Tax Policies Separate the Candidates in the US Election Race ; BUSINESS ANALYSIS Republicans Now Oversee Runaway Spending While Democrats Preach Fiscal Restraint

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THIS IS the moment in US election campaigns when the last vestiges of clear-cut economic policy is lost in the fog of partisan rhetoric. Hear George W Bush tell it, and John Kerry is a free- spending Massachusetts liberal who never met a tax increase he didn't like, and whose election would be a death knell for American capitalism. For the Democrat, this President is the tool of big business, sacrificing US jobs and the mythical "middle class" so that his greedy corporate backers can grow richer still.

Ever wilder estimates are hurled about. Mr Kerry's programme would cost $2 trillion, says the Bush/Cheney campaign. Rubbish, retort the Democrats, who claim that Mr Bush's proposals would cost $3 trillion. Clear differences between the candidates' economic platforms do exist. Whether they will be implemented - and if so whether they would have much impact - is another matter.

The power of any White House to influence the economy is limited. The 1990s boom, which Mr Kerry promises to restore, owed something to the brave deficit-reduction package of tax increases and spending cuts pushed through by President Clinton. But it probably owed more to the new opportunities opened up by the IT revolution - a feat that is unlikely to be repeated any time soon.

For his part, Mr Bush may have signed into law record income and dividend tax cuts. But historically low interest rates, and the property boom which they helped bring about, may have done at least as much to promote today's solid if unspectacular economic recovery.

His first term has also been remarkable for the surge in federal spending. But not once has the President wielded his veto. The philosophy of this White House, unashamedly sympathetic to business, is classic supply side. Give enterprise its head, and a rising tide of prosperity will boost growth, cure unemployment, and remove deficits. If re-elected, Mr Bush has said he intends more of the same.

In practice, Mr Bush would have little room for manoeuvre in a second term. Whoever wins on 2 November will still be at the mercy of global oil prices; in the short term at least, Mr Kerry's plans to boost US energy independence will change little.

Then there are the current account and federal deficits, about which Alan Greenspan, the Federal Reserve chairman, has expressed concern. A loss of international confidence in US macroeconomic management could cause a drop in the dollar or on Wall Street, which no White House could long ignore.

In short, the economic policy of a second Bush term is set to be less ambitious than his first. The focus may well be on marginal and long-term initiatives. …