McCain vows to deal with severe economic crisis

PRESCOTT, Arizona (Reuters) - Republican presidential candidate John McCain said on Saturday he would not underestimate the severity of the ongoing U.S. economic crisis and would keep open all options to deal with it.

"When Alan Greenspan says this is the worst crisis since World War II, we have a major challenge and we should never underestimate it, nor exhaust all the measures that we need to put into effect," McCain said, referring to the former Federal Reserve chairman.

The economy has become increasingly important in the presidential campaign, surpassing the Iraq war as the top concern of voters heading into the November election.

A protracted downturn could bode ill for the Arizona senator, whom Democrats are trying to taint with allegiance to polices of President George W. Bush.

McCain, who will run in November against Democrat Barack Obama or Hillary Clinton, spoke about the economy a day after a bleak report on jobs convinced many analysts the economy was in recession. The government report showed U.S. employers cut payrolls in March for a third month in a row and the jobless rate jumped to a 2-1/2-year high of 5.1 percent.

McCain told reporters he would oppose any big government bailouts, saying they had not worked in the past and would not work in the future. But he expressed support for the Senate's economic stimulus package.

"We have got to restore confidence on the part of the American consumer to invest, to save, to do the things that make our economy run," the Arizona Republican said.

"We have got to find the floor on the cost of houses. When we find the floor, then there will be people who will come in and purchase some of these at bargain rates," he said.

A sharp downturn in the U.S. housing market has led to a full-blown credit crisis that has reverberated throughout the U.S. financial system.

Still, McCain said he was confident about America's economic future. "The fundamentals of our economy are strong," he insisted.

Some Democrats have criticized McCain for advocating a less interventionist approach to the housing and financial crises than either Clinton or Obama. McCain said in a speech on the economy last month it is "not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers."

Both Clinton and Obama have said McCain's plans amount to little more than sitting on the sidelines of the economic crisis. Clinton, a New York senator, and Obama, an Illinois senator, have both repeatedly hammered McCain over a comment he made in December that "the issue of economics is not something I've understood as well as I should."

McCain said earlier this week that comment was taken out of context and he had meant to say he was not as steeped in economic issues as he was in foreign policy. A former Navy pilot and prisoner of war, McCain has been outspoken on international affairs.

"I know economics very well, certainly better than Senator Clinton and Senator Obama. So let's clear that up," McCain told CNN in an interview on Thursday.

(Writing by Caren Bohan and Jim Vicini, editing by Todd Eastham)