By David Schepp BBC News Online North America business reporter

At his recent economic forum in Waco, Texas, US President George W Bush sat side-by-side his vice president, Dick Cheney.

Bush: Economy is sound

It was an unusual coupling given the top two US leaders for security reasons have kept their distance from one another since September's attacks in New York and Washington.

It is but one example of how vulnerable Republicans feel given the wobbly state of the US economy.

No longer fearful of terrorists and their tactics, Messrs Bush and Cheney feel far more threatened by the ballot box.

Accounting debacles and an anaemic economic recovery threaten to remove Republican lawmakers, long associated with corporate interests, from their offices after November's elections.

It is a turnaround from the mood after 11 September, when rapid action by the government and the US central bank, the Federal Reserve, seemed to stop the recession in its tracks.

Funny books

Mr Bush continues to hammer away his message the economy is sound - if sluggish.

Americans, already angered by a spate of accounting scandals, are clearly worried by the slow progress of the economic recovery after enduring many months of uncertainty.

Following last September's terrorist attacks, doomsayers predicted the US economy, already slowing down, would fall deeper into recession.

But it rebounded quickly, leaving analysts to remark on what was thought to be the mildest recession in recent memory.

One reason was the series of interest rate cuts by the Fed, bringing rates down to 1.75% by Christmas, the lowest in forty years.

Beginning with the New Year, however, it became apparent the glut of corporate-accounting scandals could swamp the fledgling recovery.

Cavalier executives through their funny bookkeeping accomplished what Osama bin Laden's grand attack could not in dashing America's confidence.

Y2K boost

Nevertheless, the effects of the 11 September attacks still ripple through the US economy.

Shrinking share prices have created a headache

The most conspicuous are those that affect the travel industry, including airlines, aerospace manufacturers, and resorts and hotels.

The recent bankruptcy filing by US Airways was blamed squarely on the attacks, as are United Airlines' current woes.

But there are also significant indirect effects, says John Lonski, senior economist at Moody's Investors Service.

"There's a lot of risk aversion that is restraining business-investment spending, [which] will perhaps persist until the matter with Iraq is clarified," he says.

Corporate investment has been noticeably absent in the US, following massive outlays for new computers and software in advance of Year 2000 (Y2K).

US government spending

Businesses have since reined in costs, including business travel, thereby contributing further to airlines' woes.

Consumers, however, have continued to spend - and so has the US government.

In fact, the biggest effect of the 11 September terror attacks has been on the US budget, says Jim Glassman, chief economist at JP Morgan.

"It changed our attitudes about fiscal austerity and the use of the budget," he says, adding the attacks opened the floodgates for government spending - much of it unrelated to terrorism.

The boost in government largesse has fanned fears that years of fiscal discipline have been abandoned and budget deficits will balloon.

Optimistic predictions

As Uncle Sam loosens his budget belt, Mr Bush's much-touted tax scheme, which helped sweep him into office, has come under fire.

The Bush administration has forecast a deficit this year of $165bn (�107bn), $60bn greater than previously thought.

The International Monetary Fund (IMF) has criticised the president's economic policies, saying he should raise taxes to balance the budget.

"The economic slowdown, the June 2001 tax cuts, the additional outlays associated with the 11 September terrorist attacks, and the March 2002 stimulus package now mean that deficits are likely for the next few years," the IMF said in its annual review of the US economy.

Mr Greenspan is mindful of the weakening recovery

The IMF also called the Mr Bush's prediction of return to budget surpluses by 2005 "optimistic".

Economic risks

The IMF assessment was not all doom and gloom.

It said the recovery remains on track despite steep drops in share prices over the last four months.

It revised upward its expected growth rate of the US economy to 2.5% from its previous 2.3% it expected in April.

Nevertheless, the IMF said even as the economy is on the mend, "downside risks have intensified".

The Federal Reserve Bank came to the same conclusion after its most recent meeting.

It said in its policy statement, "the [economic] risks are weighted mainly toward conditions that may generate economic weakness" and hinted that it might lower interest rates further.

Ballot box

Even as the US economy continues to shake off the effects of the 11 September attacks, the president is haunted more by the spectre of scandal and economic mismanagement.

To address that concern, the Bush team in recent weeks has begun pointing the finger at the previous administration for the recession.

Revised data unveiled in July proves the downturn started during the final months of Bill Clinton's term, the Bush administration says.

More recently, senior officials have begun to blame the recent accounting scandals on Mr Clinton as well.

They insist slack policies under his watch led to the corporate malfeasance that has soured investors and threatened to derail the current economic recovery.

At his economic forum in Waco, Mr Bush touted the meeting as a way for "ordinary Americans" and "regular folks" have their concerns aired over the state of the economy.

November's elections, however, will be the final test of whether Americans believe the Bush team is delivering on its predictions.