreed on, and phased in gradually. The board intends this statement and the analysis in the accompanying volume to contribute to a process that leads to broad agreement on the longer-term objectives for the economy.
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