Economic proposals will be at center stage in final debate

NEW YORK – On the eve of the final presidential debate, Sens. John McCain and Barack Obama have issued a last-minute flurry of proposals meant to show expertise and focus on kitchen table worries and ailing markets.

With millions of voters taking a last side-by-side look, the contenders have plenty to hash out – from taxes to foreclosures to staggering bailouts – during Wednesday night’s debate at Hofstra University in Hempstead, N.Y.

At a McCain rally Tuesday in Blue Bell, Pa., an upscale Philadelphia suburb, real estate investor Joan Levin, 54, said she’s “praying” the debate elicits a serious discussion.

“I’m not so thrilled that the federal government had to bail out Wall Street,” she said. “I’ll watch like a good citizen, but I don’t expect much.”

The candidates seem to agree on one thing: the need to scrap the income tax on unemployment benefits. Obama called for that on Monday and McCain echoed him Tuesday.

“It is unclear to me why the government taxes money it has just sent you,” McCain told supporters in Blue Bell, where he outlined a $52.5 billion plan to curb taxes on capital gains and early withdrawals from retirement accounts, and fully ensure all savings accounts for six months.

From Toledo, Obama shot back that “nobody really has capital gains right now. That probably is not going to be particularly useful in solving the financial crisis (but) … I’m sure that Senator McCain will have more to say about it” at the debate.

Analysts expect the final debate to provide more revelations than the previous matches. The format allows more time for follow-ups, particularly compared with the “town hall” debate last week.

“The shotgun nature of the second debate made it very difficult to learn anything,” said Kathleen Hall Jamieson, director of the Annenberg Public Policy Center at the University of Pennsylvania.

The conversation on economics also is likely to be more freewheeling than at the first debate, Sept. 26 – the one McCain threatened to boycott pending a breakthrough on the $700 billion bailout package. Until that came, neither candidate was eager to stray far from talking points.

“The debates are taking place against the backdrop of this big, complicated economic problem,” said Alan Schroeder, a Northeastern University professor and author of a book about presidential debates. “They are probably not comfortable talking about economic policy.”

As the Bush administration rushes to invest $250 billion in wobbly banks, the candidates have tried to grab some of the spotlight by unveiling proposals aimed at foreclosures, job losses and failing banks.

In Toledo, an industrial city where the unemployment rate is nearly 9 percent, Obama called for a 90-day moratorium on home foreclosures and for new tax breaks for businesses that create jobs.

McCain sought to overcome doubts about his command of economic issues and distance himself from the unpopular president.

“So much of this decline in our markets and value destruction was due to the failure of Congress and the administration to come out with a timely rescue package,” he said.

They offered dueling proposals on retirement accounts.

McCain called for lowering taxes on the first $50,000 withdrawn from an Individual Retirement Accounts or 401(k) plans to help 9 million seniors.

Obama would let younger people withdraw up to $10,000 without penalty for the next two years, but McCain said that would encourage early withdrawals and lead to “continued instability in the market.”

Financial planners and economists find both approaches lacking.

“It sounds good for the people who are hurting right now. I’m not sure it makes sense,” said Alan Goldfarb, of financial strategies for Weaver and Tidwell Financial Advisors in Dallas.

For one thing, 401(k) rules already allow “hardship” distributions to pay tuition or medical bills, or to buy a first home – though the funds must be repaid to avoid a tax bill. And penalties are meant to deter people from dipping into retirement funds.

Dean Baker, co-director of the liberal-leaning Center for Economic and Policy Research, called the Obama proposal “counterproductive. … You have a lot of people who are losing their homes. If on top of that they lose their retirement savings, it makes things worse.”

And McCain, Baker said, is exaggerating the problem facing seniors because most people aren’t heavily invested in stocks by the time they reach age 70.