Donald Lambro

Meanwhile, a tax rebate stimulus bill will be mailing checks to taxpayers next month, further injecting cash into consumer pockets and that, to some degree, will help boost spending. And let's not ignore the Bush tax cuts; their absence would have made a bad situation much worse. The lower income tax rates have made our economy's fundamentals sturdier and more resilient, continuing a bull market that has, with a few pauses along the way, lasted more than two decades.

Overlooked in all of this is the behavior of the stock market, which has by and large responded to the economic turmoil in a remarkably mature way, despite periodic plunges. The Dow was around 12,600 by the middle of last week, and global financial markets were experiencing a bit of a bull rally in Asia and Europe in the wake of the Fed's actions. The recovery continues.

We keep hearing the present situation billed as the worst crisis since the Great Depression. But in fact "this crisis is not as bad as the Asian crisis or the stock market bubble of 2001 (when Nasdaq along lost $4.5 trillion in market capitalization)," notes Wall Street economist David Malpass. We survived both and the stock market has hit new record highs since then, only to fall back and then rise again as conditions warrant.

Still, we are facing two quarters of either economic contraction or very slow growth before July. "It now appears likely that gross domestic product will not grow much, if at all, over the first half of 2008 and could even contract slightly," Bernanke testified. Forecasters see GDP falling in the first quarter to somewhere between zero growth and -1 percent, but rising slightly in the second quarter as we work our way out of this trough.

But the usual signs of a deeper recession appear to be missing in the present economic downturn, suggesting that this one will be shallower than previous declines. Unemployment remains relatively low, U.S. exports are stronger than ever -- thanks to a growing global economy and a dwindling dollar -- and the financial markets appear to be stabilizing. There is still a lot of liquidity on the sidelines.

At the same time, Congress is moving on a bipartisan package of tax breaks to help homebuyers and the housing industry, though by the time it gets enacted and fully implemented, the housing industry may already be showing signs of life.

As Bernanke says, we're going to have to see how things evolve.

Donald Lambro

Donald Lambro is chief political correspondent for The Washington Times.