Dan's Papers - May 16, 2008 - Which Way For Economy? Expert Speaks

The Feds lowered the federal discount rate another notch a few weeks ago, from 2.5% to 2.25%, and people have been asking me, since I'm the expert, what I think of our economic prospects. Will we have a recession? If we do, will it be a bad one? Will we slog through without one? Are things looking up?

I think for the economic answers, you have to look at the good things that are happening and the bad things that are happening and perhaps compare them with ten years ago.

Let's look at the bad things first.

Ten years ago we were essentially at peace. Today we are spending $300 billion a year to restore and keep peace in a country that we conquered five years ago in about five minutes. $300 billion a year is a lot of money. And we could sure use it for social programs or something. Hopefully we'll see some progress soon.

Ten years ago the price of a barrel of oil was stable at about $15. Now it is approaching $130 a barrel and economists say there is a point at which the country will be unable to continue to sustain itself. Can't OPEC open the spigot to lower the price? Wait a minute. Didn't we invade an Arab country?

Ten years ago the balance of payments was in surplus. Today, our balance of payments is in deficit and we are leaking money like a sieve to the rest of the world. The dollar is worth, I mean, ten dollars is worth, well, at least something.

Ten years ago China was pedaling bicycles and working for a dollar a day. Now, half the population has a car, they are building power plants and skyscrapers by the hundreds, and they are rapidly westernizing. The cheap goods from China will vanish. And there is no other China.

Ten years ago scientists said that if something were not done soon, it would be too late to stop global warming. Sea levels would rise six inches by 2100. Today, we're still where we were ten years ago, and much of the polar ice caps have melted or collapsed and the scientists say that in 2100 the sea levels will be four feet higher than now.

Ten years ago the price of real estate was high but still within the grasp of the middle class. Then they took off like a shot. By last year, the middle class might, with financing, be able to buy a tent. Today, there is the sub-prime mortgage crisis. It turned out that real estate prices were rising so fast because people were buying it to sell it higher at a quick profit. Who knew? Gosh.

Well, at least there is lots of good news.

President Bush is fighting to privatize Social Security. He announced it in 2005 and any day now he's going to get that through.

President Bush also is fighting to solve the illegal immigrant problem. His latest proposal includes a plan to give special prizes to illegal immigrants here who voluntarily return to their home countries. The prize is that they would be given priority treatment in their applications to get back into the United States.

And then there are all the other programs that the President got through. Let's just take a few moments of silence to think about them.

And there's more good news. Ten years ago we didn't have the iPod, the flat screen TV, BlackBerries, satellite radio, hi-def or the GPS navigation systems. They were missing out on all the fun back then.

So on balance? Well, things can't get much worse. So I say things are looking up.

Or if I am wrong about that, at least we'll be able to watch ourselves go to hell in vibrant colors and sharp definition.