Like Richard Nixon, George W. Bush has shown a marked preference for foreign policy, though perhaps Sept. 11 and other events have forced that on him. While the U.S. has waged two wars in as many years, the American economy has shed more than 2.5 million jobs -- 500,000 of them in the past three months alone. Experts have been quick to cite various reasons. The conventional wisdom goes like this: First came the recession that followed the '90s boom, then the downturn after the terrorist attacks of Sept. 11, 2001, and, finally, the climate of uncertainty created by the war on Iraq. Many economists have hoped a quick victory over Saddam Hussein would spark consumer confidence, which would in turn ignite economic growth. But in remarks before the Orlando, Fla., Chamber of Commerce early this month, Treasury Secretary John Snow acknowledged a flaw in that forecast: "The problem is not with the concern about the Iraq war -- the problem is the underlying weakness with the economy."

Since 1982, Bradley University economist Bernard Goitein has tracked consumer confidence in Peoria and nearby Pekin. When he arrived from the University of Michigan at Ann Arbor, Goitein was attracted to Peoria's low cost of living. "I could afford a nice Victorian home with all the original woodwork," he says, "and I could walk to work." He was also moving into an economic disaster area.

Pabst Blue Ribbon closed its brewery in Peoria Heights, leaving 1,000 people out of work. Then, long-term labor problems broke out at Caterpillar, starting with a seven-month strike in 1982. Cat had logged record profits in 1981, but its sales plummeted in the worldwide recession of the early '80s. It reduced its workforce from 36,000 employees to 17,000 -- and that set off a domino effect in Peoria's economy. The unemployment rate for the three-county metropolitan area was 16.3 percent. Tens of thousands left town.

"People were starting to panic," former mayor Richard Carver recalled in 1998. "Never was the need to diversify more evident."

Peoria responded with a strategy employed by many Rust Belt cities, attempting to spend its way out of the hole with big capital projects. Millions in subsidies and tax incentives went to persuade companies to stay on or to relocate to the area. That strategy has had mixed results. Some companies simply took the money and ran, sending factory jobs overseas. The firms that remained employed far fewer workers.

Today, Goitein says, Peoria has a more diversified economy. There are two large medical centers and several shopping malls. The city has become a major product-distribution hub, and an effort is underway to plant the seeds of a biotech industry. But most of the job growth has come in services, and the high-paying union slots are mostly gone. When Goitein moved here, Peoria was the second-largest city in Illinois, behind only Chicago. Now it's No. 5. Its metropolitan area totals more than 340,000 people, but that's still about 30,000 fewer than two decades ago. Manufacturing once accounted for 36 percent of the jobs; today it's half that. Caterpillar now has more management positions in Peoria than assembly-line jobs.

Komatsu, the Japanese manufacturer of mining and construction equipment, recently announced it will lay off 60 workers and shut its Peoria plant for three months, idling 310 employees. Many wonder whether the factory will ever open again. About 40 miles west in Galesburg, a Maytag refrigeration plant provided jobs to 1,800 people, or one of every 12 adults who live there. Last October, Maytag announced plans to move operations to Reynosa, Mexico -- across the Rio Grande from McAllen, Texas -- where workers make an estimated $2 per hour.

That closure has had ripple effects. When one of Maytag's suppliers, Freedom Plastics, shut down its factory in February, plant manager Chuck Eiben told the Peoria Journal Star: "Now it's just a matter of which vendors go first." The community may ultimately lose more than 5,000 jobs and $111 million in household income.

The economic downturn has also put the squeeze on Peoria's government, mirroring similar crises in cities across the country. Last year Peoria laid off city workers and cut back on services; this year it still faces a shortfall of nearly $1 million. The 225-member police department laid off 11 officers last year, and another round of layoffs may be in the offing. The fire department's resources were stretched to the limit by a late January blaze at an industrial cleaning business. Engines were pulled from one end of town to the other, leaving an entire half of the city without fire protection.

