Triangulation.
There's a good political strategy in here. After all, it took Clinton to victory in 1996 and it took Arnold and, literally, revesed the polls by, what, sixty points (from being down about 60-30 to up that way?).
It's really quite simple, now. Work out some kind of showey "deal" on Iraq and immigration. Get enough moderate Democrats to vote to make the tax cuts permanent. Accept the minimum wage increase...
And, blamo, Bush's approval numbers go back up to 60.
Of course, that means sacrificing important national priorities, but a good chunk of the Republican Party has shown that it's not willing to do so, so why shoud the President?
Sadly, I think you're right about triangulation. And Bush will think Rove is still a genius for proposing it!