The macroeconomic trends shaping the United States economy and the effects of those trends on higher education are considered. Warning institutions of higher education about possible problems in the economy will place them in a better position to react if necessary. The economic environment is discussed in terms of productivity (goods and services consumed by households, those provided by governments, capital investment, and net export); the twin deficits (the trade and federal budget deficits); and the future (the best case scenario and alternatives to the best case). The effects on higher education include general economic strains at the federal and state levels as well as on institutions of higher education. Proactive policies and higher education are considered in terms of high technology and science, mid-level technology and industrial extension, foreign studies and modern languages, and the need for balance. Though there are few signs of immediate recession in the economy, there is still a need to reduce the federal deficit, bring down the trade deficit, and increase savings so the public and private infrastructure can be rebuilt. In this prospective environment, capital markets are especially volatile, and colleges should be cautious when borrowing. Endowment management will need special vigilance. Capital preservation will be the emerging standard for the 1990s. (SM)