War poses the biggest threat to the U.S. economy, according to a survey taken this month and released Monday of 223 members of the National Association of Business Economists.

A year ago, international military operations and homeland security weren't even a blip on the economists' radar screen. Now, 41% say they're the biggest threat to the national economy. A distant second, at 11% this month and a year ago, is the growing federal budget deficit.

The survey also reveals that technology plays a crucial role in the American economy, with 26% of the economists deeming the nation's technology lead as a major strength of the economy, up from the 21% in August--but down from 29% in March 2002. Slightly more, 28%, cite productivity gains as the economy's biggest strength, up from 25% in August and last March. Many economists contend that increased use of IT helps propel productivity.

Other findings:

• More corporate governance regulation is needed: Nearly half of respondents say more regulation is needed, but less than one-third believe more regulation has boosted confidence in U.S. financial markets. Among the regulatory remedies suggested by panelists were creation of a separate sell-side research function in investment bank firms, cited by half the panel, and requiring expensing of stock options to employees, favored by 44%.

• Monetary policy is about right: 80% of respondents think monetary policy is about right; half expect short-term rates will be unchanged in six months; and 37% expect rates will be between 25 and 50 basis points higher. Views on fiscal policy are divided: 42% believe fiscal policy is about right. Those who think fiscal policy is too restrictive rose to 24% in this survey, compared with just 15% who thought so in August. Although panelists think the odds for a double-dip recession are less than 50/50, nearly half now think fiscal, rather than monetary policy, should be used if one occurs.

• Most expect a modified version of the president's tax-relief proposals to become law: Nearly two-thirds of the respondents expect aid to states and municipalities will also be included in the budget. Fiscal stimulus is expected to add 0.5% to real GDP growth in 2003 and 0.65% to growth next year.