Don Pittis, senior producer of CBC News Business. It was nice while it lasted. All of a sudden, a refreshing bout of new year economic optimism seems to have come crashing down.

For a while, things were looking up. Markets were higher day after day. Commentators on CBC News Business said we'd turned the corner. Editorials suggested consumers would buck up and, with the help of tax cuts, pull the U.S out of recession.

But that happy feeling is being smacked out of us by a new list of ghastly bad news:

• Car sales even lower than expected.
• Thirteen thousand layoffs from giant Alcoa.
• Oil prices down $6 US in a single day.
• Horrible financial results, and fear of more to come.
• Projections of a scary trillion-dollar U.S. deficit.

And to put the icing on the cake, there was new gloom from some normally bullish Canadian bank economists.

Despite critics saying "blame the media," we decided that on a business news show, we couldn't really hush all that up.

The odd thing is that consumers could still pull us out of this mess — If they wanted to.

Many people, especially many Canadians, still have money to spend. Canadian unemployment remains near historic lows. Houses bought a decade ago are still worth more than twice their purchase price.

Blame Oprah

Maybe it's Oprah's fault. Before Christmas, America's favourite billionaire talk show host had a whole show dedicated to frugality. When Oprah says "read this book" it becomes an instant bestseller north and south of the border. Now that Oprah is celebrating austerity, can anyone doubt that her millions of viewers are right behind?

Face it, whether it's Oprah, or the business news, or gossip passed on by your barber, all downturns, except those caused by war and natural disaster are a product of mass psychology. Mass psychology up. And mass psychology down.

And the reason North American consumers can't be counted on is not because we are poor. It's because we are rich.

In his 1958 book The Affluent Society, economist J.K. Galbraith described how, for the first time in history, people had far more than they needed. Where ordinary people had once made do with a single set of clothes, in the affluent society, people had a closet-full. Cars were replaced, not because they didn't work, but because their fenders were the wrong shape.

This is the time for wise governments to invest in things that will make the economy work better once the mood changes. Education, public infrastructure, support for research and development, seed money for technology and other business startups.

Galbraith pointed out that those who stepped out of the rat race of consumerism — a rare few — would find they could live comfortable lives on much lower incomes.

This is why lower interest rates and tax cuts have little hope of forcing consumers to spend. During boom times, lower rates and tax cuts can do much to pump up an already-strong economy. When the propensity to consume is strong and animals spirits high, people are happy to bid up the price of assets, take risks on new investments and spend money on cars and houses with too many bathrooms.

But when the psychology changes, interest and tax cuts go to waste. The urge to save gets stronger and the urge to spend wilts.

Once people decide they are going to cut back, cutting back is not so hard. There's often lots of low-hanging fruit people find they can do without. Most Canadians are so rich their cars can last a few more years and don't really need replacing. They can make do with their current number of bathrooms. They can live with their existing computers and TVs, can survive with fewer dinners out, have less meat and more potatoes, less fish and more rice.

The story of the couple in Saguenay, Que., who, perhaps driven to despair by the financial pressures of lost jobs and debt worth thousands of dollars, allegedly entered a suicide pact over the holidays to kill their entire family opens a window on the other side of Canadian affluence. Tax cuts don't help people at that end of the scale.

Invest in Canada's future

This is the time for wise governments to invest in things that will make the economy work better once the mood changes.

Education, public infrastructure, support for research and development, seed money for technology and other business startups: that kind of investment, one-time grants, poured into the economy as quickly as possible, will come back as salaries and taxes while building for the future.

Over the past decades of rising private wealth, privately owned vehicles worth $50,000 crowded the roads to overcapacity while public transit projects went begging and bridges collapsed. At home, people had their choice of bathrooms while the pipes that serviced them leaked and crumbled.

Strange that during a time of shrinking private wealth, wise public spending could make us all richer.

Don Pittis has reported on business for Radio Hong Kong, the BBC and the CBC. He is currently senior producer of CBC News Business.