NEWS ANALYSIS : Bush Faces Big Trouble if Rate Cut Doesn’t Spur Economy : Fed: White House seeks desperately to prime an election-year recovery but its options are limited. The jobless figures only exacerbate the problem.

The obvious gratitude in President Bush’s voice after the Federal Reserve Board slashed interest rates Thursday illustrates vividly just how limited White House options have become as it seeks desperately to prime an election-year recovery.

Frustrated at nearly every turn in his effort to spur much-needed growth, Bush turned to the one institution still capable of working the controls of the economy quickly and directly. And once again, Fed Chairman Alan Greenspan tugged at the assigned lever.

The Fed’s willingness to respond immediately to the unexpected rise in unemployment may provide the White House with the stimulus it is seeking to get the recovery back on track. Indeed, Bush predicted that the rate cut would be “very, very well received.”

But the President’s hopefulness contrasted with a growing sense of uncertainty in the White House that the Fed’s monetary measures will stimulate the economy enough to translate into a political rebound. And with the burgeoning budget deficit precluding anti-recession tax cuts or spending hikes, the President has nowhere else to turn.

Coming after weeks in which Bush has acted as an economic cheerleader, the sudden bad news added to the appearance of a White House somewhat out of touch with recessionary realities. And because Bush has trumpeted recent signs of economic growth, it raised the danger that voters will feel betrayed if it becomes increasingly clear that economic growth is faltering.

Even Bush acknowledged that the “recovery is not as robust as I’d like to see it,” although he maintained his public optimism. “The economy grew at 2.7% in the first quarter,” he declared to reporters on Capitol Hill, “and it’s going to grow this time.”

Behind closed doors, however, the chief White House economic adviser was said to have warned that second-quarter growth may fall to an annual rate of 1.5%--or even lower. And at Bush’s reelection campaign headquarters, officials worried aloud that the new unemployment figures could pack a political wallop.

“This makes it even tougher,” sighed campaign press secretary Torie Clarke. “This makes it really tough.”

The alarming surge in California’s unemployment rate to 9.5% last month from 8.8% in May was regarded in particular as creating a significant new obstacle for the Bush campaign, whose strategists have set their sights on the state’s crucial 54 electoral votes.

Even before the news was known, campaign general chairman Robert A. Mosbacher briefed aides on what he described as a dismaying California landscape. A senior aide conceded: “California is really hurting and it’s going to be a real fight.”

As the Bush camp sought to grapple with the impact of the bad news at a troublesome point in the campaign, the President himself sought again to shift the blame to Congress for its refusal to adopt growth proposals that he said would give the economy a jolt.

But so stubborn is that election-year stalemate--and so enormous the obstacles to new spending at a time of mounting deficits--that observers from both parties described the Fed as the last best hope for a White House in dire need of economic stimulus.

“When you get away from all the posturing,” said one Bush adviser familiar with the White House quest for another round of interest-rate cuts, “it’s really the Fed or nothing.”

Administration sources detailed what they acknowledged was an unusually heavy White House lobbying campaign for a Fed rate cut. Over the last week, both Bush and Treasury Secretary Nicholas F. Brady have criticized the Fed for failing to cut rates sooner and have publicly demanded that the Fed take action this week.

Those comments were part of a concerted effort, sources said, to persuade several waffling Fed board members to vote on the side of easing rates at the Fed’s policy-setting meetings this week. The White House knew about the internal division within the Fed and sources said that the Administration believed that a public shove from the President might be enough to win over the reluctant members.

Usually, such explicit political pressure on the Fed is counterproductive. The central bank prizes its independence and resents public lobbying by the President. But this time, the White House task was made easier by the fact that the economic data clearly supported the Administration’s case. It also helped that Fed Chairman Greenspan and three Bush appointees--Lawrence Lindsey, Susan Phillips and David Mullins--already apparently favored another cut.

Ultimately, however, the big jump in June unemployment to 7.8% from 7.5% the previous month dominated the Fed’s thinking, sources said. The Fed’s Federal Open Market Committee, which sets interest-rate policy, met Tuesday and Wednesday but did not announce any move. It was not until after the jobless figures were released Thursday that the Fed’s board of governors took action.

But while the White House won the rate cut it wanted, Bush advisers conceded that the sluggish growth of the last 18 months--during which the Fed has slashed the discount rate by a total of 4 percentage points--makes it uncertain that the action will bring the hoped-for jolt.

And they acknowledged that the potential good news for borrowers will not protect the President from the inevitable political damage caused by longer unemployment lines and the expected news that economic growth is slowing again.

With opinion polls showing a striking lack of public confidence in the economy, Bush has sought in recent days to call voters’ attention to signs of progress. Answering questions from tourists in the Rose Garden on Wednesday, he described himself as “bullish on America” and suggested that growth will soon “be higher” than the first-quarter rate.

But as the bad economic news settled Thursday among the White House camp, some officials said that it may become necessary to re-examine that rose-tinted strategy.

“Basically, the way to handle this is not to get too far out front in terms of saying how good things are,” a senior Administration official said.