By most objective standards, the American economy overall is doing pretty well at present. Unemployment is at 4.7%, the lowest level in 41/2 years, and lower than the average level during the Clinton Administration, with 200,000 new jobs being produced most months. The core inflation rate (excluding food and energy prices) is hovering around 3 percent, with overall price indexes, even taking into account recent sharp gas price increases, still well under 5%.

There is more. Gross domestic product increased in the first quarter by a strong annualized rate of 4.8 percent. Housing starts in February were the highest since 1973, with prices booming in most areas. The Dow Jones Industrial Average is now above 11,500 and near its all time high. The Congressional Budget office reports "robust" tax revenues in the fourth month of 2006, with amounts taken in running 11.2 percent above last year.

Amazingly, however, despite a pretty solid record on the economy, the Bush Administration has received virtually no credit for the good times. To take a fairly typical poll, an April survey by the American Research Group, Inc., found that 31% of respondents approved of President Bush's handling of the economy, while 64% disapprove. Moreover, and even more surprisingly, 25% thought the economy was getting better, 14% thought it was staying the same and a whopping 58% thought it was getting worse.

There are no doubt a few explanations for the sour mood on the economy. First, the gas shock is hitting many consumers hard and, when combined with higher mortgage interest rates (even though these rates are still historically pretty low), is no doubt squeezing family budgets. Second, President Bush is likely suffering from the negative halo effect. People angry with him for, say, Iraq (on the left) or immigration policy (on the right) are less inclined to give him credit for success on the economic front, despite a pretty plausible claim that his tax cuts helped at least in part to fuel a substantial boom.

And much of the mainstream media is portraying the economy in an extremely downbeat way. For example, consider an article this week in The New York Times entitled "A Chill Is in the Air for Sellers", portraying an individual in San Rafael, California who originally listed his house for $1.45 million and recently had to lower the asking price to $949,000. The article states "it's getting tough out there for sellers", but then goes on to point out that the house sold for $700,000 "in February". Even assuming that the reference is to February 2005, one would think that a 15-month profit of well over $200,000 on a $700,000 house is not exactly evidence of hard times in the housing market.

In some ways, of course, the abysmal ratings on the economy represent an opportunity for Mr. Bush and the Republicans as they approach the 2006 elections. Claiming that the economy is considerably better that most people think it is has, to use the famous phrase attributed to Henry Kissinger, "the added advantage of being true".

Still, while one imagine that the perception on the economy will get a little closer to the reality, this is one more challenge that the Bush Administration and the Republicans need to address in a comprehensive manner. The President must develop more coherent policies (for example, in addressing energy issues and resisting excessive spending) and explain what he is doing better and more frequently. Otherwise, there will be little correlation between the relatively rosy economy and the election results in November.