"The wrong way to get that extra revenue is to go over the fiscal cliff, which would cause tax rates on personal earnings, dividends, capital gains, and corporations to rise," writes Martin Feldstein. "When combined with the mandatory spending sequester scheduled to be implemented in 2013, demand next year could fall by a total of $600 billion -- about four percent of GDP -- and by larger sums after that. The Congressional Budget Office rightly predicts that would push the economy into a new recession."

The Federal Reserve has now embarked on a very dangerous strategy, buying $40bn of mortgage-backed securities each month for an indefinite number of years. That could lead to high inflation, to destabilising asset bubbles and to legislative changes that limit the Fed’s future powers.

Martin Feldstein, a former economics adviser to President Reagan and member of the Belfer Center's Board of Directors argues in a new Wall Street Journal op-ed that while "Mitt Romney’s plan to cut taxes and offset the resulting revenue loss by limiting tax breaks has been attacked as 'mathematically impossible'....careful analysis shows this is not the case"

Although China has successfully confronted its recent short-term economic problems, large challenges remain. Some are economic. But the bigger challenges are political, both internally and with the rest of the world.

Recent statements by European Central Bank President Mario Draghi and Bank Governor Ewald Nowotny have reopened the debate about the desirable limits to ECB policy. The issue is not just the ECB’s legal authority under the Maastricht Treaty, but, more importantly, the appropriateness of alternative measures.

"The possible breakup of the eurozone is now openly discussed by policy officials and financial executives. The interest rate on Spanish government debt has soared above 7 per cent...Greece is likely to fail its inspection by the 'troika', bringing it closer to a eurozone exit by the autumn [and} even Germany is under financial pressure," writes the Belfer Center Board member Martin Feldstein, "The last eurozone summit ended with an optimistic communiqué but nothing of substance. Meanwhile, financial markets may already be in the process of forcing a solution upon Brussels policy makers. The declining value of the euro holds the key to the eurozone’s survival."

Spain is rapidly approaching a liquidity impasse. Markets are nervous because it is not clear how the government will finance its budget deficit and the rollover of its maturing bonds. The budget deficit now stands at 5 per cent of gross domestic product and the bonds maturing in 2012 equal a further 15 per cent of GDP. The International Monetary Fund expects these large deficits and refinancing needs to continue for several years.

With the U.S. presidential election a mere six-months away, it's outcome will largely depend on how the economy performs between now and election day, and the public's perception of that performance, writes Martin Feldstein, the George F. Baker Professor of Economics at Harvard University and Belfer Center Board member. "The polls are very close, and voters have not yet locked in their decisions....but the state of the economy is usually the most important determinant of who wins national elections in the United States. And US economic conditions now favor Romney," he writes.

The United States is vulnerable to cyberattacks by unfriendly nations and nonstate actors. Attacks through the Internet are now stealing billions of dollars of intellectual property from American businesses. Internet attacks can also bring down such critical infrastructure as the electricity supply, the air-traffic system and the stock market. Congress can and should act to protect us from this widespread and increasing danger.

Spain's disappointing government-bond auction this week is a sign of things to come: If Europe's debt-bound governments won't get their fiscal houses in order, the bond vigilantes will descend, pressuring them to do so.