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DARREN GERSH, NIGHTLY BUSINESS REPORT ANCHOR: Just as in the past, it seems that the outcome of this year`s presidential race may well hinge
on the economy. So with eight weeks to go, what are shaping up as the
election`s major economic issues? Where do the candidates stand on them?
And how are these positions resonating with the voters? Stay tuned to find out.

Good evening. I`m Darren Gersh. The markets were closed for the Labor Day holiday, so tonight we bring you a special look at the economic issues in the presidential election. For months, each side has been attacking the other on outsourcing, taxes and jobs. So with less than two months to go before Election Day, this is a good time to step back and take a look at whether the candidate`s promises add up.

Since political analysts consider reelection contests to be mainly referendums on the incumbent, we begin with President George W. Bush, his agenda for a second term and his record over the last four years. And every president`s economic record begins with jobs. In the last year, President Bush says 1.5 million Americans have found work.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Before we acted, the national unemployment rate is 5.5 percent, well below the national average of the 1970s, 1980s and 1990s.

GERSH: True, but there are roughly one million fewer jobs now than when the president took office and 1.3 million more people fell into poverty in the last year. As Democratic challenger John Kerry points out, many more Americans are under economic pressure.

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: More than 45 million
Americans don`t have any health insurance at all and some 25 to 30 million don`t have it for part of the year. Five million Americans have lost their health care coverage since the year 2000.

GERSH: But look at the gains the president points to: GDP growth is expected to come in at nearly 4 percent over the second half of the year. Home ownership is at record levels. The president argues the economic has overcome terrorist attacks, corporate scandal and recession.

BUSH: We`ve overcome these obstacles because of well-timed tax cuts.

GERSH: Well timed but costly. The deficit is now projected at $2 trillion over the next decade. Critics blame it on tax cuts.

ROBERT MCINTYRE, DIR., CITIZENS FOR TAX JUSTICE: He used the money
available in the most inefficient way possible. Instead of giving it out to people in states and places that the money would get spent and people would buy things and we`d get moving quickly, he gave it mostly to wealthy people who saved it or spent it on foreign travel or did things that did not help the economy.

GERSH: But the president insists his tax is only partly to blame for the record deficits.

BUSH: Not remember, the deficit again was caused by recession. We`re coming out of that or we`re out of it. Secondly, it`s caused by the war and we`re still in the war and thirdly the tax relief helped us generate more revenues.

GERSH: Having cut taxes and adding a prescription drug benefit to Medicare in his first term, the president is promising a bold agenda for his second. Mr. Bush wants to finish his first term agenda by passing an energy bill and tort reform and legislation to make his tax cuts permanent. Mr. Bush also plans to press forward with tax simplification. But the centerpiece is what the president calls the ownership society, health savings accounts and most importantly, a system of personal accounts for Social Security. The president argues ownership is the best security in a changing world.

BUSH: If you really think about what we`re talking about, we`re talking about policies to say to the American people, you`re in control of your life, not the government. The government`s not dictating how, you know what you, how you do things. You are.

GERSH: And now Senator John Kerry. The Democratic nominee says he has a better plan for the economy, one that will create 10 million new jobs in four years. Kerry`s plan calls for both tax cuts and spending discipline. At the heart of Kerry`s plan is a line that always generates applause.

KERRY: We believe it`s a value that you put in practice that you make certain that Americans aren`t asked out of their hard-working tax money, that their money is taken and actually used to reward a company that takes your job overseas. When I`m president, never again will any American subsidize the loss of their own job. We`re going to end that nonsense.

GERSH: To do that, Kerry proposes to overhaul the international tax system. U.S. companies that now invest overseas do not have to pay U.S. income taxes until they bring their profits back to the United States. Kerry calls that a tax break for shipping jobs overseas and he plans to end that so-called deferral. To encourage investment at home, Kerry also says he`ll cut the corporate income tax rate by 5 percent. To generate jobs in the short run, Kerry is calling for tax credits in manufacturing and other industries hit hard by outsourcing. For each new worker hired, Kerry`s plan would cover the payroll taxes for two years.

KERRY: I have a manufacturing job tax credit that I`ll put in place to encourage companies to be more competitive and create the jobs here rather than moving overseas.

GERSH: The Kerry campaign insists that no one policy change is an economic silver bullet. Rather it is the overall approach that matters.

