President: Stay calm and trust

Maybe it was the imminent passage of the stimulus bill, but 30,000 feet over Ohio as President Obama was heading to Chicago for a long weekend, "catastrophe" suddenly seemed too strong a word. Or maybe the president was just trying to keep hope alive when he noted that things have been worse than now. In fact, nearly everyone's grandparents have had it worse than we do. Americans are tough, resilient, inventive - and we will survive. He said it, not I.

Obama's reflections on America's economic past were part of a wide-ranging discussion with five columnists the president invited along for the Washington-Chicago flight. He was responding in part to a question about the potential looming "catastrophe" - a word he had invoked previously - if the stimulus package and other hoped-for measures weren't put in place fast. "What does catastrophe look like?" I asked.

With characteristic calm, Obama described what happened in Japan in the 1990s, when core problems in the banking system were papered over (his term). Should we follow that same path, he said, we might never "fully get private credit flowing again, and the economy contracts severely and then sort of limps along for a very long period of time."

A key difference between then and now is that Japan had extensive foreign currency reserves - and the U.S. was pulling the world economy along. Now all economies, including China's, are "decelerating at a fairly rapid rate." "So, if what happened in Japan is duplicated here in the United States, there's nobody else to help drive the engine of growth, you could end up seeing an even more protracted and prolonged worldwide contraction. And I think that would have a severe impact on our quality of life."

What that means, specifically, no one seems willing to say - for good reason. One of the greatest challenges for the president has been to convince the American people that our situation is serious, while not scaring them into economic paralysis. Thus, he steered the conversation away from catastrophe toward history. "So for a huge number of people out there, they're just not accustomed to seeing a bad economy with really high unemployment and very bearish markets. ... What we're going through now is nothing compared to what our grandparents went through during the Great Depression," he said.

That's not counting the Panic of 1873 when exaggerated optimism on continual economic growth, too much credit based on unbuilt or half-built houses, and low-cost products undercutting prices made things much worse before they got better. But they did get better.

No one has a crystal ball these days - certainly not Obama, as he keeps telling us. But his optimism and faith in the American character may be our best medicine. Asked what the American people should do - shop? - he urged confidence that "the same productive capacity that we had before is still there." Describing government and the economy as ocean liners, not speedboats, he said our goals are long-term. Nothing can be judged by a one-day market rise or fall. But it does seem that history, like nature, is cyclical and that our "worsts" become less worse over time. Someday our grandchildren, those little gleams waiting to be realized, may look at their shrinking retirement funds and console each other: "Hey, back in 2009? Much worse."

© 2009, Washington Post Writers Group