Here are some of the issues ahead and our take on them:THE BOOMERS ARE RETIRING ON YOUR WATCH. Some 70 million baby boomers will soon draw down trillions in government payments. The oldest, born in 1946, will start getting Social Security when they hit 62 in 2008. Three years later, many will join Medicare. You ran on allowing individuals to put 4% or more of their payroll taxes into private accounts. This helps young people build up their nest eggs, but the government has to come up with $2 trillion to cover its Social Security obligations to the boomers. Your advisers suggest borrowing the money. That's a lot of new debt, especially when the Congressional Budget Office says Social Security isn't in immediate trouble and won't hit empty until 2052. Mr. President, the real crisis ahead is Medicare, which is financially troubled, due in part to the new, poorly designed Medicare drug benefit. Medicare reform should be the higher priority.THE BUDGET DEFICIT IS OUT OF CONTROL. Squaring your election promises on tax reform with fiscal realities is certain to be one of your major challenges. True tax reform means ending the Alternative Minimum Tax, which is hitting more and more middle-class people. A long-term fix for the AMT would cost $600 billion over a decade. Your promise to make permanent the income, capital-gains, dividend, and estate tax cuts would cost $2 trillion over 10 years. Throw in $2 trillion to set up private Social Security accounts and that's about $5 trillion. Add that to the current $2.7 trillion projected deficit and it comes to $7.7 trillion of red ink over 10 years. Sooner or later, these numbers will shock the bond market. Choices on taxes have to be made, Mr. President. Keep the pro-growth capital-gains and dividends cuts and simplify the tax code. Get tough with Republican spendthrifts in Congress by trimming the pork in spending bills for highways, energy, and agriculture while reminding them of core conservative fiscal principles.THE DOLLAR, AND TRADE POLICY, ARE IN TROUBLE. Early next year, China will start exporting billions of dollars' worth of textiles into the U.S. as global textile quotas end. The trade deficit is already huge, thanks in part to surging oil imports. The current account deficit is at a record high of 5% of gross domestic product. Foreign buyers of U.S. Treasuries, who finance the big federal budget deficit, are getting nervous. The policy of benign neglect on the dollar isn't helping the trade deficit because Beijing links the yuan to the dollar. Something has got to give -- the yuan has to go up, the dollar has to drop more, or America's free-trade policy has to radically change. Mr. President, real leadership is needed here.MIDEAST POLICY NEEDS A REALITY CHECK. Elections in Afghanistan are a clear win for America. But it's time to get real in Iraq. The idealistic dream of establishing a stable, democratic Iraqi nation looks problematic. Yes, the U.S. will win the battle for Fallujah. But then what? It's time to ask what is the minimally acceptable exit strategy for the U.S. The pragmatic answer to that is stability in Iraq. A western-style democracy may have to wait. Pragmatism also demands that the U.S. directly engage in nuclear nonproliferation talks with Iran and North Korea. Your first Administration outsourced this job to Europe and China, with little success. The U.S. has to lead the negotiations. It's also time to accept that Muslims view American actions in Iraq through the prism of the Israeli-Palestinian conflict. Mr. President, reengaging as a mediator between the two parties would boost U.S. influence in the Middle East.SECOND-TERM PRESIDENTS THINK ABOUT THEIR LEGACY. Mr. President, you have a chance to lock in much of your conservative vision. Your boldness is admirable, but hard choices are essential to guarantee your success and the country's well-being.