A former advisor to US President Bill Clinton says Bermuda?s business community should be concerned about Washington?s devil-may-care approach to its deficit as well as a stagnation in middle class incomes that could ?spark a backlash against globalisation?.

?What Bermuda should worry about over the long haul is that Washington is running up such big deficits that it poses a real threat to every aspect of the tax code, every spending programme. We can?t just haemorrhage red ink forever ,? said Bruce Reed, former Chief Domestic Policy Advisor to President Clinton.

Mr. Reed was scheduled to address the Bermuda International Business Association?s 2004 Annual General Meeting yesterday after former White House press secretary Joe Lockhart had to cancel his own appearance.

Mr. Reed, 44, who served for eight years in the Clinton White House ?during the greatest economic boom in the country?s history? planned to speak about last November?s US election, its impact on the US economy and foreign policy, and what Bermuda and the rest of the world can expect from President Bush?s second term. A blizzard prevented his departure from Washington yesterday so instead he sent his speech by e-mail and also spoke with the Island?s media by telephone.

A Rhodes Scholar who studied at Princeton and Oxford, Mr. Reed currently serves as president of the Democratic Leadership Council (DLC), the national organisation that launched the New Democratic movement and fuelled the election of President Clinton in 1992 and 1996.

He said that his eight years spent at the White House was ?far and away the best job I ever had or ever will have? and anyone who has had the privilege of working there ?looks at any subsequent job as at best just a place to go during the day?.

?Politics can be a very uncertain business but public service is a great thing and there is nothing like being in the middle of all the tough questions,? he said.

The toughest challenges facing the current administration are, in Mr. Reed?s view, restoring faith in the long-term strength of the economy and restoring the world?s confidence in the way the US fights the war on terror .

?As we learned in the 1990s, the American economy is capable of reaching great heights if our leaders in government and business live up to their first duty, which is not to screw it up,? he said adding that the most important thing that happened in the Clinton years was the restoration of a sense of fiscal responsibility to Washington.

?We balanced the budget for the first time in 30 years and left a surplus big enough to solve many of our long-term problems. Unfortunately, under this administration, Washington has gone back to its old ways. Republicans want to give tax cuts we can?t afford to people who don?t need them. There?s no one saying no to spending by Democrats and Republicans alike. That $5 trillion surplus melted into a $7 ? trillion projected deficit.?

One of the prime engines of the economy ? consumer spending is another worry as it heads in a collision course with one the prime vulnerabilities of the economy ? consumer debt.

?In the ?90s, our economy benefited enormously from the steady growth of middle-class incomes and the wealth effect of a rising stock market. Now we have neither to keep us afloat,? Mr. Reed said.

?The biggest cloud over our economy right now isn?t terrorism. It?s that for the last five years, Washington has ignored these two cornerstones of the ?90s boom ? that the government must live within its means, and that in a consumer economy, the earning power of the middle class, not the investment power of the very wealthy, is the key to sustained growth.?

Mr. Reed also touched on the eagerness of the Bush administration and congressional Republicans to follow in the footsteps of Ronald Reagan by implementing tax reform. So far the Bush administration has shown little interest in corporate tax reform ? although some in Congress are making noises about a value-added tax.

?As a general matter, this administration has much less interest in streamlining the tax code, which is sure to offend someone, than in simply lowering rates, which offends future generations who don?t vote yet,? he said.

He warned that stagnation of middle-class incomes could spark a backlash against globalisation as happened in the last election when members of his party, including presidential candidate John Kerry, criticised American companies setting up in Bermuda.

?I suspect those attacks got a lot more attention in Bermuda than they did in the US. Very few Americans even heard what John Kerry had to say about the economy,? he said adding that most Americans understand that, done right, globalisation and expanding trade helps the rest of the world grow while helping rich countries become richer.

?There is no way we?re going to reverse globalisation and that shouldn?t be our goal. Our goal should be to make sure that we gave our citizens the tools to succeed in the global economy and so the reason that there was something of a backlash against globalisation in this past election cycle had more to do with the general economic failures of the current administration than it did with globalisation itself. Anytime the economy is struggling, families who are working harder and making less are going to look for someone to blame and unfortunately not enough of them blamed the current president so the election turned out the way it did.?

Mr. Reed expects that President Bush might succeed in bringing in some tort reform ? such as limits on class action ? but he does not expect broader reform to be passed. He points out that of 23 priorities listed in a recent survey ? tax simplification, limiting lawsuit awards and a gay marriage amendment ranked last.

Terrorism ranked first on the list of concerns and is a subject he expects will continue to preoccupy President Bush?s next term.

?Americans now share much of the rest of the world?s disappointment with President Bush?s handling of Iraq, with 58 percent saying the war was a mistake,? Mr Reed said.

?All of us hope the Iraqi elections go well this next week. If they don?t, the Bush administration will find itself in a miserable situation ? under intensifying pressure at home to withdraw, at a time when it would be a terrible mistake for us to cut and run,? he said adding that the country will ?need all the friends we can get, and I suspect that for all the expansive rhetoric of the President?s inaugural address last week, the administration will be forced to try harder to work with our allies, or at least not alienate them.?