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KEY POINTS:
Hillary Clinton, Barack Obama and John McCain may all be holding out lofty promises of change, liberation and national renewal to the American voters in November's presidential election, but the more pressing issue for many is whether they will still have a job - or a home - by the end of the year.
For more than 18 months, sliding house prices, sickly wage growth and the rising costs of food and fuel have been gnawing away at the feelgood factor.
David Demmler, who has driven his bright-red, 18-wheeler Peterbilt truck, with black fenders, over every inch of the United States for close to 40 years, says the rising price of fuel is squeezing businesses everywhere: "Since my father started this business after the Second World War, we have always hauled fuel oil and a lot of railroad oil. So I hear it from our customers too. The price of everything is going up."
Diesel is now so expensive that his company Covered Wagon, like most of its rivals, is charging a fuel surcharge to try to recoup some of the extra costs.
Mary-Anne Parmley, who owns Covered Wagon, has also noticed a difference.
"I do worry about the recession, and the rising price of oil has affected us terribly," she says. Trucking is her life but these days she finds running the business a struggle. She has cut as many overheads as possible and hopes that business remains strong so she can afford to keep her staff of 50 employees and fleet of 40 trucks:
"I have considered giving this up, especially when I got divorced, but the people here are what keep me going. We have to find a way to get through this recession for them. They are why I show up every day." Jared Bernstein, chief economist at Washington-based think-tank the Economic Policy Institute, says the truckers' experiences are echoed by Americans in many walks of life, right across the US.
"We are demonstrably into a period of slow growth. People are absolutely more pinched. Their pay cheques are not taking them so far, and their jobs are more insecure - if they still have a job. This is what a slowing economy feels like."
News that the economy expanded by only 0.6 per cent in the last quarter of 2007, making it the weakest year since 2002, confirmed what many both on Wall St and in the real world had guessed: a sharp downturn is under way. Amid fears of recession, the economy will inevitably be high on the electoral agenda and policymakers are scrambling to prevent the slowdown from going out of control, just as the voters prepare to go to the polls.
Ben Bernanke, the former Princeton professor who is chairman of the Federal Reserve, sharpened his academic reputation by scrutinising the failings of policymakers that turned the 1929 Great Crash on Wall St into the grinding Great Depression that left millions of Americans jobless.
In particular, he has studied the way the "credit channel" - the flow of lending through the economy - can help or hinder interest-rate policy.
Bernanke's aggressive approach since the events of last summer, which has seen rates cut heavily from 5.25 to 3 per cent since September, is a reflection of his determination to avoid the perils of doing too little, too late, and to prevent credit from drying up.
If his efforts work, the economy should start to pick up in the second half of 2008 - and not everyone is panicking yet. Simon Ward, of New Star Asset Management, says the recession warnings are so far not all flashing red.
"There are missing links in the recession argument," he says.
"Inventories are very low, and they normally start to rise before a recession; exporters are performing well. The other uncertainty is the labour market. Normally in recessions, you get less hiring, and layoffs.
"We're seeing less hiring, but we're not yet seeing layoffs, or don't seem to be."
The sharp decline of the dollar over the past year has helped to boost exports, providing a welcome source of economic growth as consumers stay at home.
But with little sign of house prices bottoming out, and a backlog of thousands of new homes standing empty and unsold, there are growing fears that the economy could be about to lurch into a painful new phase, despite the Fed's unprecedented rate-cutting spree. The closely watched ISM survey suggests that activity in the crucial services sector shrank in January for the first time in more than four years, sparking fresh talks of a recession - and another violent sell-off on Wall St.
Central bankers' worst nightmare is that if things get too bad, their major weapon - interest-rate cuts - becomes ineffective. If shell-shocked banks are reluctant to lend, or if consumers' finances are in such a dire state that they have no appetite for taking on fresh debt, then lowering borrowing costs throughout the economy may no longer work.
The parlous state of America's financial sector has already been underlined by the desperate fundraising efforts that have led to sovereign wealth funds from oil-rich states buying up chunks of embattled banks.
Citigroup and Merrill Lynch alone have raised an extraordinary US$21 billion ($26.6 billion) between them, from a hotch-potch of investors, including the Singaporean and Kuwaiti Governments.
Even with a much-needed injection of foreign cash, America's banks seem to have embarked on a bout of concerted belt-tightening. This is the worst-case scenario for Bernanke and the White House - that slashing interest rates and throwing cash at households fails to work, because lenders turn off the credit taps and consumers who have been on a decade-long borrowing binge decide to save their rebate cheques, instead of taking an economy-boosting trip to the shops.
"Fiscal stimulus is the right policy," says Dumas, "The problem is that if it's done in the form of tax rebates, it might not be spent."
Bernstein adds: "Folks have very little padding to fall back on. Savings rates are quite low; the American consumer is quite leveraged, and their main asset - their home - is no longer appreciating in value."
House prices have dropped by an average of about 7 per cent across the US but historical experience suggests that property downturns take several years to unfold. And the future path of house prices is likely to be the key to how much worse things become. According to a poll last week, the economy recently overtook the war in Iraq as by far the most salient issue for voters.
Whoever walks into the White House at the start of 2009 is likely to be haunted by the sub-prime crisis for a long time to come.
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