NEWS ANALYSIS : White House Wrestles With Economic Plan : Policy: Some Bush aides push for new initiatives. Others are working on ways to repackage old proposals.

On the economic policy front, President Bush got some good news and some bad news this week.

The good news is that, just as the economy took another turn for the worse, Congress finally began to move on a major tax bill that includes many of the provisions in Bush’s long-stalled economic growth package.

Although the White House is still not sure it will support the tax legislation that ultimately emerges from Congress, Administration officials are hopeful that passage of an acceptable tax measure will give the President a chance to sign and then trumpet a major economic initiative just in time for the fall presidential campaign.

The bad news is that such a scenario may kick the feet out from under one of the central themes of the Bush campaign: congressional inaction on his economic plan. And what’s more, senior Administration officials acknowledge, it may add to the mounting pressure on the White House to come up with some new economic proposals to present to the voters this fall.

By itself, congressional action on taxes would not have been enough to prompt a reappraisal of Administration economic policies.

But the action comes at a time when the economic news is worsening: The government reported Thursday that economic growth in the second quarter was less than half of the pace in the first quarter. And it comes while Bush is plunging in the polls--largely because of voter anger over his failure to do anything to curb the economy’s slide.

Taken together, those factors have convinced many inside the Administration that Bush must do more than simply hammer away at Congress for not passing the entire legislative package that the White House first introduced more than six months ago.

The internal Administration debate on what comes next on the Bush economic agenda is just beginning, however. It is still not certain whether a decision will be made to actually develop a new and highly specific economic package, or simply recycle and modify old measures for rhetorical purposes.

But there does seem to be a growing consensus inside the White House on the need for the President to have something different to talk about in the economic area this fall. Many Administration officials started to feel that way as soon as the new economic agenda issued by Democratic presidential nominee Bill Clinton began to garner widespread press attention.

“We are starting to discuss ways in which George Bush can define what he wants to do for another four years,” especially in terms of economic policy, a senior Administration official said Friday. “The President has got to do it. He put out a road map for the economy (in his January growth package) and now we need to show the direction we want to go in the future.”

Already, senior Administration officials, including Treasury Secretary Nicholas F. Brady, White House Chief of Staff Samuel K. Skinner, and Budget Director Richard G. Darman, are starting to thrash out new ways to present the President’s economic proposals in the fall campaign, Administration and campaign officials said.

Most of the proposals under discussion appear to be relatively modest and may focus largely on measures such as Bush’s long-sought objective of a capital gains tax cut and a proposal to cap mandatory spending on Medicare and other entitlement programs.

“I don’t think you will get any bold new initiatives out of Brady, Darman and Skinner,” said one skeptical White House official.

In fact, sources said Friday that Brady, one of Bush’s closest confidantes on economic matters, is pushing the President to keep his fall campaign focus on the capital gains tax cut--a key provision in his January growth package--which Congress is not considering in the current tax bill.

“Brady feels strongly that the President has got to talk about the need to lower the costs of capital, as well as cuts in federal spending and simplified tax rules,” said one Administration official familiar with Brady’s position in the debate.

In order to get the tax-writing Senate Finance Committee to act on many of his other measures, Bush had to drop his demand for the capital gains tax cut or face a threatened Democratic countermove to demand that a surtax on millionaires be included in the tax legislation.

The bipartisan bill, which the committee approved Wednesday, contains many other proposals for stimulating the economy supported by Bush, such as tax credits for first-time home buyers, enhanced benefits from individual retirement accounts and a number of business tax breaks. Yet Bush’s decision not to push hard now on the capital gains tax cut has already angered some conservatives inside the Administration--most notably Jack Kemp, the secretary of housing and urban development.

On Thursday--just as other senior Administration officials were publicly praising the Senate panel’s tax bill--Kemp issued a press release calling for Bush to veto it. He argued that the bill’s tax provisions for enterprise zones were too watered down and represented a “hoax on the poor.”

On Friday, a Kemp spokeswoman added that Kemp believes that Bush should not support a tax bill that does not have a broad-based growth package--including a capital gains tax cut.

Kemp’s opposition to the tax legislation appears to leave the Administration at least temporarily paralyzed again on economic policy. Instead of focusing on economic policy themes for the fall campaign, Administration officials complained that Kemp’s stance was forcing the White House to waste time on an internal squabble over the tax legislation.

But Kemp’s view appeared to dominate late Friday when the Administration issued a “statement of policy” that said “the President’s senior advisers will recommend that he veto” the tax bill if it does not include provisions for businesses to obtain capital gains tax cuts if they create jobs in enterprise zones.

Still, the Adminstration’s statement said, the White House remains hopeful that an agreement can be worked out with Congress on a tax bill that will include those provisions.

Whatever the outcome on the tax legislation, the incident pointed up the difficulty the White House is having over developing a coherent message and agenda on the economy as the fall campaign approaches.