President Bush has replaced his economic messengers, but it remains to be seen if he will change his economic message. In the end, that could be crucial.

By sacking Treasury Secretary Paul O’Neill and economic adviser Larry Lindsey, Bush put a new face on the side of his administration that has gotten the lowest marks from voters.

But the public perception of his economic leadership depends ultimately on whether his policies strengthen the economy, reduce unemployment and lead the nation in the right direction.

Key statistics so far paint a negative picture: The economy has lost 1.5 million jobs; the jobless rate of 6 percent is 50 percent higher than two years ago; and the Dow Jones industrial average has dropped more than 25 percent. On the other hand, low interest rates have spurred home sales, productivity is up, and consumer spending has barely slackened. Besides, as Republicans note, the slump started during Bill Clinton’s presidency.

Bush credits last year’s tax cut with heading off worse trouble, though some believe the most effective short-term stimulus may have been the tax rebate initiated by Senate Democrats.

Still, with his economic performance 20 points below his overall job approval, Bush and his advisers recognize they need to do more than change messengers. In January, he will propose to stimulate the economy by accelerating future income tax cuts, reducing taxes on dividends and providing relief for some businesses.

Democrats doubtless will question those proposals and present their own. Among the ideas they have floated are a one-year reprieve from payroll taxes and additional tax benefits for the working poor. Top Democrats have called for rolling back future tax cuts for upper-income taxpayers.

With Republican majorities in both houses, Bush is likely to win the initial round of the debate. But the impact of any federal tax cuts may be offset by tax increases at state and local levels.

A study by the National Conference of State Legislatures said more than half of the states have a gap caused by declining revenue. In Texas, recent estimates have pegged the shortfall at between $5 billion and $10 billion for the next two years.

Since most states have balanced-budget requirements, they have to cut programs or raise taxes. The result could be a repetition of what happened in the early 1980s when many Americans failed to benefit fully from the Reagan tax cuts because of increased state and payroll taxes.

The problem has been exacerbated, some feel, by increased mandated spending from Washington. Republicans have urged elimination of “unfunded mandates” – federal programs that require state spending. But Mr. Bush’s No Child Left Behind Act imposes additional costs on states, just as special education programs have for many years.

And economic weakness has forced states to spend more on Medicaid.

The administration believes that an economic revival will increase revenue and provide deficit relief. But the nonpartisan Congressional Budget Office predicts that, because of the extent of Bush’s tax cuts and a failure to curb federal spending, deficits will persist for the next decade.

Interestingly, both the treasury secretary-designate, John Snow, and the man reportedly picked to be the chief economic adviser, Stephen Friedman, have a history of concern about deficits. That has encouraged groups that blame Bush for ignoring the deficit, though there is no sign he has abandoned his belief in the need for bigger and better tax cuts.

– Carl P. Leubsdorf is Washington bureau chief of the Dallas Morning News.