Economy Steals Spotlight Among Debate Issues

The issue that has taken over the upcoming election is the economy. Uncertainty in the markets has forced presidential hopefuls Barack Obama and John McCain to adjust their economic proposals. Both candidates unveiled their plans this week — just in time for Wednesday's final debate.

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The financial-rescue plan is sure to be front and center tonight as the presidential candidates hold their third and final debate at Hofstra University in Long Island, New York. The focus is domestic policy, and the discussion is sure to be dominated by the turbulent economy. Both Democrat Barack Obama and Republican John McCain retooled their economic proposals this week, just in time to debate them tonight. NPR's Don Gonyea reports.

DON GONYEA: While both of these very different presidential candidates supported the president's rescue package for the financial sector with their votes in the Senate, their ideas on where to go from there diverge dramatically. For Barack Obama, the intense focus on the economy is a chance to heighten an issue on which Democrats have a distinct edge in the polls. On Monday, Obama introduced what he calls a rescue package for the middle class. And no surprise here, he did it in the battleground state of Ohio.

Senator BARACK OBAMA (Democrat, Illinois; Democratic Presidential Candidate): So today I'm proposing a number of steps that we should take immediately to stabilize our financial system, provide relief to families and communities, and help struggling homeowners. It's a plan that begins with one word that's on everybody's mind, and it's easy to spell: J-O-B-S, jobs.

(Soundbite of crowd ovation)

GONYEA: Obama called for tax breaks for businesses that create new jobs, but he also offered some emergency measures for the moment, including a three-month moratorium on housing foreclosures and a chance for people to withdraw up to $10,000 from their retirement funds without the usual penalties. Helping people with retirement funds was also a priority in John McCain's new plan, unveiled yesterday in Blue Bell, Pennsylvania, also - you guessed it - a battleground state.

McCain would allow senior citizens withdrawing cash from retirement accounts to pay taxes at the lowest income-tax rate for up to $50,000. He would also increase the dollar amount individuals can write off if they sell stocks at a loss. The current $3,000 limit would go to 15,000. And he revisits his longstanding call to cut capital gains taxes.

Senator JOHN MCCAIN (Republican, Arizona; Republican Presidential Candidate): This vital measure will promote buying, raise asset values, help companies, and shore up the pension plans for workers and retirees.

GONYEA: McCain did endorse, if reluctantly, the Bush administration move to strengthen banks by using $250 billion federal to buy stock in banks and other financial institutions. Still, he offered this promise to taxpayers.

Senator MCCAIN: We're going to get government out of the business of bailouts and equity stakes and back in the business of responsible regulation. Responsible regulation.

(Soundbite of crowd ovation)

Senator MCCAIN: We will learn from this crisis to prevent the next one, with much stricter oversight.

GONYEA: A basic difference between these two plans is that McCain's measures do more for those who have been saving for a while: older people and those who are better off. McCain says his proposal will ultimately help business owners who can create jobs. And everyone, he says, will benefit from an improved job market. McCain added that his plan would reassure the country while, he says, Obama is the biggest risk the country has ever been asked to take. Yesterday afternoon, Obama held a brief news conference and reacted to one element of McCain's speech.

Senator OBAMA: I haven't looked at all the details of his capital gains proposal. I will tell you that nobody really has capital gains right now. So, if the idea is to cut capital gains taxes when I don't know anybody, even the smartest investors, who right now are going to be experiencing a lot of capital gains, that probably is not going to be particularly useful in solving the financial crisis.

GONYEA: Obama did describe as a bad idea Senator McCain's earlier proposal to buy up mortgages from banks. That proposal would protect banks from losses but put taxpayers on the hook for those losses, at least temporarily. Tonight's debate will not be limited to the plans the two men laid out this week, but it will focus on the national anxiety those plans are intended to relieve. Don Gonyea, NPR News.

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