SANTA FE, N.M. – When President Bush and John Kerry debate domestic policy tonight in Arizona, expect them to talk a lot about creating jobs – and little about any president’s ability to do that.

“Generally, the economy creates jobs,” said David Wyss, chief economist at Standard & Poor’s. “The president mostly gets out of the way.”

For President Bush, that means cutting taxes.

For John Kerry, it means encouraging businesses to keep jobs in the United States and helping them contain health care costs – and repealing some of Bush’s cuts to pay for it.

Analysts say the direct impact of those policies on the number of jobs in the country is minimal. But tax cuts and deficit spending illustrate how presidents can affect larger economic conditions that make job growth possible, analysts said.

Economists say the Bush tax cuts stimulated the economy in the short run but that large deficits will weigh heavily on growth in the future. They applauded Kerry’s emphasis on underlying employment factors like education and health care, but questioned whether he can fund his ambitious plans and still tame deficits.

Many of these policies, which also include health care, energy policy, and government regulation, are also likely to surface during Wednesday’s third and final Bush-Kerry debate, at Arizona State University in Tempe.

“They all play a significant role in how the economy performs, and therefore how many jobs are created – or not,” said Mark Zandi, chief economist for Economy.com, a consulting firm in Pennsylvania.

Count on Kerry emphasizing the “not.”

Stressing that the private sector has lost 1.6 million jobs during the Bush administration, Kerry often invokes the spirit of Depression-era President Herbert Hoover, the last incumbent to see such losses in his first term. (Hoover, of course, lost a landslide to Franklin Roosevelt in 1932.)

Kerry doesn’t take into account increases in public employment, attributable in large part to homeland security. With those increases, the net job loss the past four years is 585,000.

Bush prefers to focus on the last 13 months, when 1.9 million jobs were added after a period of recession, terrorism, corporate scandals, and the bursting of the “90s technology bubble.

Bush credits tax cuts he signed in 2001, 2002, and 2003. With some of those cuts due to expire over the next seven years, making them permanent is the major economic plank in Bush’s campaign platform.

The first and largest Bush tax cut – a combination of rate reductions, phasing out the estate tax and the “marriage penalty,” and expanded child credits totaling $1.35 trillion over 10 years – did not spark the economy as well as other choices might have, analysts said. The package also gave rebates to taxpayers, but many put them in the bank rather than spending them; and reductions in marginal tax rates were phased in over several years, diluting their impact.

The bill passed in 2003 accelerated many of those rate cuts, making some effective immediately, analysts said. It also contained more cuts to aid businesses, such as a reduction in capital gains taxes, as did the business-oriented 2002 package that accelerated depreciation benefits.

“The effects of the 2001 tax bill were much more modest than expected,” said Matthew Shapiro, who chairs the economics department at the University of Michigan’s business school. “The 2003 bill was more stimulative for jobs because it was front-loaded.”

The result was a burst of job creation in the short term. But some analysts noted that has tapered off in recent months, while the budget deficit has grown to record amounts. That puts upward pressure on interest rates, which makes it harder for businesses to borrow money to expand.

“You didn’t get a lot of bang for your buck,” said Ethan Harris, U.S. chief economist for Lehman. Brothers. “It left the economy with chronic, fairly large deficits.”

Kerry will probably use Wednesday’s debate to attack the new budget deficits, saying they have robbed the government of its ability to help with health care, education, and homeland security. And those rising costs, he added, undermine the employment environment.

“When it comes to the struggles middle class families are facing, the truth is George Bush just doesn’t get it,” Kerry said.

Arguing that only the wealthy benefited from the tax cuts, Kerry plans to expand health-insurance coverage by rolling back the Bush tax cuts for people making more than $200,000 a year. He would keep and expand tax breaks to middle income earners and small business owners.

Zandi said that while the Bush tax cuts would exacerbate the deficit, Kerry’s plan “falls short in regard to the deficit as well.”

Economists also challenged another Kerry pledge, that he can reduce the outsourcing of American jobs to other nations by repealing the tax breaks companies can get for moving jobs overseas. Analysts said those benefits are minimal compared to the cost benefits of cheap labor overseas.

“Closing tax loopholes compared to a buck an hour?” said Robert Barbera, chief economist with ITG/Hoenig. “Doesn’t sound like it’s going to do that much.”

As he prepares for Wednesday night’s debate, Bush has argued that Kerry will have to raise taxes across-the-board to finance all his promises.

“To create jobs, we need to be wise about how we spend your money and keep your taxes low,” he told supporters this week.

Bush also touts other policies as job creators. He would control health-care costs by expanding medical savings accounts and allowing small business to buy health insurance together; tighten up lawsuits to curtail frivolous filings; enact a comprehensive energy strategy to include increased domestic energy production; reduce federal regulations on businesses; and promote free trade.

While the debate is limited to domestic issues, Iraq is also likely to surface – also as an economic issue.

“There’s more political uncertainty out there than there has been in the past,” said Daniel Drezner, a University of Chicago political scientist who has written on outsourcing and the election. “Markets really don’t like political uncertainty.”

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