NEWS ANALYSIS : Bush Must Offer Compelling View on the Economy

Tonight, in one of the most critical moments of his career, George Bush must offer what American voters seem to want most before they will agree to reelect him: a compelling vision of how he can improve the U.S. economy.

The prolonged slump, more than any other single problem, has undermined public confidence in Bush’s leadership and jeopardized his reelection prospects. Although political and economic hazards leave him little room to maneuver, Bush must somehow convince voters that he can steer the nation back to prosperity.

“Four years ago Bush could talk about his grand mission,” said Frank Luntz, a Republican strategist who worked for Patrick J. Buchanan and Ross Perot. “All that matters this year is what he has to say about the economy. He needs to talk about why things happened and where we go from here.”

Yet enormous obstacles stand in his way. GOP leaders are divided over what to do to improve the ailing economy. Bush’s own cautious view is that government meddling can do little good--and possibly much harm. A Democratic Congress hungers for a chance to ambush anything he proposes. The ballooning federal budget deficit severely limits his options. And an economy that has remained stubbornly stagnant--despite extraordinarily low interest rates--defies an immediate fix, even if Bush were willing and able to take dramatic action.

Although the possibility of new tax-cut initiatives has been a topic of rampant speculation among convention-goers here, Bush’s senior advisers appear to have concluded that a bold announcement would carry more risks than benefits--and might be dismissed as a political ploy.

“Don’t expect any blockbuster economic initiative, and don’t expect any tax cuts, because that’s not going to happen,” one top-ranking strategist said Wednesday.

“His problem on the economy is not an economic policy problem,” a senior Administration official said. “It’s a credibility problem.”

The stakes could hardly be higher. Four in five Americans believe the nation is headed on the wrong track. Consumer confidence is unusually low. Millions of voters are fearful of losing their jobs. Millions more worry that their children face an even less secure future.

At a similar moment four years ago, Bush succeeded in casting a spell over the electorate, using his convention acceptance speech to banish the misgivings of many voters.

To repeat that master stroke tonight, Bush will have to explain that he understands what has gone wrong with the economy during his first term, and how it can be made right if voters return him to the White House. Top Bush strategists have spent weeks plotting how the President might carry off that task. They have been urged on by other anxious Republicans, who have offered up a jumble of conflicting prescriptions.

Housing Secretary Jack Kemp, spokesman for the Republican Party’s increasingly restive “growth wing,” calls for an across-the-board tax cut. Sen. Phil Gramm of Texas, the convention’s keynote speaker, counters with a reminder of the need for budget discipline. Pollsters like Luntz advise that Bush must be seen to embrace “bold action”--whatever that may be. Economists fret that the wrong proposal could trigger panic in the financial markets.

Signals sent by the Bush campaign this week suggest that the President’s proposals will be modest, a general plan for action rather than a specific action plan. To be too precise, they fear, would invite trouble of all sorts: intra-party friction, economists’ objections, congressional gridlock.

“To introduce a major legislative initiative in an acceptance speech in August with limited congressional days remaining before the election is simply not a relevant approach,” one senior Bush adviser said.

In some ways, aides acknowledge, Bush is in a box. Having clung for months to the same economic agenda, he can hardly afford to embrace a new course now. “If we change our tune it’s going to look like politics, pure and simple,” a GOP strategist says. “It would be seen as an admission that what we’ve proposed before wasn’t enough.”

For Bush to face such a dilemma only 76 days before the election is something the White House had never expected. The economy has become an unanticipated nemesis of the Bush presidency, behaving in ways that few strategists ever anticipated. The pace of economic growth, by some measures, has been slower for Bush than for any chief executive since World War II. The recent recession appeared to end in early 1991--but more than a year later, a normal recovery has yet to emerge. Repeated cuts in interest rates, a traditional strategy for stimulating economic activity, have yielded meager results.

Even economists are hard put to offer clear-cut solutions for the short term. The huge federal budget deficit all but rules out the kind of pump-priming policies that other presidents have been able to undertake in hard times, such as big tax cuts or massive jobs programs. Despite the persistent slump, most mainstream economists say the nation’s future prosperity requires more savings and investment. In their view, stimulative tax cuts or increased federal spending would simply run up the deficit, exacting a heavy toll on long-term growth.

“If the markets felt there was a political move to put money in people’s pockets at the expense of a higher deficit, I think they would respond very badly,” said Robert D. Hormats, vice chairman of Goldman Sachs and a former assistant secretary of state for economic and business affairs.

A tax cut would be less likely to stir up the financial markets if it were offset by significant cuts in spending. Yet that approach leads to other problems. The biggest federal expenditures--and potential targets for cuts--are such politically popular programs as Social Security and Medicare. Bush recently promised not to cut Social Security.

Such restraints help explain why the public has been left to wonder what Bush actually is doing to help. Polls show that most Americans remain skeptical that the President cares about their problems, despite his frequent assurances in recent months that he genuinely does.

Caught in the squeeze, Bush has hammered at Congress for failing to approve the economic program he proposed in January. The package includes a capital gains tax cut, tax breaks for first-time home buyers and investment tax credits. Yet despite Bush’s crusade for a Republican-led Congress, Americans are likely to dismiss that scenario as wishful thinking.