WASHINGTON -- While the economy struggled to pull itself out of a financial hole this week, most of our political leaders were out of town or concerned with other things.
Congress was on spring break in the midst of Wall Street's turmoil that reverberated across global financial markets. The presidential candidates, one of whom will be elected in November, were focusing on other issues like Iraq, seemingly ignoring the fact that the economy is the No. 1 election issue in the country.
Hillary Clinton, attempting to save her sinking candidacy, was delivering another speech on Iraq Monday, while the Federal Reserve was trying to reverse a loss of confidence on Wall Street in the face of Bear Stearns' liquidity collapse in the continuing credit and subprime-mortgage debacle.
Barack Obama, the Democratic presidential front-runner, was striking back at Clinton's charges that his pledge to end the war wasn't worth the paper his speeches were printed on.
"Giving speeches alone won't end the war, and making campaign promises you might not keep certainly won't end it," she said in a speech calling for an end to the war.
Branding Clinton a "latecomer" to her opposition to the war, Obama fired back, saying he was "not about to (let) Sen. Clinton get away with saying this is just about speeches." He had opposed the war from the beginning, he said, while she voted for it in the Senate.
As those two were pandering to their party's antiwar wing, John McCain traveled to Baghdad, meeting with U.S. military leaders and defending our commitment to a fledgling democracy in its war against Al Qaeda.
But outside of the Fed's interest-rate cuts and smoothing the way for J.P. Morgan to buy Bear Stearns, with the approval of Treasury Secretary Hank Paulson, the rest of official Washington seemed to be just watching, waiting and hoping that the financial markets would stabilize over time.
The Fed was solely in charge of this crisis and, to its credit, has acted the way it is supposed to during troubled times. It has opened up a line of cash and credit to the banking system and the brokerage banks hit hard by the now worthless subprime securities in which they had invested.
We have been through many financial crises in our history and always emerged stronger than before. For example: the savings-and-loan debacle of the 1980s in which more than 900 S&Ls failed; and the 1997-1998 Asian financial turmoil, which roiled world markets.
"What distinguishes this crisis ... is that it involves the entire financial system, not just depository institutions, and it's more mystifying than any of its predecessors," writes economics columnist Robert Samuelson in the Washington Post.
The common complaint heard on Wall Street this week was that no one really knows how serious this one is and whether other investment banks are in deeper trouble than they are letting on. This explains the Dow Jones' roller-coaster ride, up nearly 200 points at one moment and into negative territory the next.
We're going to get through this -- we always do -- with some corrections along the way. The best advice I've read in recent days came from former Fed Vice Chairman Alan S. Blinder, who wrote in a Washington Post op-ed Tuesday that "everyone should take a deep breath ... the sky is not falling.
"Yes, the economy is limping, but it's not collapsing. And the effects of the Fed's interest-rate cuts and the stimulus package that Congress enacted last month are still to come," he said.
We are in an economic contraction, and no one knows how long it will last or how deep it will go. My own belief is that it will likely be shorter and shallower than the fear mongers are forecasting.
The unemployment rate is 4.8 percent, still low. Overall, past corporate earnings have been decent. Most Americans are paying their mortgages on time, and even with the decline in home values, most are worth much more than homeowners paid for them.
The Fed's easing will help add liquidity to the system, but it has a lag time of six to eight months before its effects are felt. The tax-rebate stimulus and business tax breaks are a booster shot that will help in the short term.
But we need a long-term growth plan for the foreseeable future, and Congress needs to get busy fashioning one now. It should include making the Bush tax cuts permanent. Even Hillary Clinton wants to keep the rates where they are, except for the top rate, which she wouldn't touch until the country is out of this rough patch, her economic advisers told me.
Meantime, the economy needs an infusion of fresh venture capital for economic expansion and new job creation. Cutting the capital-gains tax -- or eliminating it altogether -- would unlock private investment for start-up enterprises, business expansion and homebuilders. It's time to call off the spring break and get back to work.