Voters want solutions; do candidates have them?

WASHINGTON — The economy is deteriorating so quickly and dramatically that it threatens to overtake many proposals the presidential candidates have been offering for months.

Democrat Barack Obama and Republican John McCain are suggesting tax, spending and regulatory plans in response to soaring gasoline prices, a home-lending crisis and other woes hitting consumers. But it is far from clear that their ideas can seriously improve matters or even pay for themselves without expanding the deficit, as the candidates claim.

A year ago, the Iraq war and terrorism dominated the campaign, and that was reflected in candidates' rhetoric and poll results. Obama's opposition to the war helped propel him to the Democratic nomination, while McCain's national-security credentials swayed some GOP voters.

The landscape has shifted. New problems are cropping up almost daily, and voters will be demanding answers.

"I don't think either candidate has really spelled out how they would get us out of the mess we're in," said Rea Hederman Jr., who tracks the economy and campaign for the conservative Heritage Foundation.

Inflation has rarely been mentioned in the presidential contest, but that seems likely to change soon. The government reported Wednesday that consumer prices rose in June at the second-fastest pace in 26 years.

Polls show voters are clearly more concerned about the economy and gas prices than about the Iraq war and national security. McCain and Obama undoubtedly will return to these issues and offer new proposals, but perhaps the voters' chief question should be: Can they really help?

"The president doesn't have that much impact on the short-run fluctuations of the economy," said Alan Viard, an economist at the right-of-center American Enterprise Institute. The candidates will continue to talk about plans to help ease Americans' pain, he said, but voters should be wary.

For example, Viard said, McCain's proposal to temporarily suspend the federal tax on gasoline would do little more than encourage people to keep driving instead of conserving fuel. Obama has called McCain's plan a gimmick.

An Associated Press-Yahoo News poll conducted in June found that voters give Obama a slight edge over McCain in handling economic matters.

Democrats love to note McCain said in December, "the issue of economics is not something I've understood as well as I should."

The candidates offer fundamentally different approaches. McCain wants to cut taxes at most income levels, although high earners would reap the biggest benefits. Obama would raise taxes on the wealthy and pour more spending into subsidies of education, health care and other programs.

Obama says his programs would be paid for with tax increases or other savings. McCain says he would balance the federal budget by 2013. Economists are skeptical of both claims.

The candidates' specific non-health tax proposals would reduce tax revenues by $3.6 trillion in McCain's case, and $2.7 trillion in Obama's, over the next 10 years, says the Tax Policy Institute, a joint venture of the liberal-leaning Brookings Institution and Urban Institute.

"Including interest, the tax cuts would increase the national debt by $4.3 trillion [McCain] or $3.3 trillion [Obama] by the end of 2018," the institute said.

The candidates diverge on tax policies. McCain would continue President Bush's first-term tax cuts (which he initially opposed); increase the tax exemption for those with dependents; reduce the corporate income tax; exempt the great majority of estates from the estate tax; and eliminate the gas tax for this summer.

Obama would end the Bush tax cuts for high earners; eliminate income taxes for elderly people making less than $50,000 a year; reduce taxes on people making less than $75,000 a year; keep the estate tax on estates worth more than $3.5 million; and raise the capital-gains tax.

Obama calls for a "second stimulus" package of tax rebates amounting to less than a third of the $168 billion package approved last year. McCain says he would consider a stimulus package.