To get the economy back on track, we really need two sectors to revive, business investment and end demand. Low interest rates have prevented the last recession from being severe (we also had a very wise single bolus of stimulus with uncles sam sending checks in the $300/$600 range to each family), that has worked, but not enough to create momentum. Making interest tax deductible will have only a "year end impact, no immediate money in your pocket and frankly, not much (I assume that non mortgage interest per family is let say $500/year, the average tax impact might be at best $150/family spread over). Right now the economy is suffering from a real tax due to crude being some 40% higher than normal, I would not be surprise that is equivalent to a $100 B tax increase on a yearly basis, something should compensate for that. As for the general consumer and its debt level, recent reports from the Fed indicate that debt service as a percentage of total disposable income is still well under 16% (the last number I saw was 13% well below other peaks in the last 20 years). I think it is high enough to assure that it will not increase much, but maybe not so high by itself to cause major retrenchment. Thus the "muddling around" for few years in the economy which I believe we will be engaged in. If, however, unemployment starts and pick up again and business delay indefinitely the renovation of its capital assets, then we may still get into another recession, I doubt a real recession (2 sequential quarters of negative growth) would start before late in 2004, if the war uncertainty is removed before the end of April. If that is further delayed, who knows. High crude by itself, for long enough could induce a recession.
Zeev
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