Fix for economy a partisan dividing line

In the ideological gulf that divides the Democratic and Republican presidential front-runners on the issues, the economy looms largest of all.

With the economy showing signs of a significant and perhaps lengthy slowdown because of the subprime mortgage and credit crises, voters’ concern about their own economic future “is now as high as it has been in about a year and a half,” the Gallup Poll reported last month.

And there are even signs the economy’s weakness is forcing some candidates to recalibrate their economic proposals. A senior economic adviser to Sen. Hillary Rodham Clinton said she would delay her plan to raise taxes on people in the two highest income brackets because of the severity of the economy’s decline.

“She just thinks we are at a point where we are bordering on a recession, and you want to do everything you can to inject demand into the economy right now,” said Gene Sperling, who also served as President Bill Clinton’s national economic adviser.

As the Iraq war has dropped off the front pages after the decline in the levels of violence there, political and economic strategists say that major economic issues, from taxes to jobs to trade, will dominate the presidential-campaign debate in the weeks and months to come.

“With health care and energy costs skyrocketing, wages stagnating, and unemployment at its highest rate in years, American families have been feeling the strain Republicans have put on their pocketbooks. It’s no surprise, then, that the economy is now the top issue for both Democratic and Republican voters,” the Democratic National Committee said last week in a broadside on the Bush administration’s handling of the economy.

And Republican political and economic strategists readily admit that the economy is going to get worse before it gets better, and that will pose a major political challenge for Republicans.

“If it’s not a recession, it’s going to feel like one,” said David Smick, a Republican economic consultant who advises the White House and global business leaders.

“The problem for Republicans is the lag time. It’s going to take eight months for the stimulus effect to take hold, which means the economy will be improving but it won’t be in the data until later this year,” he said.

But a survey of the issues that separate the two major parties, and in some cases their candidates, shows that vast differences remain in their approach to bedrock economic issues that will affect most Americans.

Republicans, supportive of efforts to quickly stimulate the economy, also are calling for what they consider longer-term solutions, such as making the 2001 tax cuts permanent and enacting deeper income-tax cuts for workers, investors, savers and businesses.

Former Massachusetts governor Mitt Romney wants to further lower income-tax rates across the board, end the tax on capital gains, dividends and interest on savings, slash the corporate tax rate to 20 percent from 35 percent and eliminate the estate tax.

“He is proposing a deeper cut in the corporate rate, which will have a more positive long-term impact on global competitiveness for U.S. companies and goes further on capital gains and dividend tax relief than [Republican rival Sen. John] McCain, eliminating those taxes for people who make below $200,000,” said Cesar Conda, a member of the Romney economic board of advisers. “McCain simply keeps the present 15 percent capital gains where it is.”

“He also plans to provide individual income-tax rate relief, by reducing the bottom tax rate from 10 percent to 7.5 percent, effectively lowering everyone’s taxes by an average of $400 in 2008,” Mr. Conda said.

The front-runner for the Republican nomination, Mr. McCain, of Arizona, has not specified any new plan to reduce income-tax rates further, but he would cut the corporate tax to 25 percent from 35 percent, eliminate the Alternative Minimum Tax and make permanent the Bush tax cuts he initially opposed, saying those proposals would create confidence among businesses and taxpayers to better plan for the future.

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