By Tom Raum
The Associated Press
8/10/04

WASHINGTON - Soaring fuel prices and slowing job growth are presenting President Bush with a difficult choice: He can concede there are problems with his economic policies or insist the recovery is progressing - and risk looking out of touch.

The first President Bush lost re-election in 1992 in part because of a perception by voters that he was isolated from the concerns of average workers. The younger Bush has worked hard to show his engagement, traveling extensively to promote his tax cuts and other economic incentives.

But the recent flood of bad economic news threatens to undermine his message that the economy has "turned the corner" on jobs. Instead of turning a corner, "our economy may be taking a U-turn instead," says rival John Kerry.

With polls showing Kerry holding a clear advantage over Bush on the issue of creating new jobs, Democrats announced Monday that party leaders were heading for cities where Bush spoke last week - in Michigan, Ohio, New Hampshire and Iowa - to ask people whether they agreed America has turned a corner.

"If George Bush doesn't drop this new campaign slogan, he's in danger of becoming the new P.T. Barnum of American politics," Democratic National Chairman Terry McAuliffe said.

Bush, meanwhile, is trying to hedge his bets - insisting that the recovery is on track while his aides weigh possible new economic campaign themes and initiatives for a second term, including tax code simplification.

"The economy is strong, and it's getting better," Bush said Monday. "This campaign is going to be talking about visions, about how to keep the economic recovery going."

Part of Bush's problem is that economists are mixed on whether the recent spate of bad economic news still is the "soft patch" Fed Chairman Alan Greenspan identified in June or a harbinger of truly bleaker times ahead.

Recent reports have shown four months in a row of declining job growth, ever higher oil prices and a drop in consumer spending.

"The economy clearly has weakened. It's not clear why, and therefore it is particularly uncertain how the economy is going to perform between now and Election Day," said Mark Zandi, chief economist at Economy.com. "So Bush is taking a risk. But I don't know that he has a choice. The die has been cast."

The stimulative effect of Bush's policies may be wearing off after three years of tax cuts, low inflation and low interest rates. Skittish corporations are curtailing or putting off new hiring and investment. Possible terror attacks, conditions in Iraq and the close presidential race itself are adding to the economic uncertainty.

Even Greenspan's Fed, which pushed down interest rates to 40-year lows and held them there for months, can no longer help. It appeared poised to raise a key short term rate a quarter of a point today after a similar increase - the first in four years - in June.

According to an AP-Ipsos poll, fewer than half - 46 percent - of those surveyed last week said they approve of Bush's handling of the economy.

The issue takes on larger political significance because states that have suffered the biggest job losses are also likely fall battlegrounds.

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