I predict along with many other economists that the US economy will have to go into a HUGE correction within the term of the next president:


But there is one thing neither candidate is happy to concede: that unless drastic action is taken, the US could slide into a painful and lengthy recession.
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"Unfortunately, while the debate has also involved competing claims over qualifications for economic stewardship, neither candidate has clearly articulated the long-term challenges we now face, much less a comprehensive and credible vision for meeting them," insists Morgan Stanley economist Richard Berner
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A major part of the problem is this: The US is living beyond its means, and this is true both for the American people and the government.
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Shoppers have been spurred on by tax cuts and by policy-makers who see them as the main drivers behind economic growth. Indeed, consumer spending accounts for 70% of economic activity in the US.
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The growth has also been based on easy access to cheap credit. The private debt burden has ballooned to $9.7 trillion, equivalent to almost 85% of the country's economic output, or gross domestic product (GDP).
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US government debts have soared to $7.4 trillion. The country's pensions system is in crisis. And America desperately needs to push through very expensive health care reform.
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At consumer level, policy-makers are left with a tough choice: encourage consumers to start repaying debts, and spending is hit.
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Historically high oil prices, coupled with the weak US dollar, remains problematic, not least due to America's fast growing reliance on oil imports...In 1985, the US imported fewer than 5,000 barrels per day. This year the figure will be closer to 12,000 barrels per day.
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The health care system would not be fixed as promised. Taxes might have to rise. The country's deficit would not, as promised by both Mr Bush and his opponent John Kerry, be halved by 2009.
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A recession, or even just slower growth, would make it difficult for them to keep their promises.
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"I share the view of most financial market observers that neither candidate would have a sweeping mandate to govern, much less enact changes in economic policy," warns Mr Berner.
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http://news.bbc.co.uk/1/hi/business/3959867.stm

The US economy like I have always maintained does not exist, an economy based on debt is no economy at all. Total US debt is $17.1 trillion that is about $6 trillion more then the US makes per annum. That is about 54% more then the US makes, compare that to a country like China who’s debt is well below that amount, and whose economy should rival and usurp the US economy in due time. The question I ask myself is why is this happening. To all you Americans who are going to vote tomorrow listen and listen closely. The US economy in 2000 although slowing down the US economy was nevertheless in the green the government was able to pay down the debt, and save for social security; she was in relatively good shape. Then it happened, the unnecessary and totally underperforming tax cuts. Now a lot of Bush fans will scream America is fighting a “war on terror” (whatever that may mean of course), and that the deficit is a result of 9/11…Bullshit. The current deficit is caused 2/3 by the tax cuts, and Alan Greenspan supported the tax cuts a Bush support will tell me. Yes that is true, but he supported them in relation to a cut in spending this president has been increasing the US budget into the stratosphere. Much of the increase in spending is actually in education, healthcare, the military, etc. With less and less coming in (in relation to revenue). Under Bush the true liberal spender in Washington these are the stats:

Government consumption (% of GDP)
2000: 17.54
2001: 17.97
2002: 18.44
2003: 18.72

Public debt (% of GDP)
2000: 57.98
2001: 57.47
2002: 59.75
2003: 62.43

Budget balance (% of GDP)
2000: 2.44
2001: 1.27
2002: -1.52
2003: -3.46

To all you so called republicans…how can you vote in a man who is the antithesis to Republican stands on fiscal conservativism? To be clear this is not the Republican party of yesteryear, this is not a party that can be trusted with your money. From Iraq to Halliburton this administration has systemically raped and pillaged the US people for every cent she has. Now that the US is inevitably going into the sink of history, since she has squandered her once great opportunity to change her economy again she will now have to deal with slowing growth, and slowing demand. I know what some will tell me…oh but look at Reagan under his reign the US economy boomed through tax cuts, true but at what cost? The huge increase in debt, budget deficits, and the Reaganist economic model not ending with Clinton but with GHB recession in the early 90’s. What will the US have to do? Simple these following things, raise taxes and cut spending, raise interest rates, and devalue her currency. All of which require there to be a very long and painful recession if not depression. America should learn from the example that is Argentina b.c I suspect she won’t be far behind.

Yes, we will go through a serious recession by the Summer of 2005, irrespective of who comes to power. There is a solution that my friends are working on with the Department of Commerce to get out of the crisis or atleast reduce the impact.

Stay tuned...

