’08 Candidates Respond to Economic Jitters

January 22, 2008— -- When the presidential race got underway, it was widely expected that the Iraq war would dominate the dialogue. But talk of the war has receded and the economy has moved to the forefront.

The new emphasis on economic issues was acutely on display Tuesday amid fears of a U.S. recession and a worldwide stock sell-off.

Speaking on a conference call with reporters, former Sen. John Edwards, D-N.C., said for the first time that he thinks the United States is in a recession. "Our country is no longer on the brink of a recession," said Edwards. "I think we're in one." Sen. Hillary Clinton, D-N.Y., warned that a deteriorating "global economic crisis" could spark a "long recession."

The former first lady called for President Bush to pass a stimulus package including new spending, mortgage relief, and tax rebates that go to everyone, including those who do not make enough to pay income taxes. During her press conference in Washington, D.C., she also called on Bush to convene the President's Working Group on Financial Markets.

Speaking at Furman University in Greenville, S.C., Sen. Barack Obama, D-Ill., accused President Bush of waiting too long to offer an economic stimulus package. He also criticized the president for neglecting the "50 million workers and seniors who need our help the most."

The Illinois Democrat also tried to make hay out of the fact that he called for a tax rebate before his top Democratic rival.

"Senator Clinton first released her economic stimulus plan, she didn't think that workers or seniors needed immediate tax relief," said Obama. "She thought it could wait until things got worse. Five days later, the economy didn't really change, but the politics apparently did," Obama concluded, "because she changed her plan to look just like mine."

Economic jitters also reverberated in the Republican race

Speaking in Boca Raton, Fla., Mitt Romney warned of a "solvency crisis.""Credit crisis is so 2007," said Romney. "2008 is a solvency crisis. . . And that's obviously a very fearful perspective and hopefully one that does not rear its ugly head in reality but people are talking about major institutions having difficulty maintaining their level of capital and the commitments that they have and so that creates a certain degree of concern."

The former Massachusetts governor also joked about his personal investments which are now beyond his control. "My money's now in a blind trust," said Romney. "I hope I still have it at Sun Capital and I hope that as of tonight, Sun Capital still has it too. We're all a little nervous about that."

As a former business consultant, Romney is hoping the heightened focus on the economy will play to his advantage. He recently unveiled a $250 billion stimulus package that is substantially larger than anything proposed by President Bush or the Democratic '08ers.

Former Ark. Gov. Mike Huckabee described the Fed's reduction of the federal funds rate as a "much-needed boost for the economy."

He added, however, that what is really needed is a fundamental revisiting of the nation's tax code.

Campaigning in Georgia, Huckabee reiterated his support for replacing all current federal taxes with a 23 percent sales tax. When he has been asked in the past if his "fair tax" proposal would hurt the economy by dampening consumer spending, Huckabee has quipped that Americans are always eager to spend.

Former New York Mayor Rudy Giuliani responded to the economic news by encouraging long-term tax relief as well as a reduction in government spending.

"I'd like to see permanent relief," said Giuliani. " I mean making permanent the Bush tax cuts, reducing the corporate tax 35 to 25% is what I recommended," he said adding that the capital gains tax needed to be cut also.

Giuliani also pushed for a reduction in non-military government spending.

The federal government "could announce cutbacks in the civilian agencies," said Giuliani. "Each agency could be looking for ways to make 5%, 10% cutbacks… We used to do that in New York City, when there was a prospect of some kind of downturn."

Speaking in Pensacola, Fla., Sen. John McCain, R-Ariz., reiterated his call for the House and Senate to pass the Bush stimulus package, provided that members of Congress do not weigh it down with earmarks.

McCain welcomed the Fed's interest rate cut, saying he hopes that it has a "beneficial effect." He also renewed his support for cutting "wasteful" spending, repealing the Alternative Minimum Tax (A.M.T.), and cutting corporate taxes from 35 to 25 percent.

"This economy can come back strong," said McCain, "because the fundamentals of it are strong."

ABC News' Eloise Harper, Sunlen Miller, Raelyn Johnson, Kevin Chupka, Bret Hovell, Jan Simmonds and Matt Stuart contributed to this report