these actions themselves have further promoted the very globalization that, interacting with advancing technology, spurred the deregulatory initiatives in the first place. the result of this process has been an advance and diffusion of technical change that has raised living standards in much of the world. the conceptual battleground has moved far from the stark terms of the earlier capitalist - socialist confrontations. the failed experiment in central planning in eastern europe and the soviet union after world war ii has largely muted the arguments of most ardent socialist planners. the debate has now shifted to the nature and extent of actions appropriate for governments to take in order to ameliorate some of the less desirable characteristics that are perceived to accompany unfettered competition. but unlike in much of the nineteenth century, little unfettered competition is actually practiced in today ’ s world. in large part, driven by the value standards of our societies that developed out of the great depression, some government regulation is practiced virtually everywhere. nonetheless, it has become generally understood that governmental actions often hinder incentives to investment by increasing uncertainties, boosting risk premiums, and raising costs. even among those who deride the more unbridled forms of capitalism, there is a growing awareness that many attempts to tame such regimes are not without cost in terms of economic growth and the average living standards of a nation. a recent manifestation of these costs can be seen in the lower level of high - tech capital investment in continental europe, on average, and in japan, relative to that in the united states. arguably, this outcome has resulted to an important degree from the particular legal structures and customs that govern labor relations in much of europe and asia. by choice over the decades, europe, for example, has endeavored to protect its workers from some of the presumed harsher aspects of free - market competition. to discourage layoffs, discharging employees was made a difficult and costly process in comparison with that in the united states. by law and by custom, american employers have faced many fewer impediments in recent years to releasing employees. this difference is important in our new high - tech world because much, if not most, of the rate of return from the newer technologies results from cost reduction, which on a consolidated basis largely means the reduction of labor costs. consequently, legal restraints on the ability of firms to readily implement such cost reductions lower the prospective rates of return on the newer technologies and, thus, the incentives to apply them. as a result, even though

sure, forecasting has become more sophisticated as statistical techniques and economic models have evolved. but because of the increasing complexity of our markets, the inaccuracy of forecasts especially those that go beyond the near term - is a large problem. a well - designed set of measures for mid - course corrections would likely include regular assessments of existing programs to verify that they continue to meet their stated purposes and cost projections. although the vast majority of existing programs would doubtless be extended routinely, some that face appreciable opposition and offer limited societal benefit might not clear hurdles set by the congress unamended, if at all. more generally, mechanisms, such as triggers, to bring the budget back into line if it goes off track should be considered, particularly measures that force a mid - course correction when estimated future costs for a program or tax provision exceed a specified threshold. i do not mean to suggest that our budget problems will be solved simply by adopting a set of budget rules that restrain new legislation - even if those rules are augmented by effective mechanisms for making mid - course corrections. the fundamental challenge that we face is to come to grips with the adverse budgetary implications of an aging population and current health entitlements and with the limits on our ability to project the likely path of medical outlays. the rapid increase in revenues during the 1990s significantly muted the necessity of making choices between high - priority tax and spending initiatives. in the context of an unprecedented increase in retirees, the need to make stark choices among budget priorities will again become pressing. federally funding access to advances in medical technology, for example, likely will have to be weighed against other spending programs as well as tax initiatives that foster increases in economic growth and the revenue base. because the baby boomers have not yet started to retire in force and accordingly the ratio of retirees to workers remains relatively low, we are in a demographic lull. but short of an outsized acceleration of structural productivity or a major expansion of immigration, this state of relative tranquility will soon end. in 2008 - just four years from now - the leading edge of the baby - boom generation will reach 62, the earliest age at which social security retirement benefits may be claimed and the age at which about half of prospective beneficiaries have retired in recent years. in 2011, these individuals will reach 65 and will thus be eligible for medicare. the pressures on the federal budget from these demographic changes will come on top of those stemming from the