So, the senator proposes reducing the cost of living adjustment by 1 percent.

CNN: Budget cutters take hard look at Social Security - Sept. 27, 1995

But large and persistent surpluses in countries like China mean continued demand for American assets, reducing the need for fiscal adjustment by either country.

ECONOMIST: Reserve currencies

Members of Congress are talking about reducing the cost of living adjustment for Social Security, and it no longer seems to be such a political taboo.

CNN: Budget cutters take hard look at Social Security - Sept. 27, 1995

The current-account deficit, now around 5% of GDP, is a key factor: if capital flows into America slowed even more sharply, or dried up, the adjustment involved in reducing the current-account deficit could be painful both for America and the rest of the world.

ECONOMIST: Time for a rethink | The

Most economists and commentators I listen to, including conservatives like David Brooks of the New York Times and Jim Hamilton of UCSD, say that reducing the deficit will require both a reduction in spending and an upward adjustment in tax rates, or closing loopholes.

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