Economic confidence is key to door of White House

Suddenly one issue is dominating the thoughts of American voters as the election looms:

Eighteen months ago, as the housing crisis began to gain pace in the United States, the Republican and Democratic camps wondered how much the economy would become a key election issue.

Well, now they know. Nine weeks from election day, key polls show that the economy, the housing crisis and the worsening credit conditions on Wall Street are seen as the most important issues for the American electorate.

With one in every 464 households at serious risk of losing their home, foreign policy and the war in Iraq have slipped down the priority list for the American voter. Furthermore, many areas that appear to be experiencing the worst housing foreclosure rates, such as Ohio, are political swing states.

It has become imperative for John McCain and Barack Obama to prove their economic credentials, something that neither has shown to be a strong point during the skirmishing to secure their parties’ nominations.

Mr McCain, in particular, had a good deal of ground to cover. In January, he told reporters that the issue of economics was “not something I’ve understood as well as I should”. Worse, the Republican appeared to be politically hamstrung - endorsed by President Bush, whose tax cuts and support of universal home ownership have been blamed for sowing the seeds of the sub-prime mortgage debacle and for America’s crippling deficit.

He has, however, gained valuable ground. First, Mr McCain publicly backed a Bill to allow offshore drilling for oil, a move that is hoped will increase supply, ease the surging price of gasoline (petrol) and address one of the biggest threats to the American economy - inflation.

He has also kept his message simple, concentrating on jobs. With 450,000 Americans losing their employment every week, Mr McCain’s plans to cut corporate tax from 35 per cent to 25 per cent are aimed at coaxing companies to stay in the United States rather than outsource labour abroad. He is also seeking to apply the brakes to public spending.

Mr Obama, whose message of change is played against a background of echoes from the past, with unspoken parallels to President Kennedy and Martin Luther King, is trying to create jobs by promising to splash out on infrastructure projects, as part of the Democrats’ more modest version of the 1930s’ New Deal.

Don Kettl, Professor of Public Affairs at the University of Pennsylvania, said: “The economy is going to be the most important issue in November. But, in reality, there is very little that whoever is sworn in in January will be able to do. There is a very clear risk of inflation, but it’s hard to spend your way out of it with the deficit getting bigger. Bush’s tax cuts are set to expire very soon and also there is about to be a huge rise in the number of retirees. Put all together, everyone wants something to happen but there’s not a lot the new president is going to be able to do.

“Issues such as the weakness of the dollar, the mortgage meltdown and global trade are complex and interconnected. Very few people understand them, even fewer know how to solve them.

“The candidate who wins on the economy will not be the one with the best 16-point plan but the one who is able to create confidence.”

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-Suzy Jagger