Harvard economist Friedman weighs in with yet another book on the ills caused by the US federal budget deficit and trade deficit. The year 1988 might be remembered as the year economists put the ""dismal"" back into the dismal science. Economists of all stripes have been warning that the twin deficits--federal budget and trade--are pushing the American economy toward collapse. Friedman offers here one of the more lucid analyses of our economic dilemma. Astronomical budget deficits (a total of $2.6 trillion by 1987) are the result of the desire of the American public to reduce taxes without a concomitant lowering of government expenditures. Friedman persuasively links our economic woes--the trade deficit, high interest rates, and declining American competitiveness--to our ever-increasing budget deficit. We have borrowed heavily from abroad (nearly $1 trillion), and we will soon have to pay back our creditors. In order to do so, we will have to begin running a trade surplus and rein in our consumption. If we continue to borrow, Friedman succinctly notes, ""We are simply mortgaging our future living standard."" Friedman argues that cutting the federal budget substantially is politically impossible because Americans apparently do not want to reduce the level of service that they currently receive from the Federal government. Consequently, if we are to avoid economic decline, we will have to raise taxes in order to reduce our budget deficit. Friedman recommends that we adopt a consumption or a value-added tax (VAT) that will discourage consumption and encourage savings. These added revenues would be used to pay off our massive external debt and put the American economy on the road to sustained growth. Friedman may be too pessimistic about the possibility of cutting the federal budget, but nevertheless his is one of the better analyses of the dangers posed by our national deficits.