Bush, Kerry Battle over Economics ; beneath Campaign Barbs Lie Stark Contrasts on Health Insurance, Deficits, and Tax Rates

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With less than seven weeks to go before election day, and trailing President Bush by a few points in most polls, John Kerry is taking the offensive on a central issue: the economy.

It represents a point of vulnerability for the president, particularly in some Midwestern battleground states. Bush has many positives in his economic record, including an unemployment rate that has declined to 5.4 percent, a 3 percent economic growth rate, and low inflation and interest rates. But recent job growth has not made up for major losses early in Bush's tenure; wages have been stagnant; healthcare costs have soared; gas prices are high; poverty is up; and the budget deficit has ballooned.

Senator Kerry and the Democrats have done a good job framing discussion around job creation and losses, and away from an unemployment rate that favors Bush, analysts say. But the Massachusetts Democrat has not been as aggressive as some party strategists would like in going after Bush's entire record.

That changed Wednesday. In a speech at the Detroit Economic Club, Kerry scored the president for what he called "wrong choices" in tax cuts and spending decisions that have driven up the deficit and hurt the middle class.

"This president has created more excuses than jobs," Kerry said, alluding to the recession early in Bush's term, then the 9/11 attacks and the wars that followed. "His is the excuse presidency - never wrong, never responsible, never to blame."

Bush campaign manager Ken Mehlman fired back: "John Kerry offered more pessimism about an economy that has created over 1.7 million jobs over the past year and he rehashed old, tired ideas of higher taxes, of more regulation, and of more government control of people's lives that his own advisors say will not work."

Whatever the merits of the charges, economists generally agree that Bush and Kerry offer profound policy contrasts.

"The overall level of debate is sharper, louder," says William Beach, an economist at the conservative Heritage Foundation. "I don't believe politics should be quiet. The issues facing the country are important."

On taxes, for instance, Bank of America economist Mickey Levy describes Kerry as a traditional Democrat who would raise taxes and spending. Kerry has said he would restore the income tax rate on those making more than $200,000 a year to the level they were before the Bush tax cuts, putting the money into healthcare reforms.

Kerry would also raise taxes on dividends and capital gains. In addition, the Kerry staff is exploring raising the cap on earnings subject to payroll taxes above their present level of about $88,000 a year.

The latter, says Mr. Levy, would be a "gigantic tax increase" hitting business as well as individuals, and thereby eventually affecting all workers.

In comparison, President Bush proposes making his temporary tax cut permanent, including ending the estate tax.

Kerry talks of raising the minimum wage. That's not on Bush's agenda.

Bush calls for partial privatization of Social Security. Kerry does not.

Bush came into office four years ago on a platform of free trade. But he has given in to protectionist pressures in several business areas of political concern, such as steel and lumber. …