Advice for the next American President.

• Position: A SYMPOSIUM OF VIEWS

The world's economic and financial systems are under enormous pressure. What are the most critical global and domestic financial and economic issues the next president must address to help bring stability to the global system?

Sixteen noted observers offer their views.

GEORGE R. HOGUET

Global Investment Strategist, Investment Solutions Group, State Street Global Advisors

The ability of the United States to influence the policy actions of other states is increasingly limited. And the next president will be entering office in the latter phases of the current U.S. economic expansion. The most important contribution the next U.S. president can make to promote global prosperity and stability is to increase both the potential and actual growth rate of the U.S. economy and the real wages of the U.S. middle class.

On the supply side, this goal means adopting family-friendly policies to increase the female labor force participation rate; increasing incentives to work longer; keeping the U.S. economy open to foreign goods, skilled immigrants, and investment, particularly from China; adopting education and training policies to keep the U.S. labor force healthy, highly flexible, and competitive in the digital economy; and an investment tax credit to promote the acquisition of plant and equipment and capital deepening.

On the demand side, this goal means initiating targeted infrastructure investments designed to enhance work force productivity and mobility. The U.S. air traffic control system, Penn Station in New York City, and various mass transit systems around the country might be some good places to start.

The next president should also address the roughly $1 trillion in tax expenditures, and should propose a radically simplified and less distortive tax code and enhanced measures to reduce tax evasion. Part of the deal could be a lower corporate tax rate, entitlement reform, and medium-term fiscal consolidation designed to stabilize the U.S. debt-to-GDP ratio. Even a moderate sustained increase in the U.S. growth rate meaningfully improves the U.S. fiscal situation and the ability to respond to shocks. And it enhances economic opportunity domestically and overseas.

Internationally, a key priority should be to convince China of the benefits conferred by being a responsible stakeholder in the international system, and to find ways where the United States and China can work together. Together the two economies represent about 40 percent of global output (in nominal GDP terms), and the health of both is one key to global prosperity and stability. Meanwhile, the internet is both increasingly important to the global economy and increasingly anarchic. It's Too Big To Fail. An enforceable cyber security deal with China designed to protect intellectual property could promote financial stability and possibly serve as a template for a multilateral cybersecurity protocol.

As geopolitical and economic risks are inseparable, another priority for the incoming U.S. president should be a coherent but flexible Middle East policy. The Syrian conflict is widening; Russia's engagement adds a new dimension. Despite the gradual ramp-up in Iranian oil production, the risks of a supply shock coming out of the Middle East are growing. A large shock would be devastating to the world economy and the global financial system. This prospect should provide additional incentive for the United States to adopt cost-effective measures to enhance U.S. energy security and to promote the green economy.

JAMES E. GLASSMAN

Head Economist, Chase Commercial Bank, JPMorgan Chase

All global financial and economic issues are local in nature, as in politics. Global financial stresses are best managed when the world's big economies are performing well. Concerns that emerging markets are vulnerable to a coming normalization of the Federal Reserve's monetary policy are misplaced, because actions that keep the U.S. economy on a sustainable path--and that includes policy settings--will over time prove to be the most helpful for emerging markets. In other words, the sooner the Federal Reserve begins to normalize its rates, the more orderly market adjustments will be.

With the U.S. economy well on its way to a full recovery, the next president could strengthen the U.S. economy's foundation and alleviate potential stresses in the global system by exploring ways to promote faster underlying growth and improve the efficiency of the health care sector.

The U.S. potential growth rate has slowed markedly since 2008, largely because the working-age population has decelerated as baby boomers retire. Even though the economy has expanded at only half the typical pace for a recovery, the slowdown in the labor force and potential output explains why the current recovery has been fairly normal in most respects. For example, despite slow GDP growth, most areas have recovered well, including the job market, stock market valuation, business profits, household balance sheets, car sales, capital spending (near record-high ratios relative to GDP), the federal budget deficit, and the vanishing mortgage underwater problem.

Slower labor force growth is not a cyclical challenge, because it lowers the bar for the amount of hiring needed to lower unemployment and the current recovery is proof of that. But slower labor force growth weakens the public sector's ability to pay for its promises.

Washington can't keep Americans from aging, but it can ameliorate some of that slowdown in labor force growth by strengthening incentives to work--for example, job skills training, more (tax) support for child care, expanded investment in transportation infrastructure to cut commuting times, and immigration reform. The payoffs for such initiatives could be significant, because only 68 percent of people under the age of forty-five (looking past the demographic trends) currently are employed, compared with 75 percent in the 1990s.

And initiatives to boost productivity, for example transforming the federal tax code towards a consumption-based system that once had bipartisan support, would promote a saving-investment culture that would stimulate longer-term growth incentives.

On the second key issue, improving the ability of the nation's healthcare system to better manage resources would address the growing burden on public sector and household budgets. Any move in this direction would address the nation's long-term structural deficit and surely have a favorable impact on global credit markets.

Federal revenues are likely to hold steady near the historical average of 18 percent of GDP, barring changes to the tax code. But spending is projected to rise steadily and automatically as a result of the promises reflected in the government's mandatory programs. Social security spending is projected to rise from 4.9 percent of GDP currently to 6.2 percent by mid-century, according to the Congressional Budget Office. That's largely because the system's statutory retirement ages are not linked to America's rising life expectancy. So, each generation of retirees earns more benefits than the previous one. The outlook for healthcare spending is even more challenging, with federal outlays for the major health care programs expected to rise from 5.2 percent of GDP currently to 8 percent by mid-century.

Naturally, the demand for health care would be expected to expand as living standards rise. But the current health care system does a poor job managing resources, because users are disengaged from the decision-making process. The employer-provided system removes the responsibility of individuals to make health insurance choices. It limits competition. The private insurance system is responsible for covering only the first sixty-five years of age, leaving federal health care programs to care for us after that, when many problems arise. For that reason, the private insurance system has less incentive to promote behaviors when we are young that might lessen risks when we are older.

A two-pronged agenda to boost potential growth and strengthen competition in the healthcare industry would go a long way toward re-energizing the U.S. economy and promoting greater global economic and financial stability.

MARTIN NEIL BAILY

Bernard L. Schwartz Chair in Economic Policy Development and Senior Fellow and Director of the Business and Public Policy Initiative, Brookings Institution

Slow economic growth in the United States and the other advanced economies is the most challenging problem the next president will face. Former U.S. Treasury Secretary Larry Summers coined the term "secular stagnation" to describe a situation where aggregate demand is weak even with a zero interest rate. Economist Robert Gordon has suggested supply-side stagnation, resulting from a slowdown in productivity growth and a lack of major innovations. It is worth keeping the supply-side and the demand-side stories distinct, although of course they are not entirely separate. Investment contributes both to spurring demand and to supporting productivity growth.

The U.S. economy is now close to full employment and the Federal Reserve will soon increase the federal funds rate, so chronic aggregate demand weakness seems to be over for now, though inflation remains too low. No such luck in Europe or Japan where central bankers are using quantitative easing measures to bolster the impact of low rates.

What can the next U.S. president do? One approach is to employ expansionary fiscal policy in the form of an infrastructure program, and such a policy makes good sense for the United States where roads and public transportation have been neglected for years. Germany's once-admired infrastructure is also in need of investment, and both countries have the borrowing capacity to finance such programs. The politics of this approach are tough in either place. Congress is unlikely to support infrastructure investment of any magnitude and German Chancellor Angela Merkel is...