Kerry says Bush distracted nation with threat of war

CLEVELAND -- Democratic presidential hopeful John Kerry said Tuesday that President Bush has used the threat of war in Iraq to distract attention from the nation's economic problems, and he promised to make those issues the centerpiece of his campaign.

"They sat down in August and made a conscious decision to bring that up and to dominate the discussion with Iraq," the Massachusetts senator said after making a speech to the City Club of Cleveland.

In his address, Kerry proposed tax cuts now for the middle class, while criticizing the Bush administration's tax policy.

"The largest cost of the Bush tax giveaway will not be borne by any of us here today -- it will be paid for by our children," Kerry said. "We're borrowing from Social Security and Medicare to put money in our pockets today -- and sticking our children with the bill."

Although he focused on his plans for the economy, Kerry also touched on energy and health care. He said the Bush administration had not done enough to promote energy independence, and he urged more funding of energy alternatives. Kerry also said he would make health care coverage for all Americans a top issue.

White House spokesman Scott McClellan responded: "I think the Democratic presidential aspirants ought to first resolve their own differences about what taxes they want to raise. Then there will be plenty of time to talk about how cutting taxes encourages job creation and economic growth."

Kerry said Sunday that he plans to form an exploratory committee for a run for the White House in 2004, with a final decision on his candidacy early next year.

To focus tax relief on lower and middle income workers, Kerry proposed "a payroll tax holiday" on the first $10,000 of income, meaning no Social Security tax could be collected on that amount.

The Business Roundtable, made up of top executives of some of America's largest corporations, made a similar proposal recently, saying this relief would provide a needed boost to an uncertain economic recovery.

The business group estimated exempting the first $10,000 in wages from the Social Security tax would cost $129 billion next year. Kerry said the tax holiday would last for one year.

"Every worker in America would immediately receive a $765 tax cut and every two-income family would get a cut of $1,530," Kerry said.

Among Kerry's proposals:

Raising the minimum wage and expanding the earned income tax credit that rewards low-income families for being on payrolls instead of welfare rolls.

Passing a new job creation tax credit to encourage employers to start hiring.

Letting rapidly growing small businesses defer up to $250,000 in federal taxes if that money is reinvested in business.

Simplifying the tax laws and making them more fair by closing loopholes and ending corporate welfare.

Increasing investment and accelerating the technology to help with the search for alternative forms of energy.