ATRUE recession, Federal Reserve chairman Alan Greenspan told a congressional committee on Wednesday, doesn't happen all at once. It is "a process in which the economy is deteriorating in a cumulative, interactive manner." Cumulative-interactive-wise, it was quite a week on the economic front.

Item: The government revealed that the consumer price index jumped toward a double-digit annual rate in August; and much of the increase -- like the sharp increase the month before -- had nothing to do with the Iraqi oil shock.

Item: Other reports indicated that a plunge in exports and a spike in imports pushed the U.S. trade deficit up by almost $4 billion in July, a 75-percent jump over June -- and that was before Saddam Hussein knocked up the price tag on oil imports. "If you think this trade deficit is bad," remarked one big-bank economist, "wait till you see the next few."

Item: New figures showed that foreign investment in this country -- needed to finance the widening trade and budget deficits -- has plunged to a level 72 percent below last year's rate. Finance ministers and analysts, gathering for Inter-national Monetary Fund talks in Washington, fretted about a global capital crunch.

Item: Chase Manhattan, the nation's second-largest bank holding company, announced that it was laying off 5,000 workers and setting aside $1 billion to cover bad loans and restructuring costs. Meanwhile lawmakers rushed to respond to General Accounting Office reports that a single major bank collapse could push the deposit insurance fund into the red -- and that the sluggish economy was paralyzing the S & L clean-up.

Item: The chairman of the Federal Reserve told Congress on Thursday that despite the slowdown, the Fed is still reluctant to give the economy a monetary boost with inflation accelerating and no solid budget deal to cut federal borrowing in sight.

Item: The head of a major investment firm called a leading GOP senator and the secretary of the treasury to say that Wall Street would much rather have a sound budget deal than a capital-gains tax cut.

Item: The president reaffirmed his commitment to a capital-gains tax cut and Democratic and Republican congressional leaders launched a major weekend TV blitz to blame the other side for the stalemate in budget negotiations.

Yoo-hoo. Over there at the White House and up there on Capitol Hill -- anybody home?

What could be on the mind of a president who, in the face of a rapidly building economic mess, confines his economic pronouncements to a call for a capital-gains tax cut plus an assortment of other shopworn measures to stimulate the investing classes? To insist, in other words, on administering still another dose of the same tax-cut medicine that, applied to the economy over the last decade, seems to have put the patient on the multiple-ailment/treat-with-extreme-caution diagnosis list?

The academic world is full of sober analyses showing that the undiscriminating gains tax cut President Bush proposes would do little to stimulate long-term investment despite its large cost. Does the president ever consult them? (If Bush distrusts main-line academia on this point, he might consult with the American Enterprise Institute's Herbert Stein, who chaired Richard Nixon's Council of Economic Advisers.) Did he notice that GOP budget negotiators quietly agreed to stop arguing with Joint Committee on Taxation estimates showing that his capital-gains tax cut would add billions to the deficit over the next five years?

Or, at a less abstruse level, has the president picked up financial circle gossip that in the current climate, a capital-gains tax cut could actually send the stock market into a tailspin? Gun-shy investors might very well cash in their gains to take advantage of the new low tax rate and then put their money under mattresses -- or head for palmier markets overseas. (U.S. investment abroad is already running at a rate 16 percent higher than last year, adding to the U.S. investment gap.)

The kindest answer to these questions is that the president is too preoccupied with the Gulf crisis, the collapse of the Soviet bloc and other extra-territorial matters to spend much time rethinking his reflexive approach to matters of budget and tax. But the thought must surely intrude into his geostrategic calculations that enthusiasm for his Gulf venture -- and much else -- will evaporate in the face of spiraling inflation and economic collapse. Who cares about cheap gas if they're repossessing your car?

One reason that the president may be reluctant to divert his attention to his options for averting a calamity is that, in the back of his mind, he realizes that the traditional methods for doing so aren't available to him. Calling for a big round of Keynesian spending to stimulate the economy is obviously a non-starter.

Nor, as Greenspan keeps reminding him, are lower interest rates available as a source of stimulation, unless budget stringency -- rather than expansion -- were surely in the offing. Absent a sharp reduction in federal borrowing, lower rates would in the short run only add to the jitters prompting capital flight from this country, push the dollar still lower on foreign exchanges -- and thereby add to inflation by raising the costs of the imported goods that Americans are hooked on.

Real interest rates are already higher in low-inflation Japan and Germany than they are here, and investors in those countries don't have to worry about their currencies depreciating. Nor is there any shortage of attractive opportunities for investment. West Germany, for example, is buying a whole country just a week from now.

The president can take some comfort from the counsel of economists. This time, they say, our skid on the oil slick will be cushioned by the fact that the economy can better resist the inflationary spiral that punished the country -- and its politicians -- so severely in the '70s. Under constant pressure from foreign competitors, American business is far less able to pass on price increases to consumers. By the same token, workers are far less likely to demand -- or get -- wage increases to protect them from price rises. The economy is more flexible than it used to be, inventories are low, a recession might be short-lived. The Iraq crisis may be quickly resolved and ample world oil supplies could send gas prices plummeting.

And yet -- it might not work out that way. There are an awful lot of those cumulative, interactive factors kicking around, and the macro-economic tool cupboard is bare. That leaves the president with only one recourse for keeping the country from indulging in the mad rush for self-protection that touched off the price spiral -- and deep recessions -- of the '70s and early '80s. He can try some real leadership. He can try to convince Americans that they should accept a small dose of nasty-tasting medicine now -- a mix of higher oil prices and lower energy use, modestly increased taxes and modestly reduced government benefits -- for the sake of warding off an epidemic-sized problem.

Jaw-boning the American public has never been a very successful pursuit (ask Gerald Ford how he fared with his Whip-Inflation-Now slogan in 1974). That is, except in time of war. But isn't that what we're in?

Jodie Allen is the editor of Outlook.