PERSPECTIVE ON THE AMERICAN MOOD : Economic Fear Is Feeding on Itself : Faith in government has been replaced by faith that worse is in store; the nation’s psyche needs a bold recovery plan.

I’m scared. And it’s not because my business is bad. I’ve had a good year. Excellent, in fact. But I have become mildly infected by a virus--fear of the future--that has spread to virtually everyone I know except the very rich.

“Nobody is starting any new projects right now,” says a 50-something developer friend. “I’ve never in my lifetime seen so many people I respect so worried.”

“It’s really scary out there,” says my 30-something son, who built a successful landscape contracting business.

“Everybody I know is laying off people and pulling in their horns,” says a lawyer friend.

At our house, we’re pulling in our horns, too. We’re by no means in dire straits, but we’re not eating out as much and we’ve scaled back Christmas plans. I’ve put off buying a new computer and fax machine for my business.

The morning paper and the evening news shows are not reassuring. More cutbacks. More factory closings. More slumping sales. More bankruptcies. More canceled projects. More unemployment.

But my apprehension about the future of my business and my inhibition about personal spending spring not so much from hard facts as from the mood of fear that has begun to escalate, in just the last few weeks, across the country. There’s a spreading sense of foreboding that what’s already dishearteningly bad can get worse, much worse, and with calamitous speed.

Fear, in short, is clearly beginning to have its own separate and tangible impact on the worsening economy.

This is a new thing in recent American recessions: an apprehension that this isn’t just another slump that will right itself, however slowly, through some spontaneous free-market process. The fear, apparent to all but the insulated minds inside the Washington Beltway, is that the whole system can come crashing down in perhaps just one bad day on Wall Street, bringing with it times so bad as to be comparable to the Great Depression of the 1930s.

Clearly, the economic facts have begun to worsen the fear, and the fear has begun to worsen the facts.

Aggravating the fear and the facts is a pervasive lack of confidence that either the President or Congress can or will do anything to solve the problem. Not in my life have I seen so much cynicism and anger toward, and so little faith in, government.

And despite the spiraling downward slide and its attendant fear, not much has happened in recent weeks to change these feelings. The President continues to insist that there is no problem--and urges us to add more debt to our credit cards. The Democrats seem to have stumbled onto the severity of the economy’s illness and the public’s fears only after Pennsylvania voters spoke earlier this month.

What’s to be done amid all this?

Assuming the Presidency in the grim days of 1932, F.D.R. heartened the American people with the message, “We have nothing to fear but fear itself.”

But he didn’t stop with words. He assembled a brain trust and rushed laws through Congress that began to put people to work. Suddenly the nation was galvanized; there was energy and hope.

What’s desperately needed right now, this minute, from Washington is something that approximates that kind of aggressive leadership and urgent action--at the least a robust, credible declaration of intent that will address and perhaps arrest the fear.

There are plenty of ideas worth considering to confront the fact of our plight. A massive public works program to rebuild the infrastructure. Foreign aid and overseas loans redirected to domestic programs. Investing the “peace dividend” in health and education. Tax breaks for the middle class. A capital gains tax reduction.

What’s lacking is not imagination but willingness by our supposed advocates in Washington to put aside their usual pre-election tactics of blame and denial and confront the fear. Only if that process begins right away is there any hope of restoring confidence. Only then will business people and consumers begin to let go of their fear, loosen their purse strings and exercise their credit cards. In short, only if the fear factor is addressed is there much chance that brakes can be applied to an economic train that’s careening downhill.