ARE THE GOOD TIMES OVER?

Will a recession rock your world? How bad will it be? Will a tax cut help? Should you worry?

Could this be what's next? Your parents sit you down to tell you your college plans need to be scaled back from expensive and private to public and cheap; that summer job you were planning at the hip dot-com just evaporated, and you're looking at--horrors!--flipping burgers at a fast-food joint. It gets worse: that new computer, the new pair of Nikes you were banking on, forget them. Your parents are stressed out about money, and you can imagine how much fun that is.

After several years in which the news about the economy has been good, unsettling headlines in recent months about layoffs and Internet companies going belly-up have raised the possibility that for the first time in a decade the United States is facing a pronounced economic slowdown--maybe even a full-fledged recession.

While a major recession could throw millions of people out of work and send the stock market tumbling, at this point economists are still debating whether we will have one, never mind how bad it will be.

Optimists say that the economy is just throttling back after a long period of expansion. If they're right, there is not likely to be a big rise in unemployment from its current low level, the stock market is unlikely to collapse, and hard work and good ideas will still pay off.

"The issue is whether or not the economy is falling into recession," says Bruce Steinberg, an economist at Merrill Lynch, an investment firm. "Our view is it's not."

IS THE GLASS HALF EMPTY?

But it is also possible that the economy is heading into a serious recession, or is already there. "The key questions now are how deep and how long will the recession be, who it will claim as its major victims, and what it will take to promote the eventual recovery," says Richard Berner of Morgan Stanley Dean Witter, an investment firm whose economic outlook is gloomier than most.

There is no hard and fast definition of what constitutes a recession. It is often taken to mean six consecutive months in which total economic output declines. But any steep downturn, even if it lasts only a few months, could be considered a recession.

A mild recession might look something like the last one, which lasted for about eight months in late 1990 and early 1991. At that time, the unemployment rate shot up to 7.8 percent from 5.2 percent, but fell again as the economy recovered. Businesses put expansion plans on hold, and fewer new companies were started.

But for teenagers, even a mild recession could spell trouble. "In most recessions, the entry-level people are likely to take a beating," says Dick Sweeney, a professor of finance at Georgetown University's McDonough School of Business. "Teenagers are in that group. They're in the bubble for fewer hours on the job or even job loss."

And they "can expect a lot of tension at home," he says. "Their parents, whether they're making $20,000 or $200,000, are likely to be a lot more tense about losing their jobs."

A deeper recession could have longer-lasting effects. Not since the early 1980s has there been a really painful downturn, the kind that causes double-digit unemployment rates and hardship for families all over the country. If that happens, stock prices and the value of homes could slide. Big corporations could lay off hundreds of thousands of people. Young people looking for a first job or part-time or summer work could find themselves out of luck. And problems here could spread to other countries.

Should we be scared now? Not necessarily: The United States is fortunate to have a number of powerful tools available to help keep the economy healthy. The Federal Reserve, the nation's central bank, is doing what it can by cutting interest rates. Lower interest rates encourage consumers to borrow money and spend it, helping businesses out. They also make it cheaper for businesses to finance new factories and equipment, and therefore to keep hiring workers.

At the same time, President Bush and Congress are considering cutting taxes to boost the economy. Bush has proposed a plan that would reduce taxes by $1.6 trillion over 10 years, giving a tax cut to just about everyone who pays income tax. His plan would lower all income-tax rates. It would also repeal the tax on inheritances, give parents a bigger tax credit for each child, and reduce taxes for many families in which both parents work.

HELPING THE ADVANTAGED

Some economists doubt that the tax cuts, which would take full effect in five years, would have any impact on economic troubles today. Also, many Democrats in Congress say the cuts would give too much to the wealthy, who have benefited greatly from the strong economy of the last decade, and too little to low- and middle-income people, who really need the help now that the economy is turning sour.

