The dollar sank to a record low against the euro as U.S. home prices and consumer confidence tumbled, bolstering bets the Federal Reserve will keep reducing interest rates.  

The U.S. currency declined to the weakest level since the euro began trading in 1999, and slumped against all 16 of its most-active counterparts. It reached its lowest level of the day after Fed Vice Chairman Donald Kohn said turmoil in credit markets and the possibility of slower economic growth pose a ``greater threat'' than inflation.

Gasoline prices, which for months lagged the big run-up in the price of oil, are suddenly rising quickly, with some experts fearing they could hit $4 a gallon by spring. Diesel is hitting new records daily and oil closed at an all-time high on Tuesday of $100.88 a barrel.

The increases could not come at a worse time for the economy. With growth slowing, high energy prices that were once easily absorbed by consumers are now more likely to act as a drag on household budgets, leaving people with less money to spend elsewhere. These costs could exacerbate the nation’s economic woes, piling a fresh energy shock on top of the turmoil in credit and housing.

“The effect of high oil prices today could be the difference between having a recession and not having a recession,” said Kenneth S. Rogoff, a Harvard University economist.

With blunt pragmatism, Sen. John Sununu came to Concord last week and told economic development leaders not to waste time worrying about the cost of health care.  

"This may be the most bizarre recommendation, but I am sincere," Sununu said. "I'm not saying it's not an issue or it's not important, but proportionally speaking, stop complaining about health care."  

Sununu said business leaders would be better off putting their energy elsewhere. For starters, "if there was something that we could do about it that were quick or easy, it would be done," he said, predicting only marginal policy changes. "There is no solution" anytime soon, he said.  

He cited the "opportunity cost" of business types squandering time debating health care issues instead of working on issues they could control.  

If there's a glimmer of hope, it will come from open markets, said Sununu, who broke with the White House in 2003 to vote against the Medicare prescription drug bill because it restricted price competition.  

Health care "is so darn expensive," he said, "because it's worth it."

 The number of uninsured Americans increased by 3.4 million between 2004 and 2006, despite improving economic conditions. In the first four years of the decade, during a period of economic recession, the number increased by 6.0 million. The dominant factor in both periods was a decline in employer-sponsored insurance coverage. Although the recent decline was less than that experienced from 2000 to 2004, growth in public coverage was small, and the number of uninsured people increased by 1.0 million children and 2.4 million adults. Employer coverage declined most for self-employed or small-firm workers, in the South, and among noncitizens.

One-tenth of U.S. homeowners hold mortgages that are larger than the worth of their homes, Moody's Economy.com said on Friday. 

Nearly 8.8 million homeowners, or 10.3 percent, are in over their heads, its chief economist, Mark Zandi, estimates. 

As a result, millions of U.S. homeowners have the incentive to abandon their properties. 

With an already unwieldy supply of homes for sale, more inventory could prolong a recovery of the hard-hit U.S. housing sector, suffering one of the worst downturns in history. 

Zandi earlier this week told Reuters he expects home prices to drop by 20 percent from their peak in 2006.

With economic growth slowing, the Fed projected that the national jobless rate will rise to between 5.2 percent to 5.3 percent this year. That is higher than the central bank's old forecast for the rate to climb to as high as 4.9 percent. Last year, the unemployment rate averaged 4.6 percent. 

And, with energy prices marching upward, the Fed also raised its projection for inflation. The Fed now expects inflation to be between 2.1 percent and 2.4 percent this year. That's higher than its old forecast for inflation, which was estimated to come in at around 1.8 percent to 2.1 percent. 

The Fed said its revised forecasts reflected a number of factors including "a further intensification of the housing market correction, tighter credit conditions .... ongoing turmoil in financial markets and higher oil prices." 

The combination of slower economic growth and increasing inflation could complicate the Fed's work. The central bank is trying to keep the economy growing, while ensuring that inflation stays under control. The Fed's remedy for a weakening economy is interest rate cuts. To combat inflation, the Fed usually boosts rates. 

Oil prices on Tuesday jumped to a new record - topping $100 a barrel. Consumer prices, meanwhile, rose by a bigger-than-expected 0.4 percent in January, according to new government figures released Wednesday.

 Broadcaster Lowell "Bud" Paxson yesterday contradicted statements from Sen. John McCain's presidential campaign that the senator did not meet with Paxson or his lobbyist before sending two controversial letters to the Federal Communications Commission on Paxson's behalf.

Paxson said he talked with McCain in his Washington office several weeks before the Arizona Republican wrote the letters in 1999 to the FCC urging a rapid decision on Paxson's quest to acquire a Pittsburgh television station.

Paxson also recalled that his lobbyist, Vicki Iseman, likely attended the meeting in McCain's office and that Iseman helped arrange the meeting. "Was Vicki there? Probably," Paxson said in an interview with The Washington Post yesterday. "The woman was a professional. She was good. She could get us meetings."