By John W. Schoen Senior producer
msnbc.com
updated 9/4/2008 8:03:58 AM ET 2008-09-04T12:03:58

As Republicans wrap up their storm-shortened convention Thursday, presidential nominee Sen. John McCain is expected to underscore his plans to revive the slumping economy.

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But while polls show the economy is still the biggest issue on the minds of  American voters, it’s not clear how much impact either candidate's policies would have in boosting growth.

With inflation and unemployment rising in the final weeks of the presidential campaign, American voters are understandably nervous about economic security. In a recent Gallup poll, 43 percent identified the economy as the most important issue in the election.

On issues such as fighting terrorism or dealing with a newly energized Russian adversary, McCain holds a commanding lead in polls over his Democratic rival, Sen. Barack Obama. But by a sizable margin — 52 percent to 40 percent — likely voters said Obama is better able to handle the economy.

Obama also is seen as the better candidate to deal with issues such as health care and energy, according to Gallup. (Poll respondents gave Obama a statistically insignificant edge over McCain on tax policy.)

Republicans are hoping to tip those numbers this week in their candidate's favor. Meg Whitman, McCain campaign adviser and former eBay CEO, says the Arizona senator's speech will focus on "reform, prosperity and peace," including economic policies that are “first and foremost focused on small business."

“What he understands is that creating jobs is the most important thing as we go forward," she said. "And as you know, 70 percent of new jobs in America are created by small business. So his tax policy and regulatory policy is focused around small business.”

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The McCain campaign faces a tough set of challenges addressing economic issues. The Obama camp has made strides linking the current sluggish economy and stagnating wages to the policies of the Bush White House. That means key issues — like the weak job market — may upstage some of the “bump” the McCain camp might otherwise expect this week.

“On Friday morning we have an unemployment report, and it's probably going to be a pretty soft one,” said Greg Valliere, a political analyst at Stanford Financial Group. “That's the one issue that will come back and come back, I think, to Obama's favor.”

While both campaigns are going to great lengths to highlight differences in their economic proposals, neither side so far has advanced ideas that will have much immediate impact. Both advocate increasing offshore drilling and developing alternative energy sources to blunt the impact of rising energy prices, but those efforts will take years.

Rising inflation is being fueled by increased global demand for a variety of commodities from corn to steel. The mortgage meltdown and the resulting credit crunch are proving stubbornly resistant to the Federal Reserve’s efforts to push large quantities of money into the financial system. Job cuts lost to globalization will not be easily restored.

Neither candidate has outlined detailed plans to head off the huge financial strains faced by Social Security and Medicare as baby boomers begin to retire in greater numbers. Both candidates' proposals would increase the national debt, according to independent analysis.

McCain also faces a difficult task in striking the right balance between advancing solutions to economic issues such as home foreclosures and stagnant wages without overstating the economy’s weakness. Though economists are divided on whether the United States has entered a recession, the economy continues to show surprising strength — particularly in farming and manufacturing industries critical to several important swing states.

McCain’s personal wealth makes him vulnerable to voter fears that he’s out of touch with the problems faced by budget-stretched, middle-income voters.

"If the Republicans go down the road they went down in 1992 and said, 'Gee, things are actually getting better, this economy is pretty good,' they are going to run into the same kind of hostility and disdain," said Democratic strategist Robert Shrum. "And they’re going to make a bad situation politically even worse."

While both candidates have a laundry list of proposals to spur the economy, the biggest differences in their platforms center on tax policy.

McCain wants to make permanent the Bush administration tax cuts that are due to expire at the end of 2010 and cut corporate taxes.

Obama wants to expand child tax credits and increase top tax rates. He would also expand tax credits to low-income workers and eliminate taxes on seniors making less than $50,000 per year. Obama wants to raise payroll taxes for those earning more than $250,000 a year.

On health care reform, McCain’s plan is more modest; he wants to turn employer-paid health insurance benefits into taxable income and then enact a health care tax credit up to $5,000 for families.

Obama wants to target tax subsidies to low-income people, expand Medicaid to cover all adults up to the poverty line and all children in families with income up to three times the poverty level. Obama’s plan would also charge employers a 6 percent payroll tax penalty if they don't provide health insurance for employees. Obama’s critics say his health care proposals would be more costly than he has estimated.

“He has massive tax increases with figures that show his health plan (will cost) zero,” said Republican strategist Jack Burkman. “Can you imagine how big the tax increases will have to be when he's finally honest about how much his health plan will cost?"

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Both candidates are vowing to pay for any proposed new programs by closing tax loopholes, though they differ on which ones. But both fail the math test in balancing the budget, according to the Tax Policy Center.

Including interest costs, the tax research group says Obama’s tax plan would boost the national debt by $3.5 trillion by 2018; McCain’s plan would increase the debt by $5 trillion. Obama’s tax plan would cut taxes by $2.9 trillion from 2009-2018, while McCain would cut taxes by nearly $4.2 trillion, according to the center.

On energy issues, both candidates support increased spending on research and development of alternative energy sources. They also both support measures to limit greenhouse gases, and they support limited drilling offshore to help ease tight supplies of crude oil.

Both have opposed drilling for more oil in the Alaska's Arctic National Wildlife Refuge, although McCain’s selection of Alaska Gov. Sarah Palin for his running mate may signal a shift in that position. Palin told CNBC shortly before she was chosen that “we need to drill, drill, drill."

"Otherwise, I cannot believe that a domestic solution is any part of a national energy policy if they're not going to let Alaskans drill on our own lands and on federal lands within our own state,” Palin said. “And if a domestic solution isn't part of the national energy plan, then our nation is in a world of hurt."

That message is polling well with voters, especially in states where higher energy prices are hitting hardest: cold-weather states facing high heating bills this winter and sparsely populated states where drivers log the most mileage.

“On the other hand, a lot of the battleground states aren't those states," said Kevin Book, an energy analyst at FBR Capital Markets. "Some of those states are actually doing a little bit better on disposable income, driving less, more temperate climate. So that may not be the message that pulls it across for Republicans."

The Associated Press contributed to this story.

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