"Housing is a key variable in the intensity and longevity of this new climate," Malpass said in his latest weekly Wall Street memo to clients and interested parties. "We think there is a material chance that the lower mortgage rates will cause a U.S. housing turnaround. This would magnify the excess liquidity process. One indicator to watch is the volume of housing traffic and sales."

But we are in a slowdown period right now, and other economists think it will last a bit longer, while dodging the recession bullet.

Chief economist David Huether at the National Association of Manufacturers (NAM) sees GDP growing by a severely anemic 1.4 percent in the first six months of this year.

A big reason: The manufacturing picture looks bleak, he said this week in a new study. "The ripple effect of the housing downturn and a slowdown in motor-vehicle production has caused a significant hit to the overall manufacturing economy.

"While these sectors shed 125,000 jobs and saw output decline by 2.4 percent last year, the remaining sectors picked up 18,000 jobs and output rose by 2.7 percent," he said.

NAM has the answer to increasing manufacturing growth that should be a major part of the stimulus package. "The best way to create jobs is to jump-start business investment with an enhanced capital-cost recovery system" that lets business quickly write off the purchase of new equipment and technology for plant expansion, says Dorothy Coleman, NAM's vice president of tax and domestic economic policy. Its chief tax proposals being strongly lobbied on Capitol Hill include a 50 percent bonus depreciation provision for new business investment.

With all its problems, the U.S. economy turned the corner into 2008 with some strong fundamentals that could help get it through this downturn faster than anyone expected: strong export sales in a still-booming global economy, tumbling interest rates, the Fed's infusion of liquidity into the financial system, strong corporate earnings, relatively low tax rates that need to be reduced further and a resilient, high-productivity economic infrastructure that has pulled us through hard times before.

These are reasons to remain optimistic about overcoming this latest economic challenge. Anyone who bets against the American economy will lose.