WASHINGTON -- A White House desperate for some good news on the economy saw its hopes crushed yesterday with a painful thud as wary consumers took the steam out of what might have been a drive toward recovery.
"There wasn't a lot of good cheer in these numbers," said a senior administration official, who noted that the dive in consumer confidence during October "was particularly bad news" and overwhelmed an encouraging 2.4 percent rise in the gross national product.
Even before the figures were released, President Bush moved to end the standoff with Democratic congressional leaders on a bill extending unemployment benefits to laid-off workers, whose fate during the recession has been a drag on the economy and the president's political popularity.
Mr. Bush has twice rejected similar legislation sent to him by Congress on the grounds that it would add unnecessarily to the budget deficit. Senate Majority Leader George J. Mitchell, D-Maine, suggested yesterday that a foxhole conversion inspired by the gloomy economic news might be under way.
"The president has just reversed himself on civil rights, and if he's now prepared to reverse himself on unemployment, we'd be very happy [about] that," Mr. Mitchell told reporters.
It isn't likely, however, that the disappointing economic news will be enough to convince the president to endorse an early tax-cut package, which he has all but decided is not the answer now, either for the economy or his own political needs, officials said.
There's no dampening of spirits at all among congressional advocates of a tax cut, including Sen. Lloyd Bentsen, D-Texas, chairman of the Finance Committee, who said he plans to hold hearings on his proposal before Congress adjourns for the year.
In fact, if a compromise proposal on jobless benefits moves through Congress before the Thanksgiving holiday, as expected, it also will likely become the target for lawmakers determined to pursue their own tax-cut proposals regardless of whether Mr. Bush will support them.
Progress on such a measure might keep Congress in session until Christmas.
Administration officials had been hinting recently that yesterday's GNP numbers for the third quarter would be such good news that a major tax-cut package would not be necessary. And even though the figures came in lower than expected -- growth of 2.4 percent instead of 2.5 percent to 3 percent -- Treasury Secretary Nicholas F. Brady called them "encouraging."
But the good news signaled by those growth figures for July through September was outdated by the bad news from October, when the Conference Board index of consumer confidence plunged 12.5 points to 60.4 from 72.9 as Americans grew more pessimistic about their financial security.
"If those attitudes were different, the recovery would really be under way now with a vengeance," an administration official observed. "It's really a mental thing. Somehow, we have to build confidence that the economy is strong again."
At President Bush's urging, House Minority Leader Robert H. Michel, R-Ill., opened negotiations yesterday in hopes of finding a compromise on a measure to extend unemployment benefits to laid-off workers whose 26 weeks of payments have run out, removing potential buyers from the economy.
Democratic leaders responded quickly, postponing indefinitely a House vote scheduled for today on a third version of the Democratic proposal, which would provide an extra 13 weeks of benefits at a cost of $5.3 billion.
A compromise on the jobless issue could give Mr. Bush and lawmakers of both parties the benefits of a short-term boost to the economy. It might also quiet some critics who argue that nothing is being done for Americans whose well-being has been diminished by the recession.
President Bush has been pressed repeatedly by many of his political advisers to take an aggressive stand on the economy in hopes of impressing voters as well as consumers that the country is financially sound.