The question of whether the economy will continue to grow at a moderate rate, or slip into recession, comes down to whether the problems in the housing sector will spill over into the economy as a whole. If consumers have to rein in spending because they are no longer able to withdraw equity from their homes, or if the number of jobs lost in construction overwhelms gains in the service sector, the expected return to 3 percent growth by year-end will prove unattainable.

In that case, all eyes will be on the Federal Reserve Board’s monetary policy committee, which will be under pressure to cut interest rates. [Chairman Ben] Bernanke, however, is impervious to the sort of pressure brought by whinging businessmen and panicky politicians.