When the U.S. economy was breaking the rules that were thought to govern growth, and breaking more than a few records along the way, some saw it as the dawning of a new age for what had up until then been known as the dismal science. The promise of technology, globalization, and the ascendance of free enterprise made the environment for growth fundamentally different, it was argued, and the term "new economy" came to embody the notion of this metamorphosis. 

But now that the once-robust expansion has turned into a fragile shadow of its former self, it has become painfully apparent that the rules that have governed previous economic expansions are still in force today. Indeed, even in the midst of the so-called information revolution, the fog that obscures the true state of the economy from the worrisome eyes of the current Federal Reserve chairman is just as thick today as it has been for his predecessors. 

Those predecessors, by and large, failed badly at recognizing the signs of an economic slide in time to do anything about it. The perfect hindsight of history shows that expansionary policies, whether in the form of interest rate cuts or tax cuts, have usually kicked in months after the economy had actually already pulled out of its decline. 

This isn't because our policymakers are not up to the job. It is because the job is extraordinarily difficult. 

For example, if you were to plot on a graph the quarterly growth of the U.S. economy since 1960, as economist Gary Santoni has done, you would immediately be struck by its irregularity. Although growth averaged a healthy 3.5 percent over this forty year period, there have been many instances when growth nosed quite a bit below that mark, as occurred at the end of year 2000. 

In most of those situations, growth bounced back up and recessions were avoided. But the instruments available for determining that outcome in advance are crude and unreliable. An old joke about so-called leading indicators of economic activity is that they have predicted ten out of the last four recessions. 

To its credit, the Federal Reserve has cut the lag between its recognition of a downturn and its policy decision to cut interest rates to a bare minimum. Even if the preliminary data on economic output for the fourth quarter are revised to show that a downturn started at the end of last year  which is doubtful  the three month gap that elapsed before policy action is tiny compared to the response of the Fed in previous recessions. 

What makes the central bank's job so difficult is that even this will not be quick enough to make a difference. It will take between six and nine months before the cut in short term interest rates has any meaningful impact on the economy, by which time the downturn, should it occur, will be in our rear view mirrors. Thus the Fed's action is at best an insurance policy against future threats to economic growth, and can do little to nip in the bud any contractionary forces that may halt our growth in the first half of the year.