The word deficit appears over and over again in news reports, usually as part of solemn warnings or on lists of issues of great and immediate concern. The federal budget deficit has preoccupied the administration and Congress for the past five years, culminating in this year's balanced budget agreement. The seemingly endemic U.S. trade deficit continues to arouse great consternation in the business press. And the prospect of Social Security deficits in the next century has spurred debate about the need for drastic measures to resolve what's perceived to be an imminent crisis.

But all three of these dreaded deficits--budget, trade, and Social Security--are less ominous than politicians and the mainstream media have led us to believe. The confusion has become so pervasive that Americans should be forgiven for thinking that somehow balancing the federal budget follows logically from cutting taxes; or that the continuing enormity of the U.S. trade deficit demonstrates that overseas competitors are outfoxing domestic producers; or that Social Security will collapse or go out of business in thirty years if we don't act now.

In each of these cases, there are real underlying economic issues that affect, and must be addressed by, public policies. But our understanding of those issues and the process of achieving consensus on policy is, to some extent, frustrated by the misunderstanding of the statistics available to us and their significance. Myths and realities about the three deficits intermingle, providing almost a folklore of public conversation that only distantly relates to what's known to be true. Clarity of vision in these matters is at a premium.

In search of such insight, the Twentieth Century Fund/Century Foundation decided to commission Robert Eisner, a distinguished economist, to took at the arguments about the three deficits and help bring them into perspective for thoughtful readers. Eisner, professor emeritus at Northwestern University and former president of the American Economic Association, has a long history of cutting to the heart of complicated economic matters. His combination of intellect and the ability to write about these issues accessibly makes him unusual not just among economists but among all those who speak out on these important subjects. This volume is no exception to his past record of providing thoughtful, clear, and concise analysis of the nation's economic circumstances.

Eisner takes each of the "deficits" in turn, describes how they have come to be (or might be, in the case of Social Security), what their magnitude really means, and what long-term impact they would have under various conditions. In effect, this work should reduce alarm, not because some of the problems are illusory but because all of them tend to be exaggerated by those with an ax to grind. The oversimplified language of our political discourse only compounds the confusion. Moreover, Eisner indicates just how easy it would be, in some cases, to essentially neutralize the effect of these problems for an indefinite period. This is important news-important especially because policy decisions on so many issues are being driven by the argument that an emergency exists: a budget emergency, a trade emergency, a Social Security emergency.

Perhaps the most important point in the pages that follow is that there is no emergency. We have, if nothing else, time to fashion appropriate policies, to learn exactly what it is we are trying to correct before we charge off to change our world in important ways.

Of course, Congress has already acted to reduce the federal budget deficit to zero by the year 2002. In its own right, the legislation demonstrates the need for clarification. For all intents and purposes, the federal budget deficit is already negligible in 1997 as compared with the nation's overall economic output--mainly because of tax increases enacted in 1993 and subsequent economic growth that exceeded expectations. The panoply of tax cuts in this year's legislation may serve a variety of purposes, but reining in the deficit isn't one of them.

In recent years, the Fund has looked at many of these issues. Our Basics series has examined the issues of reforming Social Security and Medicare as well as balancing the budget. We have supported an overall examination of the American economy by Robert Kuttner: Everything for Sale; a look at the issues involved in state balanced budget requirements: Balancing Acts by Richard Briffault; and the problems of inequality in wealth: Top Heavy by Edward Wolff. Our goal in these publications is not only to clarify and educate but also to help raise questions about the conventional wisdom. Perhaps nothing is more dangerous to the process of policymaking than pretending certainty where only opinion exists.