Washington ? Let the economists debate all they want. This is a recession.

Scared and often broke, Americans stopped buying everything from cars to corn flakes in the July-September quarter, cutting back spending by the largest amount in 28 years and jolting the national economy into what could be the most painful downturn in decades.

Analysts will be studying the figures for months before confirming the meltdown recession of 2008. But the result is no longer in doubt.

With retailers bracing for a grim holiday buying season, the economy isn’t just slowing; it’s actually shrinking, the government said Thursday. It reported that the nation’s gross domestic product declined at an annual rate of 0.3 percent in the year’s third quarter and consumers’ disposable income took its biggest drop on record.

In simpler words, “The train went off the tracks,” said Brian Bethune, economist at IHS global Insight.

Wall Street took comfort in the fact that it wasn’t even worse. The Dow Jones industrials rose 190 points.

But it looks as if tougher times are still ahead. Economists believe consumers are cutting back even more right now, and they predict a much larger economic decline – anywhere from a 1 to 2 percent rate – during the current October-December period. That would meet a classic definition of a recession – two straight quarters of shrinking GDP.

Clobbered by pink slips, shrinking nest eggs and falling home values – consumers are holding ever tighter to their wallets. The new report said Americans’ disposable income fell at an annual rate of 8.7 percent in the quarter, the largest in records dating back to 1947.

Whether Democrat Barack Obama or Republican John McCain wins the White House, he will inherit a deeply troubled economy and a record-high budget deficit that could cramp his spending plans.

“The decline in GDP didn’t happen by accident – it is a direct result of the Bush administration’s trickle down, Wall Street first, Main Street last policies that John McCain has embraced for the last eight years,” Obama said. He pledged to provide tax relief to middle class families and help people facing foreclosure.

Pointing to the economy’s sad state, Doug Holtz-Eakin, senior policy adviser for the McCain campaign, shot back that “Barack Obama would accelerate this dangerous course.” McCain said his tax cuts, free-trade policies and help to struggling homeowners would help turn things around.

More than in recent recessions, consumers are bearing the brunt of the country’s housing, banking and other ailments. The third-quarter decline in spending was the first in 17 years, and the 3.1 percent annualized cutback was staggering – the most since the spring of 1980 when the country was in the grip of what some call the worst downturn since the Great Depression.

Under attack from Democrats and Republicans alike, the White House defended giving billions of bailout dollars to banks that now are rewarding shareholders and executives – or buying other banks – rather than making loans to consumers and businesses.

Ed Lazear, chairman of the Council of Economic Advisers, said the government is keeping close tabs on banks’ use of the money and normal activities such as paying performance-related salaries or distributing dividends are allowed under the law Congress passed.