Can Kerry beat Bush on the economy?

By Stephen Evans BBC North America business correspondent

Could Mr Kerry steer the US economy through choppy waters?

How might John Kerry's economic policy be different were he to win in November?

The broad thrust is already clear: Mr Kerry would undo Mr Bush's tax cuts for those earning more than $200,000 a year and use the money to boost health cover and education.

So far, so simple. The plan - promise? pledge? - would be a straight redistribution from top to middle and lower. Mr Kerry's tax rises would hit only about 3% of tax-payers.

The gainers-in-chief would be about 27 million Americans who are not currently insured for their health care - the "working poor" - plus the less-than-comfortable middle class.

The question marks arise over Mr Kerry's second firm proposal. He says he would cut the public deficit by half over four years. To help do that, he would require any government spending increases to be covered by revenue increases.

Concessions

The difficulty would come if the economy refused to grow. Would President Kerry have the stomach to cut public spending? And if he did not cut spending, how would additional tax rises sit politically with the previously mentioned raise in rates for the rich?

Can Mr Kerry change his image in the eyes of the American people?

On business, Mr Kerry has been shrewd.

Democrats suffer from the accusation that they are worse for business than Republicans - despite evidence that profits and share prices have not risen more slowly under Democratic administrations, least of all the last one.

All the same, perhaps to counter that claim, Mr Kerry has said he would cut the corporate tax rate from 35% to 33.5%. He would also offer tax concessions to companies which invested profits made abroad back in America.

Flip-flopping

Mr Kerry is open to the accusation that he would be a protectionist president. After all, he - and even more so his running mate, John Edwards - has made strong protectionist noises to blue collar America to get its endorsement.

In the heat of power, his bark may or may not turn out to be worse than his bite. Certainly, Mr Clinton talked a lot tougher on protectionism than he acted. And certainly, Mr Bush has been more protectionist than some of his free market supporters might have liked.

It is impossible to know with crystal ball certainty how policies will work out economically or politically. Republicans say that their tax-cuts have got the economy moving up, albeit unsteadily, from recession.

Would Mr Kerry be prepared to cut public spending?

And that the tax cut on dividends helped the stock market recover, albeit unsteadily, from the crash. The Democrats counter that Mr Bush is the first president since Herbert Hoover under whom the American workforce has actually shrunk.

Mr Kerry's political difficulty is that people may not believe his assurance that only the richest will pay higher taxes.

On top of that, his assertion that he would be "better for business" sits uneasily with his comparison of business leaders who take work abroad to traitors.

He now says that the remark was "misinterpreted", but that may not satisfy those who accuse him of "flip-flopping" and saying different things to different audiences.

Doubters

There is no doubt there will be a long list of business endorsement for Mr Bush, though the common assumption that business always backs the party of the right simply is not true. Warren Buffett is no mean capitalist, and he is full square behind Kerry.

And the economy has often done rather well with Democrats in charge, from FDR to Bill Clinton.

But perceptions are what count in election campaigns so Mr Kerry will find the economy difficult ground on which to fight. Doubters are what he does not need, but doubters there will certainly be with an untried candidate.

"Better the devil you know" is a powerful thought when standing next to the ballot box.