The New York Times-20080128-Echo of First Bush- Good Economy Turns Sour

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Echo of First Bush: Good Economy Turns Sour

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Will George W. Bush be remembered as the president who lost the economy while trying to win a war?

Mr. Bush has spent years presiding over an economic climate of growth that would be the envy of most presidents. Yet much to the consternation of his political advisers, he has had trouble getting credit for it, in large part because Americans were consumed by the war in Iraq.

The chaotic events of the past week -- wild stock market swings, a major cut in the interest rate from the Federal Reserve and a rare bipartisan deal between Mr. Bush and Congressional Democrats on an economic stimulus package -- has turned that equation on its head, just in time for Mr. Bush to deliver his final State of the Union address Monday night.

The speech will not be filled with bold new ideas; the White House concedes that the time for ambitious plans like overhauling Social Security and revamping immigration policy is past.

On Iraq, the president will make the case that his troop buildup has been successful and remind the people of the United States what is at risk, a senior White House official said, speaking anonymously so as not to upstage Mr. Bush's speech. He will also press lawmakers to reauthorize a domestic surveillance law.

But the real thrust of the speech will be the economy, as Mr. Bush himself suggested Friday during a short preview of the speech at a Congressional Republican retreat.

With polls showing that the economy has eclipsed Iraq on Americans' list of most pressing concerns, Mr. Bush faces the unwelcome prospect that his legacy -- which the White House always assumed would be wrapped up in the war -- will be wrapped up in hard times instead. Like his father, he risks leaving office on an economic sour note, with a reputation for spending so much time worrying about foreign affairs that he forgot about the problems of ordinary Americans at home.

That is one reason Mr. Bush moved quickly, after an extended swing through the Middle East, to join Democrats last week in proposing a stimulus that would distribute rebate checks of up to $1,200 to 117 million families. Speed is of the essence, his treasury secretary, Henry M. Paulson Jr., said in announcing the plan on Capitol Hill.

Thirty minutes later, Mr. Bush and Mr. Paulson were together at the White House, where the president thanked Congressional leaders for showing the American people that we can come together to help our nation deal with difficult economic challenges -- even as he insisted that the economy remains structurally sound.

The reassuring talk and emphasis on bipartisanship are smart politics, said Kenneth M. Duberstein, a former chief of staff to President Ronald Reagan who is widely credited with helping to turn around Mr. Reagan's second term. Mr. Duberstein said Iraq and the economy had been the twin pillars of Mr. Bush's presidency.

In the final analysis, he said, people vote for their wallet -- what's in it, and what's not in it -- more so than Iraq or anything in foreign policy.

Polls show that the public feels unsettled about the future. The percentage of Americans who believe the country is on the wrong track now stands at 75 percent, while just 19 percent believe it is on the right track, according to a New York Times/CBS News poll this month. Democrats intend to capitalize on those numbers in the fall campaigns; despite joining hands with Mr. Bush on the stimulus package, they are already hammering him on the economy.

Representative Rahm Emanuel of Illinois, the chairman of the House Democratic Caucus, has been warning for months of a looming Bush recession. The day before the stimulus deal was reached, Mr. Emanuel released a chart titled The Legacy of George W. Bush's Presidency, which contrasted a litany of economic indicators, like the price of gasoline and median household income, from 2001 to today. None favored Mr. Bush.

From a strictly economic perspective, it is difficult to blame Mr. Bush for the current crisis. Even some economists who have been critical of the president, like Bruce Bartlett, who worked in the Reagan and first Bush administrations, say he cannot be held liable for the burst of the housing bubble or problems in credit markets.

But from a political perspective, it is hard for Mr. Bush to escape. The economic expansion that came after his tax cuts has largely benefited the wealthy, which is why it is easy for Democrats like Mr. Emanuel to make the case that Mr. Bush's stewardship of the economy has created a middle-class squeeze. And if the president ends his term in a recession, it will be difficult for him to point to any real economic progress on his watch.

Mr. Bush counters that the fundamentals of the economy are strong, even as it appears to be unraveling. He is careful to avoid the word recession, preferring to talk instead about economic challenges and uncertainties, as he did on Friday at the Republican retreat. We have a flexible, we have a resilient and we have a dynamic economy, Mr. Bush said. But there are some uncertainties.

Once the stimulus package is passed, the president plans to turn his attention to making his tax cuts permanent, an approach that Joel Kaplan, the deputy White House chief of staff, said would provide the foundation for continued economic growth.

And I think the historical record will reflect that, Mr. Kaplan said.

Still, for the White House, there are obstacles ahead. Democrats are unlikely to agree to extending the tax cuts and, despite the seeming bipartisan enthusiasm for the stimulus package, it could run into trouble on Capitol Hill. Even if the package does pass, some economists -- Mr. Bartlett among them -- believe it will do little to improve the nation's economic health, leaving Mr. Bush vulnerable to accusations that he did too little, too late.

Mr. Bush has roughly 51 weeks left in office. He had hoped to spend the time focused on creating peace in the Middle East and stability in Iraq. Now he has a new battle on the home front. And here in Washington, where finger-pointing is practically a pastime, the economic blame game has only just begun.