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		Home Page Mortgage News You Can Use Economists say U.S. growth spurt will end, crisis looms Monday February 9, 10:59 pm ET By Anthony Boadle HAVANA, Feb 9 (Reuters) - The U.S. economy is enjoying a growth spurt that will not last beyond 2004 because it is driven by military spending and tax cuts while the Bush administration turns a blind eye to a looming deficit crisis, American economists said in Havana on Monday. "Developing countries that still rely on the American market as an engine of growth should be cautious about expecting too much after 2004," said University of Texas professor James K. Galbraith at an annual economists conference on globalization issues hosted by Cuba. Economic Nobel laureate Daniel McFadden warned that the United States is heading toward a generational demographic crisis in social security and Medicare that will require government funding, and in turn imply unsustainable deficits. "The current administration in Washington is making no serious effort to deal with the looming failure of its programs," McFadden said in a lecture to 1,300 economists from 43 countries. "There is a high risk that social and financial turmoil will result, threatening the continued prosperity of the U.S. economy and the stability of the globalized markets in which it is a key player," he said. Galbraith said the current "spurt of growth" in the U.S. economy was kicked off by the increase in military spending for the Iraq war and sustained over the summer by an infusion of cash into household spending. ANOTHER INFUSION OF CASH "We are going to see another such infusion in the second quarter, so it is not over yet," he said, but added that future tax cuts will not add to household spending and that a slow down is predictable. Galbraith, son of Harvard economist John Kenneth Galbraith, said the Bush administration ran policies designed to make the economy stronger in the short run, such as child credits and the 2003 tax cuts, to enhance its chances in the 2004 elections. While the Federal Reserve said it can be patient before it raises very low interest rates, it will come under pressure to defend the dollar through higher rates, he said. "Whether they yield to that pressure is more a question of when than if. I would not be at all surprised to see interest rates rising next year and that will cause further problems," Galbraith said. McFadden won the Nobel Prize in 2000 with James Heckman, who also attended the Havana conference, for developing econometric theories and methods widely used in the statistical analysis of individual and household behavior. McFadden said the unregulated flow of speculative "hot money" had created global financial volatility and burdened developing nations with unpayable debt and attacks on national currencies. The support provided to nations in difficulties by the International Monetary Fund ( News - Websites ) is often "cold comfort" due to painful austerity demanded in return for bailouts. "We need to cool down hot money, keeping long term flows while reducing short term volatility, and warm up the cold comfort currently provided by the IMF to countries that are in trouble," he said.   Back to Original Article: Mortgage News You Can Use   Continue with: EU Finance Ministers Oppose Currency Sales, Clear Way for Further Advance DIARY-U.S. Treasuries, Tuesday, Feb 10 Analysts look for strong 2004 U.S. economic growth OPEC Springs Surprise Oil Output Cut SEC calls for fraud investigation Housing Affordability Improves In Fourth Quarter The Mortgage Market This Week Mortgage Application Volume Holds Steady Tax Advocates Pressure House Declaration Fails To Give Dollar a Boost Inventories, Sales Rose in Dec. Bush hits road, touting economy Euro Falls as EU Wants Weaker Currency Treasuries Higher on Hopes of Demand
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