Bad Credit Replaces Terrorism as America's Boogeyman

By , Money Morning •

By Mike Caggeso

Staff Writer

Credit defaults have overtaken terrorism as the U.S. economy’s Public Enemy No. 1, a key national research group reported Monday.

The National Association of Business Economics, a Washington-based association, surveyed 258 NABE panel members in the survey: Of that total, 32% cited loan defaults and excessive debt as their biggest short-term concern, a response that also topped energy prices, inflation and government spending as causes for worry.

They are also problems that investors must either figure out how to profit from, or at least determine how to keep from having the financial fallout cause losses in their holdings.

“Financial market turmoil has shifted the focus away from terrorism and toward subprime [mortgage issues] and other credit problems as the most important near-term threats to the U.S. economy,” Carl Tannenbaum, NABE President and Chief Economist, La Salle Bank/ABN-AMRO (NYSE: ABN) said in the report. “However, these concerns appear to be somewhat transitory, as the five-year outlook for housing remains positive.”

When this survey was last conducted in March, 35% of respondents cited national security/terrorism as their chief worry. The report issued this week is the first one in which terrorism worries cooled – and not just a little, since it dropped 15 percentage points to settle at 20%.

However, such a statistical drop in terrorism fears should be viewed within its context. This is the first time “subprime default and debt problems” were added to the survey’s list – as were “excessive household/corporate debt.”

What’s more, these categories were added just as what began as a slowdown in the long-scorching U.S. housing market morphed into a global credit contagion that has some analysts talking of an international slowdown – if not a worldwide recession.

The list of long-term challenges to the nation’s economy, however, is topped by health care (24%) and the growth of the elderly population (21%). Those items were followed by the education system (17%), the federal deficit (13%), energy issues (9%) and competitiveness (6%).

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