Depressive Economics ... After spending much of the past year in central Europe, one of the things that's surprised me upon returning home is how similar the economic pessimism here is to that of the euro zone, despite a significant disparity in both growth (roughly 3.5% to .5%) and unemployment (roughly 5% to 10%). Given the comparative health of our economy, it's hard to imagine what the mood would be if we were ever mired in a recession comparable to the one Germany is enduring now.

Yet the scary thing about our trade deficit today is that it makes us increasingly vulnerable to just such a recession. The Times op-ed page is currently running two columns to that effect. The more substantial of the two, by William Greider, is probably the best piece I've read to date on America's precarious role in the new globalized economy. The second, by Paul Krugman, conveys his typical exasperation with more mainstream economic forecasters. But it also contains a jarring coda:

...it's hard to see where further expansion will come from. We've already had four years of extremely loose fiscal and monetary policy. Tax cuts have pushed the federal budget deep into the red. Low interest rates have helped generate a housing bubble that has lifted real estate prices to ludicrous heights in major parts of the country.

If all that wasn't enough to give us a full economic recovery, what will?

The key point here is not that America's foreign debt and high trade deficits are necessarily a prelude to disaster. There is a scenario in which the "managed interests" Greider references will lead to continued global growth and development, concurrent with a gradual decrease in American debt.

Rather, the key point is that there's no longer any margin for error. All it would now take to spark an American recession is an unexpected shock in the global oil supply or a rash monetary decision on China's part. If either of those or any number of other plausible scenarios occur, then there's nothing else the Bush administration could do to stimulate the economy upwards.

Crucially, this does not mean that we should join with central Europe in bemoaning our fate -- I'd much rather have our structural problems than theirs. But it does mean that if we're not duly cautious -- and worse, possibly even if we are -- we may have reason to join them soon.