In November 2000, Peoria voted for Bush, giving him a margin of less than 1 percent over Democratic candidate Al Gore. Today, however, Goitein's index of consumer confidence is at its lowest point since the recession of the early '90s. Confidence normally spikes up in patriotic times: The first Gulf War provided a temporary boost, as did the events of Sept. 11, 2001. The conflict in Iraq may confer another rise, but any increase will have to overcome more than two years of bad news.

"The direction," Goitein says, "has definitely been down."

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One block away from the unemployment office is O'Brien Field, a new ballpark built for the Peoria Chiefs, a minor league baseball team affiliated with the St. Louis Cardinals. The privately financed $16 million stadium is part of a larger $23 million project just south of downtown. But when Peorians talk about the revitalization of their city, they usually point farther north to the downtown riverfront, a district of restaurants and gift shops. In warmer months, it hosts outdoor festivals. Caterpillar's seven-story headquarters is a block west on Adams. Currently there's talk of building a $60 million museum on a site once occupied by a Sears.

Despite all this money being spent on the central city, many locals still call downtown "seedy." Big Al's, a strip club, anchors a string of bars on Main Street. Located next to the Hotel Pere Marquette, the city's best hotel, Big Al's went upscale and turned into a multimillion-dollar enterprise when it was taken over in 1985 by Duane Cassano, a former welder laid off from Caterpillar.

A block away from Big Al's is Sullivan's Pub. Owner Mike Sullivan excuses the two shuttered nightclubs next door, saying they're "under reconsideration." Competition among the survivors on Main Street has grown fierce, he says.

On a Friday night, Sullivan's is packed. At the front of the room is a young crowd, mostly office workers from Caterpillar. They talk about their jobs and complain that the local paper lacks national news. The best they can say about Peoria is that there's no traffic. In the back of the pub -- past a table groaning with happy-hour hors d'oeuvres, sandwiches and ribs -- are the old-timers.

Mark, a thin bald guy in his early 50s, sits on a stool and nurses a bourbon on the rocks. He sells steel and remains "reasonably optimistic" about his business. But "there is no doubting these are difficult times," he says. "This is the toughest period I've lived through. There isn't anything that compares to it in my 30 years in the industrial market.

"Iraq has something to do with it. Global competition is part of it. But there doesn't appear to be an end in sight. Nobody knows what to do. Everything's in a complete state of flux."

Mark thinks the Iraq war was "probably the right thing to do," though he says it with hesitancy. "My son went to Iraq in 1991 and I'm very sympathetic to all of the families that have children over there." He supports the Bush administration "for the most part," he says. "I'm disappointed to see so many jobs leaving the United States, but I'm also sympathetic to the costs of the manufacturers."

On the next bar stool is Wayne Powell, a real estate agent. Times are still good for Powell's business. "There may be a bit of a slowdown, but we haven't felt the slump," he says. "I've been in real estate since 1961, and real estate is usually the first thing to fall and the first thing to rebound. But this time everything else is slumping and the real estate market remains strong."

But most of his business has moved to the suburbs: Germantown, Metamora, Dunlap. North of the city, he says, "they can't get the homes up fast enough." He's weathered the bad times, and these, he says, are not the same. "It lasted from 1979 until 1987 -- there was no work here, no building. Everyone was moving to Texas, Arizona, or somewhere to find work. A lot of people elsewhere in the country, they couldn't understand what we were going through, because they were doing well.

"If you've been out of work for a year, you'd probably say this is the worst time. But it's well-known that everything is much better off than back then."

Still, Powell is sympathetic to those having a rough time. He had been planning a winter vacation in Brazil, "or at least Florida." Then the war started, and his companion wanted to stay put. "I'm sure we weren't the only ones to change our plans," he says. "And our decision didn't affect just the airlines. It hurt the hotels, the rental car places, restaurants, souvenir shops. Everyone suffers."

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