The problem with that assertion is that the US only has $80 billion or so in FOREX to spend. With the budget already being in deficit, how can the US afford to alleviate the pain of a recession? Remember that during the great depression, the US ran a surplus before the depression, now it runs a huge deficit. I don’t know how or what the US gov’t can do apart from raising taxes which would only further depress the economy further. Which goes to show how much taxes the president has cut, too much. The gov’t has little to no leeway when it comes to discretionary spending anymore. Here is some good news for Bush on the election:


Manufacturing expanded at the slowest pace in more than a year in October, Americans spent more than they earned in September and home construction declined in the final economic reports before tomorrow's presidential election
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``We should look for some slowdown in the economy in the fourth quarter,'' said Michael Moran, chief economist at Daiwa Securities America Inc. in New York. ``Consumer spending, although it looked strong in September, is likely to slow. Energy prices will weigh more heavily as people have to turn on their furnaces at home.''
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Energy prices may increase consumers' fuel bills by $60 billion and subtract as much as 0.9 percentage point from fourth- quarter growth, according to an Oct. 22 research report by economists at Citigroup Global Markets Inc.
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Incomes slowed in conjunction with tepid payroll growth in the last three months, today's Commerce Department data showed
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The economy added an average 103,000 new jobs per month last quarter, compared with 204,000 per month from January through June. Wages, salaries and bonuses received by workers increased at a 4.5 percent annual rate in the third quarter after a 5.1 percent pace in the April-June quarter.
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While worker pay slowed for a third straight quarter, it's exceeding the rate of inflation. The personal consumption expenditures index rose at a 1.1 percent annual rate in the three months ending in September.
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September's personal savings rate was 0.2 percent, down from 0.7 percent and the second-lowest on record, the Commerce report showed. The indicator, which weighs current income from wages, salaries, businesses and government payments against spending, was the lowest since negative 0.2 percent in October 2001.
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http://www.bloomberg.com/news/economy/economies.html

There are ways to increase job growth very rapidly. It is a complex multi-lateral initiative meaning many projects need to be interconnected for job growth including a lot of technology that we are not using but are waiting to be exploited. That is how commerce works. You have something I need and vice versa. The world is still a big place. The catch is if not coordinated properly - the process would not work.

I don't see your problems, Rumsfeld says there is enough money to cure world hunger

http://www.theregister.co.uk/2004/11/14/dod_global_information_grid/

kmguru, how do you propose to increase job growth very rapidly? Does it invovle lots of investment? I know that commerce works by means of big interconnectedness, but cannot see how it will work, seeing as growth needs capital, innnovation, physical resources and human resources.

And do you agree that the amrket is teh best coordinator of things, or not?

Here are the problems and issues:

Our Commerce department have no clue what to do now because it was designed and polished in 50s where America was exporting a lot of goods. Now that America is mostly a service oriented economy, they have no idea how to sell them. The Department sucks Billions of Dollars in tax payer money with no clue.

As you know, Ohio put the President Bushy back in business. So, natuarally they expect the Govetment to help Ohio in economy and jobs. But in US governments do not produce jobs, the private industry does. To do other wise, means, taking hard earned tax dollars and creating fake jobs.

I just came back from a political brain storming session in Ohio. The winner does not have a clue as to what to do. So, do not expect any help from this government in economy.

Then, you say Market is the best coordinator. Not necessarily so. It is the innovator that moves us in the right direction and not the market. The market has a propensity to control (look at DVDs costing $15 while VHS costing $5). The Market only works if there is choice. Who is going to provide that choice if the giver of the choice is controlled? There is a big disconnect between theory and practice just like Communism.

How to increase job growth very rapidly? Jobs are created when suddenly there is a real demand and people are willing to work for that demand. You get paid after you do the work. At least most of us work that way. So, the work credit creates the real work output and so on. By cordinating the work process, in a organized manner...they connect.

Growth does need Capital, innovation, physical resource and human resource. That is true. To my way of thinking, growth needs the following items:

People
Process
Technology
Information

It has been this way since the dawn of civilization. But most people (if you google the first 3 words) think it only requires the first 3. Have you seen a 3 legged animal? It does not work.

But as you say, the innovation is the key. It is a word that is used like water. If someone says, he or she is an innovator, find out if that person does a specific act the same way everyday or changes the process. If you do a time and motion study of a non-innovator, he or she would get up the bed the same way, eat breakfast the same way, open the door out the same way everyday....it is the change that is the hall mark of an innovator. There are very few of them out there...

As to the Capital - there is plenty of Capital and Resources that is idle even today - 80% is not used productively. The entire Department of Commerce and CIA is only 20% productive. Now you get the idea.

"The Market only works if there is choice. Who is going to provide that choice if the giver of the choice is controlled? There is a big disconnect between theory and practice just like Communism."

Indeed, that is why I despair over the free market fanatics that often seem to infest newspapers and gvt think tanks. I had one argue with me in a newspaper that rationing in the UK in WW2 was bad, and no rationing and a free market would have resulted in everyone being fed. (I'm not so bothered by the communists, since despite the republicans and Christian right wings paranoid fantasies, they have little power.)

ACtually, I'm sure theres something more to argue with in your post, but I'm too busy right now. Broadly I would agree with you.

I understand. My friends are involved with State of Ohio at the highest political level to improve the state's economic conditions. My comments are due to the direct observation of what is going on between State Republican Party, US Department of Commerce, Small Business Adminstration, The Governor's Office and the US State Department.

There is always the possibility that I misunderstood some items. But over all, it does not look good. No one has a clue what to do, but they all speak with buzz words that they rarely know what it means - like "Innovation".