KENNEBUNKPORT, MAINE, JULY 28 -- As he campaigns around the country this summer, President Bush delights in pointing out the differences between Republicans and Democrats. But back in Washington, he is betting that by blurring those distinctions, he can assure his reelection in 1992.

It is a high-risk strategy, made even more so by the latest government figures showing that the economy is close to recession. Bush is counting on his ability to negotiate a deal with Democrats to reduce the federal deficit, an action he and his advisers believe will give the economy -- and his reelection prospects -- a significant boost.

The consequences of failure are great. Key Bush advisers say the most serious threat to his reelection is not the abandonment of his "no new taxes" pledge but rather an economic downturn. They also believe that without a credible budget deal, the odds of a downturn are far greater.

"There's no bigger component to healthy politics than a healthy economy," a White House official said this week.

But in seeking the budget deal with Congress, Bush has repeatedly raised the stakes for himself, while undermining the partisan advantages his party has enjoyed for nearly a decade.

The percentage of people who say the deficit is the country's most serious problem has grown from 6 percent in April to 21 percent in July, according to a new Gallup Poll, putting the deficit ahead of drugs and all other issues in the public's mind.

Administration officials say the president is responsible for heightening public concern. "It's been necessary for him to highlight the problem," one official said. "Otherwise you would never get a solution."

At the same time, Bush and the Republicans have suffered from his decision to abandon his no-tax pledge. A new Washington Post-ABC News Poll showed that the Republicans now enjoy only a modest advantage over Democrats on the question of which party will do a better job holding down taxes. And ironically, a higher percentage of Democrats than Republicans disapproves of Bush's decision to jettison the campaign pledge, suggesting that while conservative Republican politicians have complained the loudest about the tax issue, the political cost to Bush may be among those voters he has been working to attract to the party.

Bush and his advisers are betting that the public will reward them politically for good government.

The budget talks are only one element of that overall strategy.

Bush's nomination of federal appeals court Judge David H. Souter to the Supreme Court is another. Seeking to avoid a costly confirmation fight over the abortion issue, Bush chose a nominee who, while conservative, is not a polarizing figure politically. Eventually, there could be a political backlash, especially if Souter has to decide an abortion case before the 1992 election. But initially, even Democrats expressed private admiration for Bush's ability to avoid a firestorm over the court.

Still, this good-government strategy has blunted Bush's partisanship on the campaign trail. The president has no rhetorical call to arms with which to rally his Republican audiences, no Reaganesque flourishes, no metaphors of the fight between good and evil.

Befitting his government style, his is a plainer, simpler political message, the essence of which is, yes, folks, there really are differences between Republicans and Democrats. His salesmanship, however, sounds tentative. "There are clear differences between the parties," he said. "And when the voters understand those differences, I think our side wins."

But they are not the sharp differences upon which Ronald Reagan campaigned so effectively. More than the tax issue has been diminished. The communist threat has been buried under the upheaval of democracy in Eastern Europe. The social issues -- particularly abortion -- have been muted by Republican National Committee Chairman Lee Atwater's call for a big-tent party that accommodates diversity on sensitive issues.

The savings and loan scandal has given government deregulation a bad name, and even the "big spender" label Republicans enjoy pinning on the Democrats -- a sort of attack of first and last resort -- has been blunted by a desire for bipartisan comity among the budget negotiators.

Where Bush has drawn the line, there are political consequences. His veto of the parental leave bill gives Democrats the opportunity to make inroads on family issues. His threats to veto the civil rights bill undermine efforts by the party to reach out to black voters, and the latest Post-ABC poll showed that his approval rating among blacks had slipped sharply, with almost three in five blacks now disapproving of his performance.

The president's stump message centers on the fuzzy issue of "empowerment." The theme -- giving people power over decisions on education or child care -- is a variation of the attack on Democrats as the party of big government. But because Bush's strategists believe there is growing public demand for governmental attention to domestic problems, Bush can no longer cast the issue as a choice between government activism and getting the government off the backs of the people.

All of this makes the outcome of the budget talks crucial to the administration. But despite efforts to raise the stakes on the talks -- first by calling the talks, then by agreeing to include new taxes in the eventual deal, then by warning of the economic consequences of across-the-board cuts of as much as $100 billion, and lately by the president's participation in morning sessions with Democratic congressional leaders -- the negotiations continue to languish.

"What more can we be doing?" a frustrated administration official said.

Republican political operatives see a warning sign for Bush in the current round of polls that show public uneasiness over the direction of the country, and a dip in the president's approval ratings. "Americans are really frustrated right now," one Republican pollster said. "They don't sense any direction. They see the country as rudderless."

So far, not much of this has nicked Bush personally. But it could, especially if the economy continues to weaken, the pollster said.

But key advisers to Bush remain confident the president will emerge victorious from the budget talks, arguing that the problem is so big that both sides in the negotiations will eventually come together.

"But there's an obstacle course ahead, a couple of moats and some wild animals in the way," one strategist said. "It's going to get tough before it gets done."