Voters will grumble, but what can they do?

Just hold on — spring is almost here! The business sector is anxiously examining rising costs (fuel, real estate taxes, electricity and other utilities to name some). We are told that U.S. exports are rising due to the soft dollar. But if you do not sell your widgets overseas or to the U.S. government (defense spending is ramped way up) then you still have to check rising costs because global competition is not letting you raise your pricing.

While we hear that global competition is forcing us to become more productive and that we are achieving much more industrial output per unit of energy consumed compared to 30, 40 or 50 years ago, we still face sharply rising energy costs. Fuel and food are outside the measurement of “core inflation.” Don’t ask me why. We all have to eat, and in suburban America, we all have to travel because for 60-plus years we have been separating our zoning, building our places of work well away from where we live, go to school or shop.

The Federal Reserve is working overtime to prime the pump to either prevent us from sliding into recession or bounce us up out of recession if we are already there. But at the same time, there is increasing talk of inflation. I read and study this stuff diligently, but I am as uncertain as most where we will be in six to 18 months.

Housing prices are cooling off, sales are slow, developers and banks are very anxious about inventories of newly built homes. The papers have more residential foreclosure notices. Contractors are looking for work. A banker told me this morning that her manufacturing clients were finally able to find good help. So while construction and residential development is cooling off, other sectors may be benefiting. I suspect that a prolonged slowdown in construction will affect us more than we think. Construction, development, redevelopment and remodeling employ a significant percentage of our workforce. If they are not earning, they are not spending.

I think mid- to late summer will be a watershed. Things will have bottomed out and be on an uptick or not. My gut tells me the recession is under way and will last at least until the end of the year, and perhaps well into 2009, but I have no hard facts or data. It is all anecdotal at this point.

Like most recessions, this will not be officially recognized until it is over or nearly over. The fact that it is an election year just adds to the fog and confusion. National Public Radio featured a discussion about how the Democrats do not want to approve the appointment of a new director of the Federal Aviation Administration because it is a five-year appointment. So they want to wait on the premise that if they win the White House in the fall, they can appoint and approve their nominee. There is a lot of that going on in this lame-duck presidency. Just business as usual inside the Beltway. So it becomes difficult to not be cynical.

Whether you support the idea of the Iraq War or not, there is no doubt that the cost of the effort is putting heavy stress on our debt load. The national debt has doubled in the past 15 years and has increased 70 percent since Reagan’s initial term. Our ability to pay the debt has not increased proportionately, and that is particularly reflected in the weakness of the dollar. So this recession is much more complex than most believe.

The Fed wants to add stimulus to prevent or soften the recession. But too much stimulus will ignite inflation. These are tricky waters to be navigating.

A majority of states are running large deficits currently. California’s is over $20 billion. That makes New Hampshire’s $100 million or $200 million deficit seem insignificant. But closing our deficit will affect many of us in one way or another.

In good economic times, voters grumble but absorb tax increases. In soft economic times they grumble and then vote things down.

So the fall elections will be affected by the economy, and the pundits are staying on the sidelines as to where the economy will be after Labor Day. What is clear is that most forecasts have been revised downward. The second half of the year is no longer seen as a significant uptick. Perhaps it will be slightly better, perhaps flat. We will find out soon enough! nhbr

Bill Norton, president of Norton Asset Management, is a Counselor of Real Estate (CRE) and a Fellow of the Royal Institution of Chartered Surveyors (FRICS). He can be reached at