Gramm Remark Adds to McCain's Difficulty Addressing the Economy

"America is hurting today. Michigan is hurting today. The automotive industry is hurting," he said at a town hall meeting. "We have to understand the urgency of the situation, and we should remind ourselves time after time."

But the 100 or so in the crowd sat on their hands throughout most of McCain's speech, especially during his remarks about the need for free trade -- a policy that is generally reviled in manufacturing areas. The first question McCain received was from a free-trade critic, who told the candidate that "what we need to do is control some of those trade issues going on. What we want is fair trade."

With most Americans blaming President Bush for their troubles, McCain faced an uphill climb even before his campaign's recent miscues. Macroeconomic Advisers, a St. Louis-based economic forecasting firm, will release a report next week that factors in such variables as the growth rate of real disposable income, unemployment rate, real oil price increases, the power of the incumbent party as well as the impact of party fatigue to forecast the outcome of the election. The result projects a victory of more than 10 percentage points for presumptive Democratic nominee Barack Obama, said Chris P. Varvares, the firm's president.

"How do you define a landslide?" he asked.

Gramm defended his statement, saying Thursday that the nation's economy was initially thought to have grown by an anemic 0.6 percent in the first three months of the year. That was revised up to 0.9 percent, and again to 1 percent.

"Look, the economy is bad. It is far below what we Americans have a right to expect, but we are not in a recession," he said. "We may or may not have one in the future, but based on the data, we are not in a recession. But that does not mean all this talk does not have a psychological impact."

But, the former senator added, "when I said we've become a nation of whiners, I'm talking about our leaders. I'm not talking about our people. We've got every kind of excuse in the world about oil prices -- we've got speculators, the oil companies to blame -- but too many people don't have a program to get on with a job of producing."

Obama seized on Gramm's comments.

"He said we're in a mental recession. I guess what he meant was it's a figment of our imagination, these high gas prices," Obama told a crowd of more than 2,000 at Robinson Secondary School in Fairfax. "It's not just a figment of your imagination, it's not all in your heads, when people are struggling with the rising cost of everything from gas to groceries."

Turning to his GOP rival, Obama said: "This comes after Senator McCain recently admitted his energy proposal for the gas-tax holiday will have mainly 'psychological benefits.' " He added: "Now I want all of you to know that America already has one Dr. Phil, we don't need another. When it comes to the economy, we need somebody who can actually solve the economy."

McCain was almost as harsh about his friend and adviser: "I believe the mother here in Michigan and around America who is trying to get enough money to educate their children isn't whining," he said.

Weisman reported from Washington.