Last debate eyes financial crisis

HEMPSTEAD, N.Y. -- Democrat Barack Obama and Republican John McCain met each other on the stage here for their third and final presidential debate Wednesday, touting their economic plans amid more further bad financial news.

The candidates debated domestic policy at Hofstra University just hours after the stock market plunged more than 700 points for the second time in three weeks.

The two debated tax increases as McCain accused Obama of waging class warfare by advocating tax increases designed to "spread the wealth around." Obama denied it, and countered that he favors tax reductions for 95% of all Americans.

"Nobody likes taxes," Obama said. "But ultimately we've got to pay for the core investments" necessary for the economy.

"If nobody likes taxes, let's not raise anybody's, OK?" McCain retorted with a laugh.

Both candidates stressed economic proposals they have re-tooled in recent days. Obama, who has pulled ahead in national polls, this week proposed a new package of tax relief, including tax credits for businesses that create new jobs.

McCain proposed suspending rules that require seniors to sell stocks from retirement accounts at age 70 ½ or retirement. The Arizona senator also proposed cutting the capital gains tax in half, from 15% to 7.5%, and eliminating income taxes on unemployment benefits.

Obama has also proposed penalty-free withdrawals for up to 15%, or $10,000, from a 401 (k) or Individual Retirement Account. McCain criticized that proposal, saying it would encourage more selling of stock at a time when the markets are volatile.

Instead, McCain has proposed taxing retirement account withdrawals at 10%, instead of the varying rates on other income.

Spokesman Tucker Bounds said McCain will argue that Obama's plans will lead to higher taxes and bigger government, while stressing his own experience and record of reform. Bounds also said McCain could raise Obama's relationship with former 1960s radical Bill Ayers.

"He's certainly going to draw stark contrasts," Bounds said, adding that McCain is going to be aggressive. "In a word, fight."

Obama spokeswoman Linda Douglass said the Illinois senator would "keep talking to the middle class" and their worries about the economy, rather than side issues such as Ayers. He is a founder of the Weather Underground, which was linked to bombings.

"In every debate, he's kept his focus on voters," Douglass said. "And it seems to be working very well."

The three presidential debates have all taken place as the Bush administration and Congress have struggled to contain a global economic crisis with a $700 billion federal rescue package, including a $250 billion government investment in struggling national banks.

The economic crisis has benefited Obama politically. Recent polls have shown Americans believe he would do a better job than McCain in improving the economy, and he leads McCain in national surveys. In battleground states such as Missouri, the race is closer, but Obama has an edge in more states than McCain.

"We have 20 days that will be full of do-or-die moments," said McCain spokesman Tucker Bounds.