Bush and Kerry Spar From Afar on the Economy

PHOENIX —  President Bush and Sen. John F. Kerry dueled Friday over an issue that could decide the presidential election -- the economy -- with the president painting a sunny picture of low interest rates and strong business growth, while his presumed Democratic challenger was decrying job losses and increasing poverty.

Although Bush was in the Sun Belt and Kerry in the Rust Belt, the two candidates were in effect debating one another on the national stage. The outcome of the election may hinge on which vision of the economy takes hold in the public mind.

Kerry, who described the economy as in weak condition, unveiled a plan Friday to cut corporate taxes by 5%. The Massachusetts senator said he would fund the proposal by ending a tax break that he said encouraged companies to add jobs overseas, rather than in the United States.

For his part, Bush portrayed the economy as thriving and highlighted rising rates of homeownership -- a trend he said he hoped to foster in a second term, especially among minorities like the largely Latino audiences he addressed Friday in Albuquerque and later in Phoenix.

“Things are improving. Things are getting better,” Bush told home builders and local supporters gathered in the adobe courtyard of an agricultural exposition center in Albuquerque. “Thanks to being the most productive workforce in America -- and I might say thanks to good policies -- this economy is strong, and it’s getting stronger.”

Kerry sketched a starkly different picture.

“This president doesn’t have a record to run on, but a record to run from,” Kerry told students at Wayne State University in Detroit. “A record of negative job growth and stagnant incomes, with long-term unemployment at its highest level in 20 years and manufacturing jobs at a 50-year low.”

“Under President Bush, 3 million more Americans have slipped into poverty and 4 million more have lost their health insurance,” Kerry said.

Each candidate added lines to his speech seemingly designed to counter the other. As if answering Bush’s claims on high homeownership rates, Kerry said “bankruptcies and foreclosures are the highest they have ever been.”

And Bush modified his language on trade issues, making his position sound more like Kerry’s: “My attitude is, if our markets are open, I want the other people’s markets to be open.”

Bush, who has not talked about broadband Internet access in two years, suddenly took up the issue Friday, calling for universal access by 2007 and an end to taxes on broadband access. In his speech two hours later, Kerry also mentioned broadband, pledging to offer a plan to spur the growth of new technologies. For both candidates, the high-tech industry is an important source of financial and electoral support.

Two years ago, Bush promised his administration would work to make high-speed Internet access available in more areas, saying wider deployment of broadband services would help stimulate the economy and create new jobs. But legislative efforts to promote broadband have stalled.

Bush’s focus on homeownership is part of a campaign strategy to build a vision of the nation as an “ownership society.” Under that vision, Social Security and other programs might be partially replaced by privately owned stock and bond accounts, in which people save for their retirement, healthcare and education.

The homeownership theme also has resonance with minorities, especially Latinos, who are a critical constituency in Arizona and New Mexico -- both front-line states in the election. Bush lost New Mexico by fewer than 400 votes in 2000, and he took Arizona with 51% of the vote.

Bush chose a carpenters union training center for his remarks in Phoenix, where he emphasized that more housing starts meant more jobs for carpenters.

“Housing starts in 2003 were the highest in a quarter of a century,” Bush said. “The homeownership rate is the highest ever. And that’s fantastic news for America. We want more people owning their own home.” The president acknowledged that the homeownership rate is lower for minorities.

“There is a minority homeownership gap in America,” Bush said. “Not enough minorities own their own homes. And it seems like to me it makes sense to encourage all to own homes.” To that end, Bush pledged $2.6 million in Arizona and $900,000 in New Mexico to help minorities make down payments.

Kerry said his “Jobs First” proposal outlined Friday was the first of many that together would create 10 million jobs over four years.

One aim of the plan is to slow the flow of U.S. jobs to foreign nations. Kerry has railed for months about “Benedict Arnold CEOs” who move operations and jobs to other countries.

Under current federal tax law, companies that earn profits from overseas operations often pay foreign taxes, but they do not have to pay U.S. taxes on that money until it is returned to the United States.

Kerry and others have said this encourages companies to keep their foreign profits overseas, and to invest them in overseas plants and foreign workers. That way, they can avoid U.S. taxes on their overseas profits indefinitely.

“If a company is torn between creating jobs here or overseas, we now have a tax code that tells you to go overseas,” Kerry told an audience of about 350 in a university auditorium. “That’s crazy. And if I am president, it will end.”

Kerry called for taxing a U.S. company’s overseas profits at the same rate as its profits earned in the U.S. The change, he said, would encourage companies to move their money into the United States for investment in local plants and local workers.

Gene Sperling, a former top economic advisor to President Clinton who helped Kerry develop the plan, said changing the tax law on overseas profits would bring about $12 billion a year into the U.S. Treasury.

Kerry would use that savings to cut the standard corporate tax rate from 35% to 33.25% for all companies. Greater tax breaks would go to companies that created jobs or provided health insurance to workers. Companies that hired workers would receive a tax credit equal to the increase in the company’s payroll taxes. A smaller credit would be given for those providing health insurance.

Kerry asserted that 99% of tax-paying companies would get a tax cut under his plan.

Kerry also used the speech and the proposal to send a larger message: that he cannot be pigeonholed as a tax-raising, liberal Democrat, as the president has argued.

“Some may be surprised to hear a Democrat calling for lower corporate tax rates,” Kerry said. “The fact is, I don’t care about the old debates. I care about getting the job done and creating jobs here in the United States of America.”

Kerry called the plan “the most sweeping reform of international tax law in over 40 years.” But Republicans said it amounted to mere “tinkering” that would do little to create jobs. They also said Kerry needed to explain how he would pay for other new programs he had proposed, which Republicans claimed would cost $1.7 trillion over 10 years.

Kerry said he would make other economic proposals to spur the growth of new technologies like broadband, lower healthcare costs to U.S. companies, improve worker training and cut energy costs while creating new jobs in alternative-fuel industries.

Democrats believe that the stagnant job market could be one of their most powerful arguments for ousting Bush. In the Detroit area, unemployment last fall stood at 14.3%, while 6.6% of Michigan workers were reported without jobs. The unemployment rate nationally is 5.6%.

Midwestern states hit hard by the loss of manufacturing jobs are expected to be some of the prime battlegrounds of the November election. An Ohio poll released Friday showed Kerry and Bush in a dead heat in that state.

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Reynolds reported from Albuquerque and Phoenix, and Rainey from Detroit. Times staff writer Jube Shiver Jr. in Washington contributed to this report.