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Double down


ENOUGH POSITIVE economic signs abound these days that -- in theory, at least -- there ought to be more smiling faces around.

America's economy is still growing at a decent rate. Productivity gains remain healthy. Inflation is hard to find. The housing market could be cooling down but is still strong from a boom that has buttressed homeowners' net worth. Mortgage rates hit a 31-year low last week, continuing to provide sizable windfalls from refinancing -- projected at $200 billion this year. About half that mountain of cash is believed to be fueling consumer spending, on everything from home additions to vacations.

But the growing reality for many households is a regressive double whammy -- from precipitously dropping stock prices and falling household income. And that has corporate America spooked about another double, the possibility of a double-dip recession.

First, let's take the striking news last week from the Census Bureau: Americans' median family income dropped last year for the first time in 10 years, by 2.2 percent. The decline was broad, felt virtually across the country, by all racial groups and at all income levels except the highest.

Poverty increased for the first time in eight years, with a million more people living below the federal poverty line. The increase for blacks was milder than for whites -- an atypical pattern in search of solid explanation given that unemployment has been rising faster among blacks.

And the gap between rich and poor continued to widen, hitting record levels. The only group with rising income was the top fifth, which already takes home about half of all income.

Then there was the second bit of really bad news last week: The Dow, off more than 20 percent this year alone, fell to a four-year low. The tech-heavy NASDAQ, down by about 35 percent this year, hit a six-year low.

If 401(k) investors have continued to pour their retirement savings into the market -- after already losing big in 2001 -- they've been doubling down and losing. Anyone still support private Social Security accounts?

So last week brought home an awful truth. We've lost a wad of money in the market, and now we're even making less. Little surprise that household debt as a percentage of disposable income persists at a historically high level.

Given all this, the prospect of war in Iraq supplied enough additional risks that the Federal Reserve held off pressure last week to cut interest rates.

In 11 rate cuts last year, the overnight rate has already been slashed 4.75 percentage points to just 1.75 percent, a 41-year low. Auto sales may be up as a result, but not critical business capital investment. The Fed seemed to conclude that cutting rates right now wouldn't leave it with enough arrows in its quiver if things go from bad to worse.

In making their non-move, Fed governors said they expected an upturn but were uncertain when. No wonder: Corporate profits, expected to rise by 20 percent this quarter, are coming in at half that in many cases. While some economists not long ago were suggesting that perhaps we really didn't even have a recession last year, there's now more talk, at least in corporate America, of a possible double dip -- a second downturn.

Why not? It's happened before, and there were enough bad numbers just last week to suggest that it could well happen again -- giving credence to Democrats' politically driven criticisms that the Bush administration, while preparing for war, has been bungling things badly on the economic front.

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