Bush and Kerry begin final debate

2.15pm - UPDATE

TEMPE, Arizona - President Bush and Democratic Senator John Kerry have begun the final debate that could give the winner a critical boost in the last three weeks of a tight White House race.

The stakes were high for both candidates, with polls showing the president and the Massachusetts senator in a dead heat heading into the showdown on domestic issues like taxes, jobs and health care.

The televised encounter at Arizona State University, the last big scheduled event before the sprint to the November 2 election, gives Bush and Kerry a final opportunity to make their case to an audience of millions of likely voters.

Prior to the debate Kerry aides said he would grill Bush on the administration's record of job losses, rising gas prices, increasing budget deficits and growing rolls of uninsured, while Bush aides said the president would attack Kerry's US Senate record and portray him as a tax-and-spend liberal.

The two rivals visited the debate site this morning to familiarise themselves with the set-up after several days of preparation and run-throughs.

Kerry had "three or four" practice debates, aides said, while Bush held a full 90-minute run-through at his Phoenix hotel yesterday afternoon.

Kerry criticised Treasury Secretary John Snow's reported comments during a recent Ohio visit that Bush's failures on the issue of job creation were "a myth," saying it showed the administration's "callous disregard" for unemployed Americans.

"It reflects the degree to which the White House tries to spin its way out of the problems facing working America when it should be focusing on solutions," Kerry said.

While Democrats are traditionally strong on domestic issues, the escalating campaign battle over the war in Iraq has eclipsed their bread-and-butter domestic message for most of the year.

Polls show Kerry leads Bush on handling the economy, jobs, health care, education and the environment. The latest CNN/USA Today/Gallup poll found taxes and terrorism were the only two domestic issues where Bush held an advantage.

BUSH ON ATTACK

But Bush has mounted a strong counter-attack focused on Kerry's Senate record. He has repeatedly labelled his opponent a "liberal," charging he supports higher taxes, greater spending and a government-run health care plan.

The attacks have had some success, with 48 per cent saying in a Gallup poll they believed their taxes would increase if Kerry wins the White House and only 13 per cent saying they will decrease.

Kerry says he will raise taxes on those making more than US$200,000, but promises to provide targeted tax breaks to lower-income earners.

White House communications director Dan Bartlett said Bush also "wants to talk about what he wants to do for the next four years -- goals and his vision."

Bush campaign manager Ken Mehlman said on Fox News there was "a huge difference" on domestic issues between Kerry and Bush. "The president believes that we should reduce taxes and we should empower patients on health care, we should empower parents on education," Mehlman said.

Independent analysts have rejected Bush's characterisation of Kerry's health care plan as a government takeover, saying it would not reduce choice or increase government control.

The Kerry campaign countered Bush with an ad saying Kerry's health care plan lowers costs and "you choose your doctor, you make medical decisions, not the government."

(Additional reporting by Patricia Wilson, Steve Holland and David Morgan)

- REUTERS