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'Sick' housing market and Iraq war spending add to weakened economy, says CU economist

A weak U.S. dollar, war spending and falling housing prices are likely to contribute to weakening the 2008 economy, said a Cornell economist who shared his predictions for next year at a Dec. 18 agribusiness conference at Cornell.

Steven Kyle, associate professor of applied economics and management, spoke at the Dec. 18 Agribusiness Economic Outlook Conference hosted by Cornell's Department of Applied Economics and Management. The conference included Kyle's lecture, as well as two speakers on immigration reform who detailed the effect that millions of illegal workers have on the U.S. economy.

Kyle described the current economic climate as "vulnerable."

Though such indicators as retail sales (which include gasoline and heating oil) and personal income are rising, other factors are making the immediate and long-term future uncertain, he said. A major long-term problem in terms of the fiscal deficit is Medicare and Medicaid, whose obligations are even more pressing than projected shortfalls in Social Security, he noted.

Spending on the war in Iraq has risen to the tune of $1 trillion to $2 trillion and is going up by billions every week, Kyle added. The United States is going further into debt with foreign countries as a result, Kyle said.

The housing market is also "very sick," he said, as he described housing prices on a downward slope after inflating dramatically since 2000.

"It would take a lot in order to get housing prices back into ratios that are historically precedented in terms of house price to rent ratio," Kyle said.

One of the largest crises facing America today is the question of immigration reform, and how the federal government will handle the documentation of the millions of illegal immigrant workers living in the United States.

Craig Regelbrugge, vice president of government relations and research for the American Nursery and Landscape Association, detailed the importance of the immigration issue for agriculture.

In any given year there are about 1.6 million farm workers in American agriculture, and one out of every six is new to the sector. Of that population, about 99 percent are working illegally in the United States. This means there is virtually no domestic applicant pool seeking to do farm labor, Regelbrugge said.

Furthermore, the legal channels by which the government admits needed foreign workers, he said, are so "stymied," particularly at the low end of the economy, that workers have no choice but to come in illegally.

"We have reaped exactly what we have sown," he said.

Any reform system must deal sensitively with this issue, he said, because at this rate, the workers, who are the backbone of the agriculture industry, are currently in the United States illegally.

Focusing on agriculture in New York state, Thomas Maloney, Cornell senior extension associate in applied economics and management, said the contributions that migrant workers make in the agriculture industry are significant.

In 2006 immigrants harvested nearly the entire apple crop in New York, valued at $200 million, Maloney said. It was a similar story for vegetable crops. New York ranks No. 5 nationally in fresh vegetable production.

The day ended with smaller-group sessions on such topics as outlook for feed grains, impact of biofuels on livestock feed costs and the 2007 Farm Bill's implications for specialty crop agriculture.

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Blaine Friedlander