Kerry Proposes Direct Aid to States

Despite recent signs of economic recovery, gloomy days of "deficits, debt and doubt" will remain as long as President Bush holds office, Democratic presidential hopeful John Kerry (search) said in announcing a broad plan to boost the economy and create jobs.

The Commerce Department (search) said Thursday that the economy grew at a 3.1 percent annual rate in the April to June quarter, a better-than-expected showing.

But Kerry remained grim, saying the 2004 election will determine whether America still offers opportunity for all or allows a privileged few to call the shots.

"We need action and leadership because we're not just in a temporary downturn. America is in a fight for our economic future," he said at the University of New Hampshire, where he outlined an economic package that mixed new ideas with some old proposals.

His new ideas include sending $25 billion to states struggling with budget deficits under Bush administration policies that put the interests of the president's "buddies and big shot campaign contributors ahead of the people he passes by in his motorcade," the Massachusetts senator said.

"When it comes to creating opportunity, restoring fiscal discipline, putting values back into our economy, and preparing for the jobs of the future, George Bush hasn't lifted a finger," Kerry said. "I intend to move mountains."

A spokeswoman for the New Hampshire Republican Party (search) responded by calling Kerry a "typical Massachusetts tax and spend liberal."

"John Kerry likes to say President Bush's answer for everything is a tax cut," said Julie Teer. "The bottom line is John Kerry's answer is to raise taxes."

But Kerry said he would provide tax relief to middle-class families by keeping the child tax credit (search), reduced marriage penalty and lower tax rates that were part of the Bush tax cut package while lowering capital gains and dividend taxes for the middle class.

Though he would repeal Bush's tax cuts for the top 1 percent of income earners to finance some of his proposals, Kerry criticized some of his Democratic rivals - Rep. Dick Gephardt of Missouri and former Vermont Gov. Howard Dean - who want to repeal the entire tax cut.

"Some in my own party are so angry at George Bush and his unfair tax cuts that they think the solution is to do the exact opposite," Kerry said. "They want to return to rejected old-style policies that eliminate all tax breaks, including those to working people."

Kerry also proposed a new tax credit to help families afford college. The credit would apply to the first $1,000 spent on tuition and 50 percent of the rest, up to $4,000 a year.

He also proposed a new tax credit to encourage manufacturers to remain and expand operations in the United States.

Some of Kerry's proposals sounded familiar to one of his Democratic rivals. A spokesman for Sen. John Edwards of North Carolina noted that Edwards also has proposed lowering the capital gains and dividends tax for the middle class and reining in executive pay.

"Apparently the Edwards economic plan was on somebody's summer reading list," said Colin Van Ostern.