GENE SPERLING, KERRY ECONOMIC ADVISER: Senator Kerry believes that the way to lay a foundation for private sector job growth is to have strong fiscal discipline, is to have tax incentives for new jobs, is to bring down the cost of health care, of energy, of the type of things that have served as barriers to job creation during the last two years.

GERSH: But at the same time, Kerry is promising new benefits, keeping the Bush tax cuts for the middle class and expanding tax cuts for education and health care, all this on top of a $650 billion health care plan. Analysts say the bottom line is Kerry will make the Federal bottom line worse, not better.

LEONARD BURMAN, TAX POLICY CENTER, THE URBAN INSTITUTE: Overall,
according to our estimates, the Kerry plan would add about $1.2 trillion to the deficit over the next decade which is basically what President Bush`s plan would do as well. So it`s not a great triumph for fiscal responsibility, but it`s not any worse than what the president`s proposing.

GERSH: But there is a difference. Kerry says he will reinstate old rules enforcing the budget documents that roll off the government printing presses. But timing is everything. Kerry plans to abide by the pay as you go rules after his tax cut and spending programs are enacted.

BURMAN: It`s a little bit like an alcoholic saying after this one last drinking binge, I`m going to stop drinking for good.

GERSH: That kind of talk infuriates Kerry aides, who say their man has a 20-year record supporting budget discipline, a sharp contrast to a president who wiped out a $5 trillion surplus.

SPERLING: President Bush came into office and completely and single handedly obliterated a bipartisan commitment to fiscal discipline.

GERSH: If you doubt Kerry`s commitment to deficit reduction, the campaign would remind you that the senator is being advised by four Clinton aides and deficit hawks like Robert Rubin. The hope is, if you`re nostalgic for the fiscal record of the `90s, you`ll vote for Kerry.

For a closer look at the electoral landscape on this Labor Day and more perspective on the candidate`s economic platforms, I spoke with Stuart Sweet, president of Capital Analysts Network and a prominent neo-conservative commentator. I began by asking how the race stacks up as we enter the campaign`s closing weeks.

STUART SWEET, PRES., CAPITAL ANALYSTS NETWORK: The race remains Kerry`s to lose. By the usual measurements that we look at these things, Bush is serious trouble for an incumbent. Forty-six percent of the people say they want to see Bush re-elected; 50 percent say they do not. Another measurement that is often used to judge these things is the president`s approval rating. Presidents who have approval ratings of 52 percent or higher make it back. Presidents who have approval ratings 48 percent or lower, do not make it back. Bush is around 49 percent. So if Kerry can consolidate that 50 percent of the population as of now thinks that he should not, he does not deserve reelection, the John Kerry will be the 44th president of the United States.

GERSH: So if it looks like we`re heading into a very, very close election, what are the issues that are going to decide this?

SWEET: Well, there are a variety of tactical factors as well as issues that can determine the winner. Something as surprising as the weather can determine the outcome. If it`s raining and nasty in Ohio and Pennsylvania on Election Day, that might help the president. If there is a terrorist episode here in the United States, that might also help the president. If there`s a defeat in Iraq, that would hurt the president. If Ralph Nader does not succeed in getting on the ballot in a variety of
states, that would help Mr. Kerry.

GERSH: Is it going to be these macro issues of the economy or are we down to the point where it`s going to be micro issues that move people one way or the other?

SWEET: If it`s a close race, the micro issues will probably prove decisive and there will be some surprises. For example, on the gay rights issue, there are several swing states where this could actually help Mr. Bush. If it looks like we`re heading for overtime in politics, then who`s going to decide this race will be nontraditional voters, people who usually don`t vote. There`s as many as 80 million Americans who could vote but elect not to and if these conservatives are energized for example on the gay rights issue, this could be a surprising reason
why President Bush comes back and wins the race.

GERSH: We keep hearing about swing voters. The swing voters will decide the race. Who are these people? Who are the swing voters?

SWEET: Well, the swing voters are, tend to be younger people. They tend to be under 40. They tend to be high school graduates that usually have little college education and they tend to make less money than the rest of the electorate. They also tend to be less well informed than other members of the electorate. Partisanship seems to correlate very well with educational attainment. The more college you have, the more likely you are to be partisan. Partisanship also tends to be correlated with income, which is somewhat surprising. So they tend to be folks who are young. They`re not certain of their party affiliations, perhaps because they don`t read as much, perhaps because they don`t earn as much,
perhaps because they don`t care as much.

