SYNOPSIS:

TOKYO — I got obsessed with the Japanese economy after it was fashionable.

Americans paid a lot of attention to Japan in the 1980's, when Japanese manufacturers were conquering the world. Remember when airport bookstores were filled with management tomes bearing samurai warriors on their covers? Then Japan's bubble burst, and most Americans concluded that we had nothing to learn from Japan — except how a country can stumble when it lacks adequate business and political leadership. And we, of course, don't have that problem.

Or do we? Jack Welch's gut is starting to look as overrated as those business samurai. And our political leadership doesn't exactly inspire confidence. In fact, lately I've started to have a truly depressing thought: Bad as Japan's policy has been, it's possible that the United States will do even worse.

It's hard to say anything good about how Japan has handled its post-bubble economy. But I've worried for years about how other countries would deal with similar problems. Sure enough, as America tries to cope with its own burst bubble, it's a lot easier to see how bad economic decisions get made.

It's true that Alan Greenspan and his colleagues made a much better start than their counterparts in Japan. They knew that the Bank of Japan cut interest rates too slowly, and that by the time it realized the seriousness of the country's problems it was too late: even a zero interest rate wasn't enough to spark a recovery. So the Fed cut rates early and often; those 11 interest rate cuts in 2001 fueled a boom both in housing purchases and in mortgage refinancing, both of which helped keep the economy from experiencing a much more severe recession.

But it's starting to look as if the interest rate cuts weren't enough. I don't need to tell you about the stock market. Economic indicators strongly suggest that the economy is either sliding into a double-dip, "W-shaped" recession — bet you thought I was talking about the guy in the White House — or close enough as makes no difference. Bond markets are clearly predicting that the Fed will have to cut interest rates again. What if the Fed, like the Bank of Japan, goes all the way to zero and finds that it still hasn't turned the economy around?

Not many people realize that in some ways Japanese economic policy responded quite effectively to a sustained slump. It's easy to make fun of the country's enormous spending on public works — all those bridges to nowhere in particular, highways with no traffic, and so on. Without question enormous sums have been wasted. But it's also clear that all that spending pumped money into the economy, preventing what might otherwise have been a full-fledged depression.

So what will be the U.S. equivalent? Right now we are in effect following the reverse policy: slashing domestic spending in the face of an economic slump. Some of this is taking place at the federal level; the Bush administration is nickel-and-diming public spending wherever it can, shaving a billion here, a billion there off everything from veterans' benefits and homeland security to Medicare payments. More important, the federal government is doing nothing to help as state and local governments, their revenues savaged by recession, make deep cuts in spending on everything that isn't urgently necessary, and many things that are.

It's true that we haven't yet confronted head on the possibility that Uncle Alan may not be able to save us single-handedly. But last fall's debate over economic stimulus suggested that our political leadership cannot make a rational response to economic problems. Where economists saw danger, the White House and its Congressional allies saw opportunity — an opportunity to ram through more tax cuts for corporations and the affluent, measures that suited their political agenda but had almost no relevance to the economy's problems. Remember the proposal to give retroactive tax breaks to ChevronTexaco and Enron?

In the end, the need for stimulus was less urgent than it seemed at the time, but there is no reason to think that we'll do better if, as now seems all too likely, the recovery stumbles.

Of course, the worst thing of all would be if our leadership decides that economics is not its thing, if it simply tries to distract the public from rising unemployment and plunging stocks by going off and invading someone. But we don't have to worry about that, do we?

Originally published in The New York Times, 10.1.02