McCain outlines economic stimulus plan

COLUMBIA, South Carolina (Reuters) - Republican presidential candidate John McCain shifted his campaign emphasis in South Carolina on Thursday to the ailing U.S. economy and proposed a long-term economic stimulus plan to fight "tough times ahead."

Two days before South Carolina votes in a crucial Republican contest to choose the party's presidential candidate in the November election, McCain told supporters in Columbia and Aiken that the U.S. economy is in some difficulty now.

"The fact is we have some tough times ahead," McCain told supporters in Columbia. But he said the U.S. economy will rebound. "We will get through this rough patch," he said.

His shift to a greater focus on ways to help the economy came as rival Mitt Romney, a former governor of Massachusetts, hammered McCain on the same economic themes in South Carolina that helped him defeat the Arizona senator in Michigan on Tuesday.

McCain holds a steady 7-point lead over rival Mike Huckabee in South Carolina ahead of Saturday's vote, according to a Reuters/C-SPAN/Zogby poll.

South Carolina's Republican primary is the next battleground as both parties choose candidates to succeed President George W. Bush. Nevada also holds Republican and Democratic nominating contests on Saturday.

Romney had accused McCain of giving up on jobs lost in Michigan's faltering auto industry after McCain said some jobs there would not be coming back and it was important to retrain displaced workers for new high-tech jobs.

"I know there is a defeatist, pessimist attitude that says, 'Hey, those jobs are gone, they're gone forever,'" Romney said at a Staples Store in Columbia. "Well, I'm not going to sign up for that. I'm going to always be optimistic. I'm going to fight for every job."

Responding to concerns about a slowing U.S. economy on Thursday, McCain proposed a stimulus plan that would lower the corporate tax rate from 35 percent to 25 percent, allow expensing of equipment and technology investments and establish a permanent research and development tax credit.

McCain said he would pay for the plan by cutting what he called wasteful government spending in Washington.

His plan came as Washington was fixated on coming up with a short-term stimulus package to try to prevent the U.S. economy from slipping into a election-year recession.

While Romney said he would offer a short-term stimulus plan in the next few days, McCain expressed some skepticism about a short-term fiscal stimulus, saying he wanted to see where the money to pay for it was going to come from.

"You're going to hear from the Democrats, let's pump $70 billion, let's pump $80 billion, let's do this, let's do that. My friends, remember who's going to pay that. It doesn't come off a printing press, OK? It comes out of your pockets," he said.

McCain was joined on the campaign trail by Jack Kemp, who was the Republicans' 1996 vice presidential nominee and who is an ardent believer in tax cuts.

McCain's stimulus plan is a "long-term, pro-growth tax reform," Kemp said, while the short-term plans he is skeptical about are efforts to get cash to consumers most likely to spend it quickly, giving the economy an immediate boost.

McCain has taken some fire for voting against tax cuts enacted in Bush's first term. The cuts are due to expire in 2010.

With Kemp at his side, he now sounds like a true believer, saying, "Every time we have cut taxes we have increased revenues."

(Editing by David Alexander and David Wiessler)

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