GERSH: Let me ask you about the issues though. The president`s laid out a big theme about the ownership society. Is it a coherent economic strategy? Is it new and will it make a difference?

SWEET: Well, neither Mr. Kerry or Senator Kerry or President Bush are likely to get much of what they`re proposing actually adopted into law. There`s a big difference between campaigning and governing and campaigning is about getting more votes than the next fellow. What you do once you`re in office often in quite different than what you say, what you say you`re going to do while you`re campaigning for votes. So the president may talk about modernizing Social Security. It`s unlikely he would ever get such a proposal through the Congress.

GERSH: Let`s talk about Senator Kerry. Is he going to get everything he wants should he become President Kerry through the Congress or are we looking at a much different actual Kerry agenda?

SWEET: Senator Kerry`s problem is getting his agenda through the Congress or even more problematical than they would be for a reelected George Bush because the Congress is probably going to remain in Republican hands and Republicans are unlikely to give President Kerry much of anything on his agenda which means that Senator Kerry will probably try to do as much as possible through regulation where he cannot be blocked by the Congress. But there`s only so much he can do as a regulator. You really need the Congress to make lasting changes. So these two men are talking about sweeping change, but they won`t be able to deliver.

GERSH: Let me ask you about the Senate, because that seems to be a wild card in all of this, that it`s possible that the Senate could switch over. How likely is that and what would that mean?

SWEET: There`s several volatile races that will determine who controls the Senate. At the moment, I would say there`s about 35 percent chance that the Democrats could reclaim. The odds actually go up if Senator Kerry wins because then Senator John Edwards would cast the vote, the tie-breaking vote. So a 50-50 tie goes to the president`s party because the vice president casts the 51st vote. So if you believe Kerry`s going to win, then perhaps we`re closing in on a 50-50 chance. If you think that Bush is going to win, then we`re probably somewhere around 30 percent.

GERSH: The bottom line on this election?

SWEET: Bottom line is that this is going to be a hard-fought election. It will be exciting if you`re interested in politics. The race probably will be decided the last two weeks before we vote.

GERSH: Stuart Sweet, president Capitol Analysts Network. Thanks a lot.

SWEET: Thank you.

GERSH: Some call them swing states, others battlegrounds. They`re the 16 purple states, not now solidly Republican red, nor Democratic blue. Many are in the industrial heartland. Ohio is a perfect example. No Republican has won the White House without it and Democrats think they have a good chance to take back the Buckeye State. On a recent visit to Ohio`s Stark County, I found a state divided not only politically, but economically as well. The sparks are flying again at Alliance Castings. They`ve been forging railroad couplings and frames here in eastern Stark County, Ohio, for more than a century. But the flames died out three years ago and the plant shut down as the recession began. It reopened in January only after Alliance Mayor Tony Middleton beat out the Chinese
competition and convinced investors to bring back the factory where he`d
worked briefly as a young man.

MAYOR TONI MIDDLETON (R), ALLIANCE, OHIO: Eighteen years old, I operated one of those right here.

GERSH: 430 people now work here. Still Mayor Middleton, a Republican, calls the economy slow. But it is recovering he says, even if the president doesn`t get enough credit for it.

MIDDLETON: I believe the tax cuts have helped the individuals putting some dollars in their pockets that they were able to spend or save. It helped them out.

GERSH: The help is easiest to see in the Stark County suburbs where Republicans will tell you the Bush voters live. Retail sales along the strip are booming. Luxury homes rise row after row from old corn fields, although if you drive to the middle of the county, you will see the new American economic divide. Here it is industrial America. The Timken Company (TKR) has announced plans to cut 1300 jobs at its Canton manufacturing plant. In North Canton, Hoover has laid over 380 workers.

MIKE MCNICHOL, HOOVER WORKER: We`re fighting for our lives, our jobs.

GERSH: At the International Brotherhood of Electrical Workers Union hall, I spoke with four men with more than 100 years combined work experience at the Hoover plant.

