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Economy Still a Potential Problem for Bush

As President Bush and his Cabinet mulled figures that show the economy slowed during the second three months of this year, and was in recession most of his first year in office, the president searched the clouds for a silver lining.

"Second-quarter growth was 1.1 percent. When you combine that with the first-quarter growth, it's a 3 percent growth. This is a positive trend," he said in the White House Cabinet room Wednesday.

The trend is a definite upswing from revised numbers that showed the economy was indeed contracting for the first nine months of Bush's administration. Bush said that the last nine months have been a whole lot better.

And while the White House expressed confidence that the United States would not swing back into a double-dip recession, Senate Majority Leader Tom Daschle, D-S.D., focused on the dip in growth from more than 5 percent in the first quarter of this year to 1.1 percent growth between April and June.

"That substantial drop of 4.5 percentage points says, as clearly and conclusively as anything can, we need economic leadership. We need it from the president. And there's no better time to start than right now," Daschle said.

Administration officials say there are positive signs hidden in the numbers. For example, Americans are increasing their savings rate and reducing their credit card debt. Both are positive in the abstract but neither will stimulate the economy.

Economic aides say the the economy's future looks bright, with more robust growth expected in the fall and winter of 2003.

That's what the president needs as he faces a wavering stock market and eroding consumer and investor confidence from a slew of accounting scandals.

Bush tried to put that spin into motion Wednesday even though the second-quarter numbers were half of what economists predicted.

"When the American people take a look at the facts and are confident about those facts as I am, they're going to realize we've got a bright future ahead of us," Bush said. 

Meanwhile, even though Bush signed into law corporate accounting reforms, Democrats think Republicans' business ties make them vulnerable in the November election to guilt by association with corporate malfeasance.

They are pinpointing the practice of moving headquarters to offshore tax havens, which Democrats say is corporate treason.

Democrats want legislation that makes such companies ineligible for government contracts.

"The only sacrifice this amendment asks of federal contractors is they pay their fair share of taxes like anybody else," said Sen. Paul Wellstone, D-Minn., who wants to add a provision to the Defense Department spending bill making illegal "inversions" or the relocation of company headquarters offshore.

Democrats note the president's Harken oil company had a Cayman Islands headquarters for a drilling operation in Bahrain -- "which I opposed, as you may recall, when I was a director of the company," Bush said in response to questions.

The Caymans headquarters, aides say, protected Harken from lawsuits in the event of an oil rig blowout in Bahrain. The president said he thinks looking at offshore tax havens is a worthwhile exercise.

"I think American companies ought to pay taxes here, and be good citizens."

Fox News' Wendell Goler contributed to this report.