To promote economic research of the highest quality, it is essential that the research activities of the HKIMR are, and are seen to be, carried out freely, without interference from interested parties, including the HKMA. It is therefore not desirable for the HKMA to exercise control of the  BIS Review 38/2003  1  HKIMR's day-to-day activities. But, of course, the professional quality and academic integrity of its activities need to be monitored and ensured. For this reason, a Council of Advisors, whose members are all distinguished economists working in and outside of Hong Kong, has been established. Many of them are in fact here today. The role of the Council is to ensure the quality of the HKIMR's activities and to alert the Board of Directors if shortcomings become apparent. While the relationship between the HKIMR and the HKMA remains close, the HKIMR does enjoy independence in research matters. One consequence of this is that the views expressed in its different publications do not necessarily reflect those of the HKMA. One of the distinguished members of the HKIMR's Council of Advisors is our first speaker today, Charles Goodhart, and it is my great pleasure to introduce him. It was very much his visit to Hong Kong that gave the HKIMR the idea of organising this workshop. As you all know, Charles is one of the world's foremost monetary economists and an expert on central banking issues.
The second risk is the long-term fiscal position of the United States. Recognizing that fiscal policy is the domain of the executive and legislative branches rather than the Federal Reserve, I would emphasize several points. For one, the current U.S. fiscal position is far worse than it was at the end of the last business cycle. For example, in fiscal year 2007, the budget deficit was 1.1 percent of GDP; in fiscal 2017, it was 3.5 percent of GDP. Similarly, federal debt held by the public was 35 percent of GDP in fiscal 2007, and 77 percent in fiscal 2017. Additionally, three factors will undoubtedly cause these budgetary pressures to intensify over time: the tax legislation will push up the federal deficit and federal debt burden; debt service costs will rise as interest rates normalize; and entitlement outlays will increase as the baby boom generation retires. Let me discuss each of these in turn. With respect to the tax legislation, the Joint Committee on Taxation estimates the cost at around $ trillion over the next 10 years.9 This estimate takes into consideration the likelihood that the legislation will boost the productive capacity of the U.S. economy somewhat—raising the economy’s potential growth rate—and that this incremental growth will generate additional tax revenues. To me, this seems like a reasonable estimate, recognizing that with any complex tax legislation, there is a high level of uncertainty about its impact on longer-term growth and revenues.