BRUCE LIGHTELL, HOOVER WORKER: It`s tense. You go, even walk in our
factory, I mean you can see it in people`s faces. They don`t know what tomorrow`s going to bring. I mean it`s not a good thing.

GERSH: When demand for high end vacuums dried up, the overtime went with
it, leaving behind jobs at the mall paying half the hourly wage at the Hoover plant.

RICH PHILLIPS, HOOVER WORKER: That`s not going to put your kid through
college or buy you a new car. It might pay your bills, but that`s it.

GERSH: Economist Ned Hill believes Ohio has a strong technologically
savvy manufacturing base, but his research finds faith in the future has
been shaken.

NED HILL. CLEVELAND STATE UNIVERSITY: This state really does need an
economic psychotherapist, because the investment climate is so bad and its faith in its own economic base, what we do well, is just terrible.

GERSH: And there is a big difference between economic recovery and economic security.

HILL: You may have a job, but if you think it`s in play, you don`t feel very comfortable. So for the president, the real question isn`t whether someone has a job or doesn`t have a job, it`s how secure they feel in that job.

GERSH: Since President Bush took office, Ohio has lost 123,000 jobs. Alliance Casting is planning to add new shifts and new products but at best, Mayor Middleton figures the president will only come out neutral on the economy.

MIDDLETON: Look at the stock market and those in the county that have invested in the stock market, went through the pitfalls and decline and now it is recovered and come back strong. They`re going to say, yes, those economic policies that the president has put in place have been an asset, a benefit.

GERSH: But Middleton understands blue collar workers might feel differently and they do.

PHILLIPS: If you make over $100,000, things are wonderful. You`re getting all kinds of tax benefits. The stock market`s coming around a little bit, but for the average person, I don`t see it.

GERSH: People here will tell you, as Stark County goes, so goes Ohio and the nation. So when it comes to the economy and the election, it looks as if the country is going in two directions at the same time.

So as the campaign goes into its final weeks, how are the Bush and Kerry economic messages going over with voters? To get a sense of opinion around the country, NBR executive editor Linda O`Bryon assembled a group of journalists from various national and regional newspapers.

LINDA O`BRYON, NIGHTLY BUSINESS REPORT ANCHOR: As we saw four years ago, the key to winning the presidency may not be getting the largest popular vote, but getting the largest number of votes in the right states. So to
help us find out how the economic issues are playing out regionally, joining us are three distinguished journalists. In Florida, Alina Lambiet, national news editor at the "South Florida Sun Sentinel," in New York, Susan Page, Washington bureau chief for "USA Today" and in Texas, Mitchell Schnurman, columnist for the "Fort Worth Star-Telegram."

Susan, let`s begin with you. You`ve written that it sounds like the two candidates are running for the presidency on different planets when it comes to their views on the economy. How can they be so far apart?

SUSAN PAGE, WASHINGTON BUREAU CHIEF, "USA TODAY": Well, Linda I think it`s really a tale of two economies. If your job is secure, you`ve got health insurance, you`ve refinanced your house to take advantage of low mortgage rates, the economy may feel pretty good to you, but if you`ve been laid off. You`re one of the Americans, increasing number of Americans who have lost their health insurance, these are pretty tough times.

O`BRYON: Let`s talk about Texas. Mitchell Schnurman, you`re there, the president`s home state. This is one state that`s probably not up for grabs but is the Bush economic message hitting home with voters there?

MITCHELL SCHNURMAN, COLUMNIST, "FORT WORTH STAR-TELEGRAM": George Bush is doing a lot better in Texas than the economy is. It`s funny because Texas usually led the country in the 1990s, but ever since the recession hit it, stay in a recession longer, it`s been a lot slower pulling out.
The whole Democratic argument about two Americas, you would think it
would fly in Texas, because the latest census data shows that all kinds
of numbers are down. Income is down. Texas has more uninsured people
than any other country and here`s a stunning number. Almost a third of
Texan households make less than $25,000 a year. Yet George Bush has support by a 2 to 1 margin in his home state.

O`BRYON: Amazing. Alina Lambiet, just as it was four years ago, Florida is a key swing state and both campaigns have devoted a lot of time and money in the sunshine state. Is the economy a major issue in Florida.

