They say that a rising tide floats all boats. And from the ballooning budget deficits faced by state governments all around the country, you'd have to say that there are some very heavy ones stuck in the mud right now. That's why the best policy that any state legislature can adopt to solve their fiscal crises is to cheer on the U.S. economic recovery.

More needs to be done than that, of course. But as states grapple with painful alternatives to dig themselves out of their budget holes, the reality is that the path of the national economy -- which is not subject to their control -- hovers like a trump card to either crown or negate their efforts.

Besides, the national economy could use some cheering. After a surprisingly brisk third quarter report that put output growth at a healthy 4.0 percent, the news coming from the statisticians who track the economy has been almost uniformly bad. Industrial output has been down, employment losses have widened, and even car sales have plateaued. Analysts viewed the upcoming release on Gross Domestic Product in the fourth quarter with a mixture of fear and trepidation -- would it show the economy has stopped growing on the eve of what looks like a war?

The preliminary answer to this question is no. But at an anemic 0.7 percent rate of growth in the final three months of 2002, there's practically no wriggle room left. Indeed, the difference between an actual decline in the economy and the growth rate announced by the Bureau of Economic Analysis is almost imperceptibly small.

That's undoubtedly the big story in the BEA's much anticipated release of its scorecard on the national economy. And while it was certainly sobering news, it was also widely anticipated. The more interesting -- and inspiring -- news is in the details of the report, where a fuller accounting of different pieces of the economic pie is given.

Those details reveal a weak, but undeniable, recovery in business spending. For some categories of investment spending, such asspending on residential housing, respectable growth got stronger in the final three months of the year. For others, like spending on industrial and commercial structures, big declines turned into smaller declines. And spending on equipment and software, so important to the capital goods-intensive Indiana economy, enjoyed a second straight quarter of healthy growth.

The bottom line doesn't seem very dramatic -- overall business fixed investment managed to grow at a 3.1 percent rate during the last quarter of 2002. But you have to go all the way back to the third quarter of 2000, six months before the recession began, to find another time when investment spending grew. Nearly two years of declines in investment were the most painful result of a tech boom gone bust, especially to countless Indiana manufacturers whose order books remained empty.

It’s a fragile beginning, but it brings hope that the business sector of the economy may at last be able to take the baton from consumers. And it's not a moment too soon, because, as the BEA report clearly indicates, the American consumer is running out of gas. Their spending growth was an anemic 1.0 percent at the close of 2002, and with job growth still stuck in reverse, there's no reason to expect much better in the coming months.

So we have learned that the U.S. economy entered the new year with its momentum nearly spent. On the eve of an impending war that has already rattled financial markets, that's not a scenario many of us would have wished for. But the economy took some tentative, but important, steps ahead at the close of last year. With a successful resolution of the current conflict, the prospects for healthy growth ahead may still be bright.