by Calculated Risk on 9/13/2005 08:07:00 PM

The Rocky Mountain News reports:

Economist Tucker Hart Adams said today it's not a question of if the U.S. economy slips into recession — it's just a matter of when.

Adams, giving her annual forecast at a breakfast for U.S. Bank customers, predicted 3.0 percent growth in the economy for 2006, down from an estimated 3.5 percent in 2005 and 4.2 percent in 2004.

But that's what she calls the "glass half full" scenario. The "glass half empty, and leaking" possibility is a recession in 2006 or 2007.

Adams continues to be concerned about consumer debt, unsustainable housing price increases, and high oil prices.

"Will (the recession) begin in 2006, or will we keep fooling ourselves, thinking we can spend more than we make and go further and further into debt? I don't know."

Here is the economic forecast. The conclusion:

This is the glass half full forecast. The economy stands at a fork in the road as we move through 2006, and we can make an equally compelling case for a year that ends in recession for the nation and most of the industrialized world. If the Chinese economy crashes, if Asian central governments stop buying U.S. government securities and interest rates move up 150-200 basis points, if there is an outbreak of trade protectionism in the U.S. that spreads around the globe, if the housing bubble bursts, if U.S. debt and deficits – consumer, government and/or current account – become unmanageable, if oil prices continue to rise – any combination of these and perhaps no more than a single one makes a recession inevitable. In terms of a mild recession, it is only a question of when it occurs, in 2006 or a year or so later. At some point U.S. consumers must bring their debt under control and housing prices must reflect demand for living space rather than Ponzischeme speculation. At worst, the eerie parallels with 1929 turn out to be predictive and we face a long period of difficult economic times.