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McCain, Obama Clash on Economy
Candidates' Tacks Differ Sharply

By Perry Bacon Jr.
Washington Post Staff Writer
Wednesday, June 11, 2008

ST. LOUIS, June 10 -- Sens. Barack Obama and John McCain outlined on Tuesday sharply different approaches on how to revive the nation's economy and provide aid to struggling workers, giving voters a clear choice on the issue that Americans say they are most concerned about.

Speaking to a group of small-business owners in the District, McCain (R-Ariz.) pushed an agenda that emphasizes reduced regulation and long-term economic growth through cuts in corporate taxes, expanded free trade agreements and cuts in government spending. McCain would also maintain President Bush's tax cuts for wealthier Americans, raising the total cost of his plans to more than $300 billion a year.

In St. Louis, Obama (D-Ill.) called for expanding health insurance to all Americans, reducing income inequality and raising taxes on wealthy Americans, as part of his emphasis on providing immediate relief to hard-hit families. Obama has called for a $50 billion economic stimulus plan that would include rebate checks, aid for the unemployed, subsidies for those who cannot afford health insurance and tax cuts for middle-income Americans.

To pay for his plans, Obama would raise a variety of taxes, including increasing the capital gains rate to 20 percent, increasing taxes for families with incomes over $250,000 and raising the cap on taxing Social Security income, now set at $102,000, by taxing income over $250,000.

"Under Senator Obama's plan, Americans of every background would see their taxes rise -- seniors, parents, small-business owners," McCain charged during his speech.

After touring a hospital in St. Louis, Obama said: "I've said John McCain is running to serve out a third Bush term, but when it comes to taxes, that's not being fair to George Bush. Senator McCain wants to add $300 billion more in tax breaks and loopholes for big corporations and the wealthiest Americans."

The rhetoric suggests that, despite assertions by both candidates that they would take non-ideological approaches, their views on the economy will mirror the divides of most recent presidential races. Obama's criticism of McCain for backing tax cuts for the wealthy and corporations at the expense of the middle class is traditional Democratic language, while McCain is assailing Obama for proposing tax increases and excessive spending, a charge Republicans have launched against Democrats for decades.

"The substantive contrast between the candidates is deep and stark, arguably sharper than between contenders in the last two presidential elections," said Pietro S. Nivola, who studies partisan polarization at the Brookings Institution.

The difference is reflected by the people they have selected to advise them on the economy. McCain's policy director, Douglas Holtz-Eakin, used to run the Congressional Budget Office, and one of his top outside advisers on economic issues is former Hewlett-Packard chief executive Carly Fiorina.

Obama's lead economics adviser, Jason Furman, worked in the Clinton White House and is known for writing about expanding health insurance, while domestic policy director Heather Higginbottom is a former aide to Sen. John F. Kerry (D-Mass.). Campaign aides said they are also planning to reach out to other experienced Democrats, including former Treasury secretaries Lawrence H. Summers and Robert E. Rubin.

On Tuesday, both candidates discussed their plans to reduce health-care costs, an issue that provides one of the starker contrasts between McCain's emphasis on job creation and reducing regulation and Obama's focus on immediately easing financial problems.

McCain has proposed tax credits of $2,500 for individuals and $5,000 for families. They would have a limited impact on reducing the number of uninsured, but would reshape how Americans receive health care by encouraging more to get it on their own rather than through employers. Obama aims to reduce health-care costs and make health care affordable for every American, in part through greater regulation of insurance companies.

Each candidate's campaign sees political gain in taking on his opponent's economic plans. McCain aides said that, despite Obama's rhetoric about bringing people together, he has little record of doing so and that his ideas on the economy are those of a typical liberal Democrat. "We're not for increasing spending; that's the other campaign," Holtz-Eakin said.

In an attempt to paint Obama as naive and inexperienced, McCain has also begun invoking the presidency of Jimmy Carter. Former secretary of state Lawrence S. Eagleburger compared Obama to Carter at a fundraiser in Richmond on Monday, and McCain said on NBC Monday night that "It seems like Barack Obama is running for Jimmy Carter's second [term]."

Obama aides, after a bruising battle with Sen. Hillary Rodham Clinton (D-N.Y.) that offered few policy differences, are eager to hammer McCain on an issue they see as a vulnerability for the Republican. In a speech Monday, Obama repeatedly attacked McCain on the economy by using his words against him.

"John McCain once said that he couldn't vote for the Bush tax breaks in good conscience because they were too skewed to the wealthiest Americans," Obama said. "Later, he said it was irresponsible to cut taxes during a time of war because we simply couldn't afford them. Well, nothing's changed about the war, but something's certainly changed about John McCain."

For much of the next month, Obama plans to set aside the big rallies that came to define his primary campaign in favor of giving detailed speeches to smaller audiences. Aides also said they wanted to portray Obama "listening" to voters, as he did Tuesday when he followed a nurse on her rounds.

Obama has continued the criticism of free-trade agreements and big corporations that marked his primary campaign, and next week, he plans to focus on job creation and trade. He is also casting himself as more fiscally responsible than McCain, arguing that he would balance the budget and that McCain would increase the deficit.

Staff writers Howard Kurtz in St. Louis and Juliet Eilperin and Michael D. Shear in Washington contributed to this report.

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