CHICAGO – President Bush, in a marked shift from his usual upbeat economic assessments, conceded here yesterday that the nation faces “economic challenges” due to rising oil prices, the home mortgage crisis and a weakening job market.

“We cannot take growth for granted,” Bush said in a speech to a group of business leaders in which he acknowledged that many Americans share a rising anxiety over the economy.

But even after a government report on Friday that showed unemployment jumped to 5 percent last month from 4.7 percent in November, Bush stopped short of warning that the nation may be about to enter a recession.

Democrats in Congress and on the campaign trail echoed the president’s sobering view. With a number of analysts now predicting that an economic downturn could be imminent, both Bush and congressional Democratic leaders say they are considering whether a rescue package is necessary to counter the threat of a recession, in which economic activity declines and joblessness increases over an extended period of time.

But the two sides would undoubtedly take vastly different approaches, setting up a clash that could dominate the 2008 election campaign and the remainder of the Bush presidency.

If the past is any guide, Bush is likely to favor broad-based tax cuts of the sort he pushed through early in his presidency. Democrats are discussing more targeted relief – tax cuts, spending programs or a combination of the two – to help lower- and middle-income Americans who would be hurt the most if the economy falters.

“This is going to be a battle over doing more of what George Bush has done for the past six years, or doing more for the middle class,” Rep. Rahm Emanuel of Illinois, the chairman of the House Democratic Caucus, said in a telephone interview after spending the day in Chicago with Bush. “That’s where the fissure is going to be.”

The clash comes as the latest negative signs on the economy, coupled with uncertainty in the housing and credit markets, have forced Bush to abandon his usual sunny rhetoric and paint a darker picture of the economy’s condition.

After months of insisting that the economy’s fundamentals are strong – a theme he reiterated yesterday – Bush did not mince words. He acknowledged that “many Americans are anxious about the economy,” and noted that “jobs are growing at a slower pace.” He said core inflation is low – “except when you’re going to the gas pump, it doesn’t seem that low.”

Still, the White House is not convinced it must act. The deliberations are tightly held, and aides to Bush say he will not make a decision about whether to offer a stimulus package, or what it should contain, until later this month, in time for his State of the Union address scheduled for Jan. 28. Appearing in New York yesterday, Bush’s Treasury secretary, Henry M. Paulson Jr., echoed that plan, and cautioned against any rush to action.

“Working through the current situation and getting the policy right,” Paulson said, “is more important than getting the policy announced quickly.”

On Capitol Hill, Democrats were positioning themselves to get ahead of any proposal the White House might present. Aides to House Speaker Nancy Pelosi said that she had yet to conclude decisively that a stimulus package was needed, but that she had met with a group of economic advisers last month who unanimously urged her to take swift action aimed at stabilizing the jittery economy and lifting consumer confidence.

The group included Lawrence H. Summers, the former Treasury secretary under President Clinton; Felix G. Rohatyn, the financier and former ambassador to France; and Laurence D. Fink, the chairman and chief executive of BlackRock, the global investment firm.

An aide to Pelosi said the three were “unanimous in saying that we should move out ahead.” In an interview over the weekend, Summers – who has been public in his warnings of a possible downturn – said he believed there was now a greater than 50 percent chance of a recession this year.

“My view is that now is the time to be thinking about policies that would provide recession insurance,” Summers said, “and if we wait until it’s entirely clear that there is a recession, it will be too late.”

Some Democrats, like Rep. Barney Frank of Massachusetts, the chairman of the banking committee, have loudly called for a quick rescue package for the economy, while others like Rep. Charles Rangel of New York, the chairman of the Ways and Means Committee, have been more cautious.

But Democratic leaders said there was already a general consensus that any stimulus package would be temporary and targeted to the middle class and the poor. Among the proposals under consideration are a $500 across-the-board rebate, possibly to be returned to taxpayers in their pay-checks through the payroll tax system, as well as a plan to restore the $1,000 per child tax credit to many low-income families that currently do not qualify for it.

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