Recessions end when people finally focus on an economy's strengths more than its frailties. This week, global markets became gripped by fears of a possible US recession. So what would it take to end this recession before it starts?
It would require American consumers, as well as investors and banks, to buck the raging herd of bears and look at what still drives the world's largest economy – while also pruning away what has not proven of value.
Economic positives in the United States can still be found in many areas. The education and healthcare industries, a $3.5 trillion economy unto themselves, will continue to be strong. Midwest grain farmers can't meet world demand. Investments in telecommunications and energy remain strong. The US dollar is still the king of currencies. Export markets are now more than twice as large a share of GDP as US home construction. And the necessary shakeout in house prices is well under way as more banks write off bad loans and receive large foreign investments.
Workers still sock away money in 401(k)s with an eye on the long term. Joblessness is up slightly (and still low) but claims for unemployment insurance have dropped.
And interest rates remain low enough to spur investments, especially after Tuesday's emergency 0.75 percentage-point drop by the Federal Reserve in the type of interest rate that banks charge each other.
The wise need to look at the healthy fundamentals more than to the Chicken Littles who sell fear as a commodity and revel in their self-reinforcing predictions.
But such an act of confidence in economic basics isn't a leap of faith, as in "we may have talked our way into believing the economy is bad, so let's talk our way out." Nor does future economic growth rely on bottom-feeding speculators who wait to buy fire-sale "deals" in falling stocks, house prices, or other sectors. Therein lie more bubbles.
Any renewed confidence needs to start at the top, and so far President Bush appears more ready to speak of government rescue packages than to use his bully pulpit to spotlight the market's many bulls. He needs to hit the road rather than the panic button.
When passengers suspect a ship might be sinking, they look for fright in the captain's eyes more than for holes in the hull. Mr. Bush must get on Air Force One and visit the economy's strengths. If oil prices remain above $70 a barrel, for instance, he must point out the nation's strong investments in renewable energy and conservation. Last year, US industries plowed $3.7 billion into clean technologies.
Such a presidential focus on the healthy parts of the economy is as important as the debate with Congress over how much precious federal revenue to put into the consumers' pockets – whether that money comes in the form of cash or tax cuts. (By the way, Congress should look for spending cuts to pay for any economic stimulus.)
At the same time, many of the best ideas from presidential candidates for how to fix a slowing economy will only help spur a popular sense of realistic optimism that the US can avoid a recession, while still avoiding runaway inflation.
Economic turnarounds don't start with those who have fled in fear but those who march forward on the strengths of a nation's core assets.