Reports of rising inflation and weak gains in wages kept the paycheck struggles of Americans at the center of the presidential campaign Friday. Republican John McCain (web|news|bio) sought to frame an economic policy that defends extending President Bush (web|news|bio) 's tax cuts but embraces quick measures that the president opposes. Democrat Barack Obama (web|news|bio), benefiting from public disapproval of Bush's economic policies, has continued to link McCain to Bush.

The Labor Department reported Friday that consumer prices rose by 0.6 percent last month. It was the biggest one-month increase since last November, pushed up by surging gasoline costs. After adjusting for inflation, weekly earnings for nonsupervisors workers were down 1.2 percent in May, compared to a year ago, the department said in a separate report.

The economy is trumping Iraq (web|news) as the top issue facing the country, a circumstance that places McCain at a distinct disadvantage. The public splits between him and Obama as to who could handle Iraq best, but Obama is viewed as the one best to handle the economy.

With the unemployment rate in May jumping to 5.5 percent, McCain said Friday he would support extending jobless assistance and said he was willing to discuss other short-term measures to boost the economy. He did not rule out another economic stimulus package this year.

"I support extension of unemployment benefits, I think we should do that now," he told reporters following a town hall meeting in Pemberton, N.J. "I think we should explore a number of options."

Bush and Republican congressional leaders have opposed the jobless benefits extension. Meanwhile, Obama has proposed a new $50 billion economic stimulus package.

But McCain also argued for continuing President Bush's tax cuts, most of which are set to expire in 2010. Failure to extend them, he noted, would result in tax increases.

Obama has proposed tax cuts for low- and middle-income taxpayers, but would restore pre-Bush tax rates to the wealthiest Americans.

The Labor Department reports came in a week that Obama had set aside to feature his economic plan. At the same time, an independent, liberal-leaning think tank, the Tax Policy Center, issued an analysis of the candidates tax plans that concluded that McCain's would primarily benefit very high income taxpayers, while Obama's would increase taxes for the wealthiest.

McCain said that in extending Bush's reductions in capital gains taxes, he would spur economic activity that would actually raise government revenue.

The Tax Policy Center concluded that Obama's would offer much larger tax breaks to low- and middle-income taxpayers than McCain would.

The report said McCain's reduced individual and corporate rates would help "economic efficiency and increase domestic investment." It is a point McCain makes repeatedly on the campaign trail, noting that the United State's 35 percent corporate tax rate is second only to Japan's. He points out that Ireland has a corporate rate of only 11 percent, making it attractive for businesses to relocate there.

McCain has also continued to push for a summertime gas tax holiday, arguing that would provide relief for drivers and truckers. He has scoffed at economists who say the reduction would either be too small to provide relief or that the price of gasoline would increase to make up for the lack of the tax. Obama opposes the tax holiday.

McCain likes to joke that "if you took all the economists in the world and laid them end to end you wouldn't reach a conclusion."

But McCain said he recognizes the difficulties the economy pose for him politically.

A Wall Street Journal/NBC News poll this week found that 47 percent of those polled said the economy was the top issue in need of a new direction. What's more, 73 percent said they disapprove of the job Bush is doing on the economy, including 41 percent of Republicans.

When a reporter suggested Friday that the economy created a particularly hostile political environment for him, McCain laughed. "An astute observer!"

Written By JIM KUHNHENN

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