Combine potatoes, carrots and water. Cover and cook until vegetables are tender.

Fry bacon until crisp. Drain bacon; crumble into bits and set aside, saving 3 tablespoons bacon drippings. Add onion to drippings; sauté until tender but not brown.

Blend in flour; salt and pepper. Add milk, half and half, vegetables and vegetable liquid. Cook and stir until the sauce is smooth and thickened.

Add corn; heat through. Just before serving sprinkle with bacon.