U.S. economic outlook dims

NEW YORK – Bigger government, higher inflation and a poorer nation lie ahead, as the United States struggles to escape its current economic slump, analysts told Bloomberg News.

“We’re going to have 4 to 5 percent inflation,” Kenneth Rogoff, a former chief economist for the International Monetary Fund who’s now at Harvard University, told Bloomberg News. “The dollar will continue to drop and stay down for years. And we’re going to end up with more regulation,” to avert further problems like the subprime credit collapse.

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The view appears to be shared by U.S. residents, about 45 percent of whom expect their personal income to lag inflation over the next year, the Reuters/University of Michigan Consumer Sentiment report said in its gloomiest forecast since 1990. “The pessimists are beginning to outnumber the optimists,” said Lynn Franco, who directs The Conference Board’s separate Consumer Confidence survey. “Expectations about the future are at a 17-year low.”

For years, “we’ve been spending more than the economy’s been producing,” former Federal Reserve Chairman Paul Volker told the “Charlie Rose” show last week. “So we have been depending increasingly on foreign finance – monies coming from abroad.” Now, economists say, with the bursting of the stock and real estate bubbles that fueled the nation’s borrowing binge, the bill is coming due.