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Inside Politics

Jobs, tax cuts key issues for Bush

Kerry has called the cuts unaffordable and unwise

By David Williams

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CNN's Jeanne Meserve on New York police and convention protests.

CNN's Kelly Wallace on the high stakes of the GOP convention.

CNN's Kitty Pilgrim on President Bush and middle-class voters.
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Making their case:  
• Election Express: Chelsea Pier
Location: New York's Madison Square Garden, seats up to 19,763

Estimated attendees: 50,000

• Estimated budget: $91 million, according to NYC Host Committee 2004

• Delegates: 2,509 (2,344 alternates)

• Estimated volunteers: 15,000

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John F. Kerry
George W. Bush
America Votes 2004

(CNN) -- President Bush says himself there's still work to be done to keep the economy growing.

But when the Republicans gather next week in New York for their national convention, much of the focus will be on his economic accomplishments.

President Bush repeatedly has credited his tax cut plan for helping end the recession that was compounded by the September 11, 2001, attacks and the continuing fear of terrorism, as well as wars in Afghanistan and Iraq, and corporate scandals, such as Enron and WorldCom, that shook investors' faith in the stock market.

"Over the last 12 months, we've added nearly 1.5 million new jobs. The unemployment rate across our country is 5.5 percent. That is well below the national average of the '70s, the '80s and the '90s," Bush told an audience in Albuquerque, New Mexico, on Thursday.

He said his opponent, Sen. John Kerry, has promised more than $2 trillion of new spending during the campaign and warned that he would raise taxes on the middle class.

"You've heard them say, 'Tax the rich.' First of all, you can't tax the rich enough to pay for all the promises. And secondly, the rich are pretty good about hiring accountants and lawyers," Bush said. "Generally, when you hear that, be careful because he's aiming his tax increase at you."

Making the tax cuts permanent is a major part of Bush's economic agenda, along with passing a comprehensive energy plan and tort reforms to limit what Republicans call frivolous and excessive lawsuits. (Special report: America Votes 2004, the Republican convention)

Kerry called the tax cuts unaffordable and unwise in a speech Thursday in Anoka, Minnesota, and said they benefited the wealthiest people in the country.

He said his plan would lower the tax burden on the middle class.

"Ninety-eight percent of Americans, all of the middle class, the vast majority of Americans and those struggling to get in it, get a tax cut under my economic plan," Kerry said.

But Tim Kane, an economist at the conservative Heritage Foundation, describes the 2003 tax cuts as a "watershed" achievement.

"It really slashed taxes on investment in a major way and we've seen investment just boom every quarter in the GDP [Gross Domestic Product] results; I mean GDP has taken off, a lot of that is driven by investment," he said.

"That's a healthier kind of spending because it means you're going to build new factories, new machinery, new capital equipment, which raises productivity, which raises wages and increases the number of jobs."

Kane said the budget deficit -- expected to be about $445 billion for 2004 -- was a concern, but added that "if ever there was a time to run a deficit, it was during that recession and it was this kind of deficit where you promoted an aggregate supply."

"There are two things that can hurt an economy, one is a deficit and the other is higher taxes, so it's almost a matter of pick your poison," Kane said. "But why do we have to run deficits, or why do we need higher taxes? They both really stem from not the tax cuts but from overspending."

In a CNN/USA Today/Gallup Poll conducted between August 23-25, 49 percent of those surveyed said they thought Kerry would do a better job handling the economy, while 43 percent said Bush would.

In the poll, which had a margin of error of plus or minus 5 percent, respondents were divided on the impact of the tax cuts on the economy, with 32 percent saying it mostly helped, 32 percent saying it mostly hurt and 29 percent saying it had no effect.

How does it play in Ohio?

In Ohio, a key battleground state, whose 20 electoral votes are expected to be won by a razor-thin margin, one of the main issues has been jobs -- particularly the loss of manufacturing jobs.

"This is not a new phenomenon, in Ohio, and in fact in most of the Midwest, there has been a decline in manufacturing jobs for 25 years. But the recent recession exacerbated the decline and while the economy generally appears to be improving, it's recovering more slowly in this area, meaning Ohio and the job recovery or jobs are lagging behind the rest of the economic numbers," said John Green, a political science professor at the University of Akron.

He said that many people in the state support the president's tax cuts, but feel it has not led to new jobs.

"I think overall there is some disenchantment with the president's tax cuts -- not themselves, but because it doesn't seem to be doing what he claims it's doing, which is to overcome the job loss and create new jobs," Green said.

He said the economic situation has given Kerry an opening in Ohio, but was probably not enough to win the state on its own.

"My sense is that at least in this state, Kerry is playing to tie on the foreign policy questions and the so-called values issues, the shorthand for which is God and guns. He comes into Ohio and he talks about being a sportsman, he talks about his military record, he talks about his faith, but he probably can't win on those issues," Green said.

"What he can hope for is to just play even with the president, minimizing Bush's strengths in some of those areas, but if he does play to tie that opens up the possibility that he can win on the economy."

Kane said that lackluster payroll survey figures could overshadow other economic indicators -- such as GDP growth, the household survey and the unemployment rate -- that show the economy was picking up. The Labor Department reported just 32,000 new net jobs in July. (July payroll growth far shy of Wall Street forecastsexternal link)

He said the payroll figures were flawed because people who move from one job to another in the same month are counted twice -- once at their new job and once at their old job.

Kane said that job turnover has dropped dramatically since September 11, which has contributed to the lower job figures.

"I think that one of the funny things is, our economy has six or seven speedometers and six of those show acceleration and great robust speed but one of them doesn't. Well, you're perfectly suited for a political campaign because you get to pick the speedometer you want people to focus on," Kane said.

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