Republican candidates look to South Carolina

GREENVILLE, South Carolina (Reuters) - Republican White House hopefuls turned their sights on South Carolina on Wednesday, the day after Mitt Romney's decisive Michigan win focused a topsy-turvy U.S. presidential race on growing voter worries about the economy.

Romney, a former governor of Massachusetts and business executive, rebounded from second-place finishes in the first two state contests to deliver a strong Michigan win over rivals John McCain and Mike Huckabee by pledging to revive the state's ailing manufacturing base.

With McCain leading polls in South Carolina, Romney told reporters it would be an "enormous surprise" if the Arizona senator did not capture Saturday's first primary election in the South.

"I am going to be campaigning hard here in South Carolina," he said in Bluffton. But he plans to spend the next two days in Nevada, where he leads in polls, ahead of that state's Saturday contest on the road to the November election.

McCain was more than happy to take on the front-runner's role. "I'll win here in South Carolina, that's all there is to it," he told reporters in Spartanburg.

Romney, McCain and Huckabee each have won one of the first three significant contests to pick the Republican candidate who will compete to succeed President George W. Bush.

The Democratic presidential candidates -- who had a largely friendly debate in Las Vegas on Tuesday -- stayed in the West and also focused on economic issues before the Nevada contest.

The two leading contenders, Sens. Barack Obama of Illinois and Hillary Clinton of New York, battled over claim by the Clinton campaign that Obama had backed a trillion dollar increase in taxes on working families to bolster the Social Security retirement system.

With the Iraq war receding from front pages, the economy has emerged as a potent issue with voters worried about high oil prices, a housing market crisis and warnings signs of a recession.

Romney, the son of a former governor of Michigan, said during his campaign there he would help revive the hard-hit auto industry just as he had saved companies and the troubled 2002 Salt Lake City Olympics.

McCain's campaign belittled Romney's Michigan win, noting his ties to the state and his extensive promises to help its struggling manufacturing base. Michigan has the highest unemployment rate of any state at 7.4 percent, nearly 3 points above the national average.

MICHIGAN CANDIDATE

"The Michigan candidate won the Michigan primary," McCain strategist Steve Schmidt told reporters. He labeled Romney's promises of economic help in Michigan "pandering" and said they would cost $80 billion to $100 billion over five years.

The loss for McCain, he added, was "maybe a quarter step back and we'll probably be a step forward by the middle of the day."

Huckabee, who advocates an end to income tax in favor of a flat consumption tax, said the United States needed to defend its manufacturing sector and the government must help businesses by not raising taxes or regulatory burdens.

"The entrepreneurial spirit is the one thing that revives the economy," Huckabee, a former Arkansas governor and Baptist pastor who hopes to capitalize in South Carolina on his strong appeal to conservative Christian voters, told CNBC.

McCain leads Huckabee by 29 percent to 23 percent in South Carolina, with Romney in third place with 13 percent, according to a Reuters/C-SPAN/Zogby poll.

"I think the winner in South Carolina has the chance to catch the momentum and carry this through Super Tuesday," said Republican strategist Scott Reed, referring to primary elections in 22 states on February 5.

Obama and Clinton renewed a dispute that began in November during a Las Vegas debate over Obama's willingness to consider raising the income limits on Social Security taxes.

Obama, who would be the first black U.S. president, criticized Clinton for a new flier in Nevada calling it a middle class tax increase.

He said his plan would affect only those earning more than $97,000 a year, a proposal he said would affect just 3 percent of Nevada's population. "Maybe she thinks that the top three percent of the population is average middle-class American. It is not," Obama said.

Clinton, who would be the first woman U.S. president, said Obama was wrong.

"He has consistently said on several occasions ... that he would entertain lifting the payroll cap," she said. "It would be a trillion dollar tax increase on middle class families."

(Additional reporting by Deborah Charles in Washington, Matt Bigg in South Carolina, Adam Tanner in Nevada. Writing by John Whitesides; Editing by Chris Wilson)

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