The Bush administration and Congress are struggling with huge economic challenges. But political leaders could certainly help calm the public — and the financial markets — if they could focus on three fundamentals:

Stay ahead of the curve, set priorities for federal assistance, and improve cooperation with each other.

Stay ahead of the curve:

Federal officials this week announced a plan to help homeowners renegotiate delinquent loans held by mortgage giants Fannie Mae and Freddie Mac.

That’s fine, as far as it goes. But it obviously doesn’t go far enough; for the most part, these are more conservative loans and are not at the heart of the current housing crisis.

Sheila Blair, chairman of the Federal Deposit Insurance Corp., said the plan “falls short of what is needed to achieve widespread modifications of distressed mortgages.”

Such criticism could have been easily anticipated by Treasury officials. Yet they seemed taken aback by the complaints and responded with vague statements about considering additional measures later.

Another disconcerting development came Wednesday, when Treasury Secretary Henry Paulson announced the complete abandonment of the asset-purchase plan that was originally central to the $700 billion rescue plan.

While this might well be a good decision, why did it take the administration so long to announce its U-turn? The whole episode hardly inspires public confidence.

Set priorities for federal assistance:

The administration sometimes focuses on easier problems while leaving harder ones for later.

It is critical for Washington to keep its eye on the big picture and to move quickly to reduce mortgage foreclosures. Otherwise, the U.S. economy could weaken further and further, causing foreclosures to snowball and pessimism to grip world financial markets.

Lawmakers on Capitol Hill also need to be thinking carefully about priorities.

Democrats are rushing to throw more tax dollars at troubled American automakers, for example, without adequate guarantees that this money would be spent in reasonable ways.

There are also growing concerns in Washington that the $700 billion that was intended to stabilize the financial system has been diverted to other purposes and could be squandered.

Strive for more cooperation in Washington:

Disagreements are inevitable, particularly in complex economic matters. It is hard to understand, though, why Treasury officials and the FDIC chairman need to be haggling in public over a new mortgage rescue effort on the day it is announced.

President Bush and congressional leaders should also strive for a united front in pushing financial institutions to take more proactive roles in dealing with problem loans. Many of these institutions could do more to acknowledge their losses, cut reasonable deals with borrowers, and move on.