An analysis by the Center on Budget and Policy Priorities, a research group that opposes Bush's plan, says that between 36 percent and 43 percent of Bush's tax cut would go to the most affluent 1 percent of Americans. This group pays about 20 percent of the nation's federal taxes.

"President Bush's plan gives an unfair share of the benefits to those who already have the most," says U.S. Rep. Richard Gephardt (D-Mo.). He and other Democrats argue that some of the surplus should be used to bolster Social Security, health care, and education. Moreover, Democrats say, if the budget surplus that Bush is counting on to pay for the tax cut does not materialize, a big tax cut could hurt the economy by creating budget deficits (see Opinion, p. 26).

But Republicans say it is only fair to give the biggest tax cuts to the people who make the most money because they pay the most in taxes. They say that reducing taxes on everyone will encourage a strong economy by allowing people to keep more of what they earn.

"It's time to give hard-working Americans some of their money back," says U.S. Rep. Bill Thomas (R-Calif.). "Every day, tax-paying families are struggling to make ends meet."

Although there is no magic formula for fighting off a recession, economists warn against overreacting to bad economic news. Recessions do end, and if it is any consolation, there have been nine of them since World War II, and they have gotten consistently less painful and less frequent.

Free CDs! (Maybe)

Think of President Bush's tax-cut plan as a music club: You'll get 12 CDs free, but with strings attached.

Under the plan, a teenager living at home who earns $8,000 a year from part-time jobs would save $180 in taxes, enough for those CDs, or a new outfit, or a few months' worth of chalupas. After a standard $4,400 deduction, the taxable income works out to $3,600. At the current 15 percent rate, you'd pay $540 in taxes. At Bush's proposed 10 percent rate, you'd owe only $360.

The fine print? First, you'll have to wait until the tax cut takes full effect in 2006. Second, if the federal surplus isn't as large as predicted, the tax cut could create a deficit, which means you could end up paying that $180 or more if taxes go back up later.

Are the Good Times Over?

FOCUS: Do Layoffs and a Stock-Market Dip Mean Recession Is on the Way?

TEACHING OBJECTIVES

To help students understand how the economy works, why some experts say the country may be heading into a recession, what a recession means for people's lives, and how the government tries to combat recessions.

Discussion Questions:

* The ,article notes that there is no magic formula for fighting off a recession. Why do you think economists have not figured out a surefire way to prevent or cure economic downturns?

* Why do you think entry-level people, who earn less than longer-term workers, are the most likely to get hurt when a recession hits the economy?

CLASSROOM STRATEGIES

Critical Thinking: Help students grasp some of the basics of the economy with a discussion exercise. Draw six or eight concentric circles on the board and tell students to imagine these are rings in a pond that ripple out when a stone is tossed into the water. Then refer to some of the information reported in the article:

First, note the layoffs and Internet companies going bust. Imagine that these lost jobs are a stone hurled into the pond. Then discuss the "tipple effect" of layoffs. Whom does the strongest ripple hit? (Companies have the smallest investment of training in entry-level people, including many teens; that puts these workers in the center of the circle. Then, jobless people cut their spending. That effect ripples out to workers who make other products, who may lose their jobs as their companies' sales dip. If this tipple continues, recession looms as the nation's economic output falls.)

Next, picture a favorable ripple the Federal Reserve may produce. Imagine the "stone" of interest-rate cuts tossed into the U.S. economic pond. How would students react if the price of CDs they've been eyeing fell? Would they be more likely to buy them? The same is true when the interest rate--the cost of borrowing money--falls. People can now get better deals on borrowing for homes, Cars, and other big items. If they buy, their spending tipples out to other businesses, stimulating the economy.

Debate: Suppose the richest 1 percent of Americans, who pay 20 percent of federal taxes, receive between 36 percent and 43 percent of a tax cut. Does that mean the tax cut is unfair to the majority of people?

RICHARD W. STEVENSON is a Washington correspondent for The New York Times.