Donald Lambro

WASHINGTON -- With all the economic gloom and doom we're hearing on the nightly news, it should be noted that not everyone believes we are heading into a recession.

We've been hearing the mantra of recession over and over again for sometime now. It was a drumbeat throughout 2007 from people who had their own political agenda. But barring the expectantly low fourth-quarter gross-domestic-product (GDP) numbers due out this week, for the most part the economy's fundamentals performed quite well -- turning in a nearly 5 percent economic growth rate in the third quarter.

Right now, however, the economy -- housing, mortgage foreclosures and the financial sector -- is going through a rough patch, but it is unclear how deep this downturn will be and how long it will last. The gloom-and-doomers say it's going to last a long time and send the overall economy spiraling into more than two consecutive quarters of lackluster growth.

But some very credible economists think this isn't going to happen for a number of reasons -- chiefly, that steps are being taken to prevent it, including deep interest-rate cuts to make it easier for businesses and consumers to borrow money and a stimulus bill to pump needed cash into the hands of taxpayers.

"The current perception is that the bottom has suddenly fallen out of the economy. Instead, we think we're in the expected two-quarter hiatus between the pipeline of projects funded with securitizations and the still-developing pipeline of projects funded with 'new' techniques (bank loans, internal funding, equity capital)," said chief economist David Malpass at Bear Stearns.

A month ago, Malpass was sounding much more bearish about the economic environment, suggesting that we were in for a long, difficult haul before we saw the end of this downturn.

Then came the Federal Reserve Board's pro-growth interest-rate cuts that have "effectively glued together the punch bowl of excess liquidity," which will help get us out of this, he said last week. As a result, "we're changing several of our views."

Among the changes:

-- "We think the recession risk for 2008 is now 10 percent," compared to 20 percent after the Fed's Sept. 18 rate cut.

-- "We're raising our gross-domestic-product forecasts for the second, third and fourth quarters of 2008 to 3 percent (they were 2 percent, 2.5 percent and 2.5 percent)," following 1 percent GDP for the first quarter.

One of the key changes that will eventually alleviate the subprime housing crisis is falling home-mortgage interest rates that are going to lure homebuyers back into the market.

Donald Lambro

Donald Lambro is chief political correspondent for The Washington Times.