Reining in spending: this nation is headed toward economic collapse if Washington's spendathon continues unabated. But the good news is we can do something about it.(ECONOMY)(Cover story)

"Slowly but surely the overall analysts' consensus is shifting towards a high likelihood of a US recession in 2008," reported Nouriel Roubini's Global EconoMonitor (RGE Monitor) on December 19. To be sure, there are still die-hard bulls like Lawrence Kudlow, the economic guru at CNBC and National Review Online, who has insisted vociferously, in the face of overwhelming evidence to the contrary, that U.S. economic fundamentals are stronger than ever. Consumers should keep on spending, investors should keep buying more stocks, he advised.

"The recession debate is over," Kudlow declared in his December 5 Kudlow's Money Politics biog. "It's not gonna happen.... The Bush boom is alive and well. It's finishing up its sixth splendid year with many more years to come." A month later, on January 4, following the release of government data showing unemployment has risen to five percent, Kudlow stubbornly clung to his rosy view. "Despite Friday's soft jobs number, I do not believe we are heading into a recession," he said. "Any slowdown in the U.S. will be very short-lived."

Former Clinton Treasury Secretary Lawrence Summers, while rarely a source of sound economic proposals, nevertheless was far closer to the mark in a November 25 op-ed for the Financial Times in which he opined that "the odds now favor a US recession that slows growth significantly on a global basis." Moreover, he warned, "there is the risk that the adverse impacts will be felt for the rest of this decade and beyond"--unless "stronger policy responses" are made by the government.

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Incredibly, Dr. Summers' prescription is for more of the "medicine" that has been killing the patient: more government spending, tax cuts despite the additional spending, and easier credit. Unfortunately, he is not alone. Politicians on both sides of the aisle are avoiding like the plague the one medicine most desperately needed: drastically cutting government spending.

The current recession will be unlike any other in the past century. First and foremost, we have faced all previous recessions (within the memory of anyone still living) with the dollar as the de facto reserve currency of the world and the preferred global medium of exchange. That has changed; nations, companies, and individual investors are abandoning the dollar for the euro and other currencies. Second, we have lost the manufacturing base that enabled us to produce our way out of past recessions. Third, we went from being the bread basket of the world to being a net importer of food.

Here are the bare, grim facts that both the Democrat and Republican Pollyannas are at pains to ignore or misrepresent: