Really. It’s too much. Yesterday, George W. Bush told foreign leaders “Our aim should not be more government, It should be smarter government.” Didn’t Bush just spend the past eight years embodying the exact opposite? Where was the smart part creating an “ownership society” with phony money? Where was the smart part of running up record deficits? Or the war in Iraq?

- But W. didn’t stop there. Apart from wanting governments to be “smarter” (who doesn’t?), he called for called for leaders to recognize that “government intervention is not a cure-all” for economic problems. So what was Fannie and Freddie all about? Or Hank Paulson’s Troubled Assets Relief Program. Or the bailout of AIG? If government is not a cure-all, then why has Bush orchestrated the biggest government intervention in the free markets in history? Is he really that unaware of what he’s saying? Isn’t he the one who thinks the problem started because Wall Street “got drunk.” Surely, he meant this was a bad thing that needed to be prevented in the future. Should the practice of issuing “liar loans” and “ninja loans” have been allowed to thrive unregulated? Should this be allowed to continue in the future?

- The irony of Bush’s stance didn’t escape his audience. Grant Aldonas, a former senior trade official in the Bush administration now with the Center for Strategic and International Studies, said, “The disabling of capitalism has already begun and he’s the one who started it,” Aldonas said. “It rings hollow for an awful lot of people, not only in the marketplace but for world leaders abroad. . . . They are the ones who are going to have the leverage at the table.”

- As Bush shares his economic wisdom with the world, the economy he presided over for the last eight years is in the midst of the deepest and most dangerous funk since the Great Depression. “The economy faces a slump deeper than the Great Depression and a growing deficit threatens the credit of the United States itself,” former Goldman Sachs chairman John Whitehead, told Reuters Global Finance Summit this week. Whitehead is no perma-bull. He’s a former Wall Street player and Reagan administration insider. But he is deeply pessimistic about the future of the US economy. This from Reuters:

Whitehead warned the country’s financial strength is at risk due to the sweeping demand for tax relief and a long list of major government spending plans.

“I see nothing but large increases in the deficit, all of which are serving to decrease the credit standing of America,” said Whitehead, who served as chairman of the Lower Manhattan Development Corp after the World Trade Center was destroyed during the September 11, 2001 attacks.

Whitehead, who helped make Goldman a top-tier Wall Street firm and led its international expansion, left in 1984 to become a deputy secretary of state under Ronald Reagan.

He warned that the country’s record deficit is poised to balloon as the public calls on government for more support.

“Before I go to sleep at night, I wonder if tomorrow is the day Moody’s and S&P will announce a downgrade of U.S. government bonds,” he said. “Eventually U.S. government bonds would no longer be the triple-A credit that they’ve always been.”

There are at least ten “trillion dollar problems,” facing the United States, he said, including social security, expanding health insurance, rebuilding infrastructure and increased spending on green energy. At the same time, the public does not want to pay for it.

“The public is not prepared to increase taxes. Both parties were for reducing taxes, reducing income to government, and both parties favored a number of new programs — all very costly and all done by the government,” he said.

Large deficits can weaken the country’s credit and increase its borrowing costs, which already constitute a significant part of funding to cover expenses. Whitehead said it could take “several years” for the current problems to be resolved.

Whitehead said he is speaking out on this topic because he is concerned no lawmakers are against these new spending programs and none will stand up and call for higher taxes.

“I just want to get people thinking about this, and to realize this is a road to disaster,” said Whitehead. “I’ve always been a positive person and optimistic, but I don’t see a solution here.”

- This is perhaps a worst-case scenario. But it is on well worth considering. The problem right now is that even the best-case scenario is dire. The Paris-based Organization for Economic Cooperation and Development (OECD) says global economic output will shrink 1.4% this quarter for the 30 nations that make up its membership - and keep contracting until the middle of next year. According to the Los Angeles Times:

That would mean the developed world has entered a slump expected to last at least three quarters; two consecutive quarters is a common definition of recession. For all of 2009, these economies are expected to contract 0.3%.

Additionally, the U.S. economy is forecast to fall 2.8% in the fourth quarter, after a 0.3% drop in the third quarter, and then shrink 0.9% in 2009. Japan’s economy is expected to shrink by 0.1% next year and the Euro area by 0.5%.

That would be the first time since 1974-75, when they were suffering from the Arab oil embargo and a severe bear market for stocks, that the U.S., Europe and Japan had fallen into recession around the same time.

- According to NYU economics professor an economist du jour Nouriel Roubini, the US economic slump will be more severe:

The U.S. will experience its most severe recession since World War II, much worse and longer and deeper than even the 1974-1975 and 1980-1982 recessions. The recession will continue until at least the end of 2009 for a cumulative gross domestic product drop of over 4%; the unemployment rate will likely reach 9%. The U.S. consumer is shopped-out, saving less and debt-burdened: This will be the worst consumer recession in decades.

Roubini also contends that the probability of a worse, multi-year L-shaped recession (as in Japan in the 1990s) is rising. He also warns that “even if the economy were to exit a recession by the end of 2009, the recovery could be so weak because of the impairment of the financial system and the credit mechanism that it may feel like a recession even if the economy is technically out of the recession.”

- The rate of job losses in America is certainly playing ball with the deep recession theories. Today’s job loss shocker: Sun Microsystems announcement that it will slash 5,000 to 6,000 jobs, some  15% to 18% of its workforce

- It’s also the kind of recession where big companies take big hits to their balance sheets. Bloomberg reports that Freddie Mac’s [NYSE:FRE] third-quarter net loss “widened to $25.3 billion, or $19.44 a share, after writing down tax assets and providing for bad mortgages and securities.”