President-elect Donald Trump will soon be working with Republican majorities in the House and Senate to reshape tax and spending laws to increase economic growth, raise living standards and protect America’s economic future. His challenge will be to do this in a way that is fiscally responsible as well as consistent with his campaign goals.

Although the United States economy is in good shape – with essentially full employment and an inflation rate close to 2% – a world of uncertainty makes it worthwhile to consider what could go wrong in the year ahead.

Many people are worried about the fate of those whose jobs are vulnerable – or have already been lost – to the latest disruptive technology. What will happen to the millions of men and women who now drive trucks and taxis when the trucks and taxis can drive themselves? What will happen to the accountants and health workers when computers can do their jobs?

With a new American president and Congress taking office just six months from now, the time has come to rethink the government’s programs aimed at helping the poor.

Two recent pieces of budget news are a grim reminder of the perilous state of fiscal policy in the United States. President Barack Obama’s Office of Management and Budgetannounced that the federal government’s deficit this fiscal year will be about $600 billion, up by $162 billion from 2015, an increase of more than 35%. And the annual Long-Term Budget Outlook produced by the Congressional Budget Office (CBO) predicts that, with no change in fiscal policy, federal government debt will rise from 75% of GDP to 86% a decade from now, and then to a record 141% in 2046, near levels in Italy, Portugal, and Greece.

Testifying before the Senate on June 21, Federal Reserve Chair Janet Yellen said the chances of the U.S. economy sliding into recession this year are “quite low.” I agree. But the Fed still faces the difficult problem of what to do when the next downturn occurs if interest rates are still extremely low.

A thoughtful British friend of mine said to me a few days before the United Kingdom’s “Brexit” referendum that he would vote for Remain because of his concern about the economic uncertainty that would follow if the UK left the European Union. But he added that he would not have favored Britain’s decision to join the EU back in 1973 had he known then how the EU would evolve.

While voters chose Leave for a variety of reasons, many were concerned with the extent to which EU leaders have exceeded their original mandate, creating an ever larger and more invasive organization.

On May 26-27, the heads of the Group of Seven leading industrial countries will gather in Japan to discuss common security and economic problems. A major common problem that deserves their attention is the unsustainable increase in the major developed countries’ national debt. Failure to address the explosion of government borrowing will have adverse effects on the global economy and on debt-burdened countries themselves.

The problem is bad and getting worse almost everywhere. In the United States, the Congressional Budget Office estimates that the federal government debt doubled over the past decade, from 36% of GDP to 74% of GDP. It also predicts that, under favorable economic assumptions and with no new programs to increase spending or reduce revenue, the debt ratio ten years from now will be 86% of GDP. Even more worrying, the annual deficit ratio will double in the next decade to 4.9% of GDP, putting the debt on track to exceed 100% of GDP.

The primary role of the Federal Reserve and other central banks should be to prevent high rates of inflation. The double-digit inflation rates of the late 1970s and early '80s were a destructive and frightening experience that could have been avoided by better monetary policy in the previous decade. Fortunately, the Fed's tighter monetary policy under Paul Volcker brought the inflation rate down and set the stage for a strong economic recovery during the Reagan years.

The Federal Reserve has two congressionally mandated policy goals: "full employment" and "price stability." The current unemployment rate of 5% means that the economy is essentially at full employment, very close to the 4.8% unemployment rate that the members of the Fed's Open Market Committee say is the lowest sustainable rate of unemployment.

The Japanese economy is a paradoxical mixture of prosperity and failure. And, in a significant way, its prosperity makes its failures difficult to address.

Japan’s affluence is palpable to anyone who visits Tokyo. The standard of living is high, with per capita income in 2015 (in terms of purchasing power parity) amounting to $38,000, close to the $41,000 average in France and Britain. The unemployment rate, at 3.3%, is substantially lower than the US rate of 5% and the eurozone rate of about 10%.