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Goodness, who put pepper in Chris Wallace's coffee this morning? If Treasury Secretary Henry Paulson thought that he was coming on to friendly territory by appearing on FOXNews Sunday to continue to spin that the economy will be fine, really, then someone forgot to give that memo to Wallace, who hasn't asked these kind of pointed questions since Bill Clinton appeared on the show. Definitely caught off guard, Paulson stammered through his insistence that the White House is on top of things:

WALLACE: You have been criticized and the President has been criticized for striking such positive notes. When you were last here on this program, seven weeks ago, you said, quote ‘the economy is going to continue to grow’ but by every measure, things have gotten worse since then, and I’d like you to…if I may, just take a look. The dollar closed at a record low this week against the Euro. Oil is at a record high. We’ve lost 85,000 jobs in the last two months and retail sales continue to drop. Mr. Secretary, don’t all signs point to the economy continuing to decline for months to come?

PAULSON: Uh, Chris, what I said is I believe that the economy is going to continue to grow but the risks are to the down side. The risks are housing, capital markets turmoil, the price of oil. We’re focused on it, we’re all over it. I think it’s much less important what you call this—economists will be debating that for months and months and months. It’s much less important what you call it than what you’re doing about it. And we’re working very hard. Working to prevent those foreclosures that are preventable, avoidable. Working to minimize the spillover from the capital markets turmoil on the real economy and I think the stimulus package is going to make a difference.

WALLACE: But but, let me ask about that. I think that the concern, whether it’s called a recession or not, we should point out that the Wall Street Journal had a survey of 51 top economists this week, 70% of them said the economy is already in a recession. But let’s not even play that semantics. I think the growing concern is that you, the President, keep saying ‘We’re all over this’ and then a few months down the road, things are worse and so they wonder are you out ahead of these things or are you always behind the curve?

PAULSON: Well, uh Chris, there’s…there’s a question what…when there are excesses. Excesses we’ve seen in the housing market, a correction there is…inevitable. You’re going to see a correction. I believe can we outlaw the uh forces of gravity? Can we…you know, how much can government do? But this…this administration has been focused on this…I think, very early involved…very early, beginning in August. Working very hard to avoid foreclosures that are preventable, putting in in in place programs that are making a difference, are working. Are they going to to prevent the inevitable correction in housing prices? No, but we’re working hard on that and again, I think we were early with the stimulus package.

All the way back in August??? Oooh, that is early. /snark I'm sure that $300-1200 "stimulus" check will stave off just tons of foreclosures. Let's be honest, the Bush adminstration's laissez-faire free market treatment of the sub-prime crisis (which started significantly before August) has wrought far more problems than Paulson is willing to admit. It's not hyperbole to say that in some areas of the country, we'll see McMansions turn into tenements. And that's just the tip of the iceberg. Just this week it was announced that the weak dollar has contributed to the GDP of the European Union surpassing the US GDP for the first time.

How are you going to fix that with bailouts to lenders who couldn't manage their money well in the first place and piddly checks to individuals, Paulson?