ARE THE GOOD TIMES OVER?

• Author: Stevenson, Richard W.
• Position: US economy

Will a recession rock your world? How bad will it be? Will a tax cut help? Should you worry?

Could this be what's next? Your parents sit you down to tell you your college plans need to be scaled back from expensive and private to public and cheap; that summer job you were planning at the hip dot-com just evaporated, and you're looking at--horrors!--flipping burgers at a fast-food joint. It gets worse: that new computer, the new pair of Nikes you were banking on, forget them. Your parents are stressed out about money, and you can imagine how much fun that is.

After several years in which the news about the economy has been good, unsettling headlines in recent months about layoffs and Internet companies going belly-up have raised the possibility that for the first time in a decade the United States is facing a pronounced economic slowdown--maybe even a full-fledged recession.

While a major recession could throw millions of people out of work and send the stock market tumbling, at this point economists are still debating whether we will have one, never mind how bad it will be.

Optimists say that the economy is just throttling back after a long period of expansion. If they're right, there is not likely to be a big rise in unemployment from its current low level, the stock market is unlikely to collapse, and hard work and good ideas will still pay off.

"The issue is whether or not the economy is falling into recession," says Bruce Steinberg, an economist at Merrill Lynch, an investment firm. "Our view is it's not."

IS THE GLASS HALF EMPTY?

But it is also possible that the economy is heading into a serious recession, or is already there. "The key questions now are how deep and how long will the recession be, who it will claim as its major victims, and what it will take to promote the eventual recovery," says Richard Berner of Morgan Stanley Dean Witter, an investment firm whose economic outlook is gloomier than most.

There is no hard and fast definition of what constitutes a recession. It is often taken to mean six consecutive months in which total economic output declines. But any steep downturn, even if it lasts only a few months, could be considered a recession.

A mild recession might look something like the last one, which lasted for about eight months in late 1990 and early 1991. At that time, the unemployment rate shot up to 7.8 percent from 5.2 percent, but fell again as the economy recovered. Businesses put expansion plans on hold, and...