Obama and McCain square off over economy

ST. LOUIS (Reuters) - Presidential rivals Barack Obama and John McCain clashed over how to boost the ailing U.S. economy on Monday, with Obama pushing for a new stimulus package to help homeowners and McCain pressing for low income taxes and incentives for small business.

With Americans returning to work after the Independence Day holiday weekend, both candidates turned to the No. 1 issue for voters -- the economy -- in a bid to win support from people wrestling with home foreclosures, job losses and the soaring cost of gasoline.

In a speech to reporters after mechanical trouble forced his plane to make an unscheduled stop in St. Louis, Obama called for a $50 billion stimulus package to fight foreclosures and offset high energy prices. He said he would tighten rules for credit card companies and relax bankruptcy laws to help those struggling with debt.

Obama, a Democrat, said Republican McCain, like unpopular President George W. Bush, would favor the wealthy over the middle class if he won the November election.

"He trusts that prosperity will trickle down from corporations and the wealthiest few to everyone else," the Illinois senator said in remarks originally scheduled for delivery in Charlotte, North Carolina. "I believe that it's the hard work of middle-class Americans that fuels this nation's prosperity."

Obama delivered the address in St. Louis because his Midwest Airlines MD-80 made an unscheduled landing there after an emergency evacuation slide deployed inside the plane, U.S. safety investigators and airline officials said. Ordinarily the tail cone pops off and the slide deploys outside the aircraft.

The incident, which occurred about 10:30 a.m. EDT as the plane was climbing out of Chicago en route to Charlotte, increased the forces on the controls that work the horizontal flaps atop the plane's tail. That prompted the pilot to divert to St. Louis.

BALANCING THE BUDGET

Brushing up his economic credentials in a speech in Denver, McCain pledged to balance the federal budget, impose fiscal discipline on Washington and modernize how the government does business in order to save billions of dollars.

"I will veto every single bill with wasteful spending," he said.

Income taxes are a key difference between the two candidates.

McCain wants to keep in place Bush's 2001 and 2003 tax cuts, which are set to expire at the end of 2010, and he would double a $3,500 deduction for parents.

Obama would let the Bush tax cuts expire for those making more than $250,000 per year. He proposes a $500 per person tax credit and would eliminate taxes for elderly people making less than $50,000 per year.

"The choice in this election is stark and simple," McCain said. "Senator Obama will raise your taxes. I won't."

Obama rejected McCain's tax claims and said the Arizona senator's tax plan was designed to help the wealthy rather than the middle classes.

"Only a quarter of his total tax cuts will go to the middle class, less than a quarter," the Illinois senator said. "Ninety-five of people in America would get a tax cut under my plan."

He expressed skepticism over McCain's plan to balance the budget in four years.

"Not only is it overly ambitious," Obama said. "Every independent observer who has looked at John McCain's plan says that his plan would add $200- to $300-billion a year in deficit spending. He hasn't specified how he would bring it down. His own campaign has acknowledged that they don't have specifics."

Under Bush, the U.S. government's debt has nearly doubled to $10 trillion. Bush could leave his successor a record $500 billion budget deficit.

The candidates disagree in other areas connected to the economy, including trade and health care reform. Both propose spurring job growth through programs to increase U.S. use of solar, wind and other renewable energy sources, but Obama has been skeptical of McCain's energy plan.

"My opponent's answer ... is no; no to more drilling; no to more nuclear power; no to research prizes that help solve the problem of affordable electric cars," McCain said. "For a guy whose 'official seal' carried the motto, 'Yes, we can,' Senator Obama's agenda sure has a ... whole lot of 'No, we can't.'"

(Writing by Andy Sullivan and David Alexander; additional reporting by Jeff Mason, John Crawley and Andy Sullivan, editing by David Wiessler)

(To read more about the U.S. political campaign, visit Reuters "Tales from the Trail: 2008" online at blogs.reuters.com/trail08/)