News Analysis: Bush Faces Quandaries of Economy and Energy

By DAVID E. SANGER

WASHINGTON, March 20 — Hardly a day goes by at the White House without President Bush warning of the two urgent national afflictions that have defined his first two months in office: a "sputtering" economy whose growth has "stalled" and an "energy crisis" that threatens to spread beyond California.

Mr. Bush is pushing prescriptions for both: what he calls a $1.6 trillion tax cut plan that he argues goes hand-in-hand with interest rate cuts that the Federal Reserve continued today, and a long-term energy policy due out in the next month or two.

But Mr. Bush is facing critics on the left and the right who say that his proposals reflect long-range policy goals that he is trying to sell by claiming they will address short- term problems, and politically, his strategy already appears vulnerable.

A few Bush advisers acknowledge the inconsistency. And they say that, ever so gradually, the White House is now exploring its options in the face of an apparent disconnect between the immediate challenges the President is citing and the longer-run solutions he is offering.

The behind-the-scenes maneuvering over Mr. Bush's tax proposals are the clearest evidence of the problem. Under the proposal he sent to Congress just a few weeks ago, there was no tax cut for the current year at all, a fact that seemed to undercut the president's repeated claim that the combination of the Fed's rate cuts and his own tax plan would pull the country out of what appears to be a cyclical downturn.

Even the cut passed by the House earlier this month — and heartily endorsed by the White House — provides only $5.6 billion in tax relief this year. In a $10 trillion economy, that is, in the words of Robert Litan, an economist at the Brookings Institution, "something so tiny that you won't even notice it." On that point, Democrats and Republicans seem to agree. But each side is using that fact to bolster the case for substantial change in Mr. Bush's plan.

The Democrats — led by the Senate minority leader, Tom Daschle of South Dakota, who has emerged as his party's most effective voice on the issue — wrote Mr. Bush a letter on Monday offering to put a tax cut bill on his desk by May 1. Mr. Daschle's plan would be a far more limited version of Mr. Bush's, cutting taxes for those in the bottom tax bracket by more than Mr. Bush would, but providing no relief for wealthier taxpayers.

Other Democrats have chimed in with similar proposals, noting that taxpayers with the lowest incomes are far more likely to spend their rebates and provide an immediate stimulus for the economy. What the Democratic proposals all leave out are tax cuts for wealthier taxpayers.

"We're open to discussing all of it," Dan Bartlett, a deputy assistant to the president, said today. "We're willing to change the president's plan to get it in the hands of taxpayers quicker."

Mr. Bush himself has yet to endorse a specific proposal, and finds himself, one White House aide noted, a bit trapped between those on his left who would use a quick cut to undermine a far bigger one, and those Republicans who are determined to use the moment to pass a tax cut far larger than Mr. Bush's $1.6 trillion package.

And even as Mr. Bush contends with Mr. Daschle on the left, he and his aides are quietly trying to contain the enthusiasm of people like Representative Patrick J. Toomey, Republican of Pennsylvania. Mr. Toomey marshals the same facts that Mr. Bush does — a slowing economy accompanied by record tax collections by the Treasury (though the effects of the downturn, economists say, may not show up at the Treasury for months to come). 

But Mr. Toomey and others committed to shrinking the size of government see the downturn as an opportunity to pack far more tax reductions into the current year, including increasing the contributions that taxpayers can make to Individual Retirement Accounts and 401(k) programs at work, repealing Social Security tax increases that were passed in the first year of the Clinton administration, and cutting capital gains taxes by 25 percent.

Aren't these merely gifts to the rich? "It's hard to cut taxes for people who don't pay taxes," Mr. Toomey responded at a forum last week, "although Democrats are determined to find a way."

For now, Mr. Bush continues to insist that he has come up with "the right number," and that he has no plans to expand his package. 

Unfortunately for Mr. Bush, it is proving a lot harder to move barrels of oil than it is to shift the terms of the tax debate.

When Vice President Dick Cheney submits his long-term energy plan in a month or so, few doubt it will be full of plans for more oil drilling, from the Alaskan wilderness to the West Coast. Almost daily, the White House is using the blackouts in California to build support for what it calls a "long-term energy plan," and while Mr. Bush has been careful not to criticize his predecessor by name, Energy Secretary Spencer Abraham shows no such compunctions.

In a speech at the United States Chamber of Commerce on Monday, Mr. Abraham said Mr. Clinton's energy policy amounted to taxing the use of energy and neglecting to create more supply. "Our last recessions were all tied to energy crises," he said, suggesting that if the energy shortfalls worsened, the nation's economic downturn could become deeper and more prolonged.

He says the United States will have to build at least 65 power plants a year, construct new pipelines and transmission lines across the country and promote the use of coal — one reason, he said, that Mr. Bush had to back off a campaign promise to regulate the emission of carbon dioxide from power plants. 

But Californians will find little in Mr. Abraham's plans to end the kind of blackouts they were experiencing as he spoke. 

"Is this an `energy crisis?' " asked Daniel Yergin, who heads Cambridge Energy Associates and has chronicled the ebbs and flows of the energy markets. "We came perilously close to a natural gas crisis this winter, and unless there is a cool economy and a cool summer in New York, we will have similar electricity issues there."

Mr. Yergin traces the immediate problem to 1997 and 1998, when an economic downturn in Asia dampened demand and softened prices, discouraging the industry from drilling for oil or building refineries. Now those economies are back, and world oil production is at a bit more than 81 million barrels a day, well short of what it would have been if the investment levels had stayed up.

Mr. Bush was in the oil business and understands this well. "One thing is for certain," he said Monday. "There are no short-term fixes." He said he wanted to loosen regulatory hurdles — often a euphemism for environmental restrictions — and reach a deal with Mexico to allow American companies to explore for natural gas. 

He might have mentioned getting OPEC to pump more, a diplomatic failure for which he criticized the Clinton administration during the campaign, but has said little about it since OPEC became his own problem. All this, of course, takes time. 

And that is what worries Mr. Bush's aides, who know it is only a matter of time before Mr. Clinton's days are forgotten, and Mr. Bush will begin to take the heat for the immediate problems.