ALINA LAMBIET, NATL. NEWS EDITOR, "SOUTH FLORIDA SUN SENTINEL": I would say it certainly a major issue right after war and security issues. For
Floridians, as Susan mentioned, the issues are, if you`re doing better today, you`re probably happy with the status quo but we`re looking at jobs, the quality of jobs. We`re doing a little bit better than the rest of the nation in terms of unemployment, but what kinds of jobs are they? Are they high paying jobs and are they good jobs?

O`BRYON: So it sounds like Florida is more reflective of the nation as a whole rather than Texas, is that what you`re saying?

LAMBIET: Yes, absolutely and here they`re really neck and neck. Depending on which poll you look at, they`re within the percentage of the margin of error.

O`BRYON: Susan, when it comes to jobs, the manufacturing sector has been
hardest hit. Is that going to be a problem for the president in the nation`s heartland?

PAGE: It definitely is. It looks like it may cost him the state of Ohio. No Republican has ever won the presidency without winning Ohio, but at the moment, John Kerry is ahead there and when you ask voters what they`re worried about, what they`re worried about are jobs, the loss of manufacturing jobs. And as we were just hearing, the jobs that have been created tend to be service jobs that pay less and often don`t carry benefits so in places like Ohio, Michigan and Pennsylvania, that`s the heart of the problem for George Bush when it comes to jobs.

O`BRYON: Of all the economic issues, do you think jobs in number one nationwide?

PAGE: For economic issues, I think there are two big issues: jobs and health care. We haven`t heard as much about health care but when you talk to voters, you really hear their concerns about whether they`re going to have health care coverage, whether they`ll be able to afford it.

O`BRYON: Mitch, the Kerry campaign has been trying to turn high oil prices into an issue, but in Texas, isn`t a rise in energy prices good for the local economy?

SCHNURMAN: Well, Texas is one of the few states, there`s only eight that benefit from an increase in energy prices, but it`s not like it was 25 years ago. Back then, there was a spike in oil prices. It created a whole boom down in the sunbelt, including Texas, but today, back then there were 300,000 people working in oil. Today there`s only about a third of that. So it just doesn`t have the same ripple effect. It doesn`t affect the economy in the same way.

O`BRYON: All right. Let`s turn to Florida again and the issue of Social Security. Alina, that has been called the third rail of American politics and retired voters are known to punish any candidate who calls for tampering with the Social Security system. Is President Bush`s support for giving workers choice of investing, sort of privatization for some of their Social Security savings, hurting him among Florida`s retirees?

LAMBIET: Well, it`s really a brilliant move on the president`s part. It really doesn`t affect today`s retirees, the ones who are the faithful, the faithful flock who vote in every election and who faithfully vote. So I think it rings very good with some of the soon to be retiring workers and some of the younger workers, but certainly it doesn`t do much for today`s retirees. It really won`t have much of an impact on them.

O`BRYON: Susan, the Kerry camp has been hitting hard on the Bush tax cuts, saying the top 1 percent of taxpayers are the people who are most benefiting. Is this strategy working for Kerry among the middle class?

PAGE: You know, in a way it`s works when you talk about we don`t want to give tax cuts to the rich. On the other hand, Kerry has the traditional problem Democrats have, which are people inclined to believe they`re going to raise their taxes. It`s certainly a tack that we`ve heard the Bush campaign take. So in a way it`s a - he has to walk a line when he talks about taxes to reassure people that he`s not talking about the middle class. He talks about households who make $200,000 and more which certainly means that most middle class people would not have their taxes raised under a Kerry administration. But taxes traditionally have been a tough issue for Democrats.

O`BRYON: OK and with that we`ll close it there. Thank you all. I`ve been speaking with Susan Page of "USA Today," Mitchell Schnurman of the "Fort Worth Star-Telegram" and Alina Lambiet of the "South Florida Sun-Sentinel." Darren.

GERSH: If you`d like to find out more about the issues we discuss, go to our Web site, nbr.com and while you`re there, you can check out my column, Gersh on Washington.

The markets will reopen for trading tomorrow and we`ll be back with our usual coverage. With 57 days left to go in the campaign, we`ll keep you apprised on all the economic issues that may help decide who gets to live here at the White House for the next four years. In Washington, I`m Darren Gersh, for all of us at NIGHTLY BUSINESS REPORT, good night.

Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by FDCH e-Media, Inc. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. (c) 2004 Community Television Foundation of South Florida, Inc.