This is where the election will be won or lost. And it ain't Baghdad

With 16 days to go until polling day, the battle for the White House is being fought not just over Iraq's killing fields, but in places like Wilkes-Barre, where jobs and not body bags are what will drive voters to the polls. In the second of a major series of reports, US editor Rupert Cornwell visits Pennsylvania, one of three giant swing states (and one of four critical 'rust-belt' states) that will determine the outcome of the most bitterly fought election of recent times

During election campaigns, politicians peddle dreams. But there were few dreams, American or otherwise, to be savoured on a gloomy, drenchingly wet morning here last week, in a conversation with Steve Duda. These days, he is to be found in the offices of CareerLink, an organisation that is part labour exchange, part job retraining centre, operated by the state of Pennsylvania. More pertinently, he is a living symbol of the most contentious economic issue of campaign 2004, the haemorrhage of US manufacturing jobs overseas.

Wilkes-Barre, set in a broad valley in the eastern Appalachians, has an ancient link with Britain, taking its name from John Wilkes and Isaac Barre, two 18th-century Westminster MPs who stood up for the colonies against George III. In the American context, too, it is a town more famous for its past than its present, best known for the anthracite mines which in their heyday 100 years ago produced 40 per cent of the world's supply of hard coal.

Seen from this corner of north-western Pennsylvania, as the bitterly fought, neck-and-neck 2004 campaign nears its climax, the war on terrorism and the mess in Iraq seem far away. This election is supposed to be dominated by foreign policy. But in this old town, in the troubled manufacturing heart of the all-important swing state of Pennsylvania, the over-riding concern is not with the world's deadly new political faultlines. Rather, it is the world's harsh new economic realities - which Mr Duda has learnt from his own recent experience.

He is president of the local branch of the Glass, Molders, Pottery and Plastics workers union. But that did not prevent him from falling victim to what is euphemistically known as "outsourcing" - the export from the US of well paid, steady jobs to foreign countries where wage and production costs are a fraction of those at home. For George Bush, the trend is regrettable, but inevitable. For Mr Duda, whose own job vanished to Asia a couple of months ago, outsourcing is a scandal, a disgrace to the country and to the President who permits it.

Mr Duda is 40 and has six children. He used to work at Techneglas, a factory owned by Nippon Electric of Japan which makes (or rather used to make) the special glass for the screens of TV sets. "I was living the American dream, I made $40,000, some years $70,000" - but then at 7.15am on the morning of 3 August while attending a union convention in Las Vegas, Mr Duda got a call from the human resources director.

The company, he was told, was filing for Chapter 11 bankruptcy because of overseas competition and declining demand. The move provided a moratorium from the creditors, who were owed $28m (£15.5m) by Techneglas. But it also froze benefits and suspended redundancy pay. Mr Duda's job was gone. Nippon, he says, "just stepped back and washed its hands of us, even though it developed the technologies and marketing strategies. You can't let companies do this."

Oddly, in a town where organised labour and the Democratic Party are entwined, Mr Duda had always voted Republican, even as boss of a local union branch. It used to make him "feel like a snowflake on a pile of coal". In 2000 he voted for Mr Bush, he explains, because in his view Al Gore wasn't up to it, and the current President seemed the lesser of two evils. But now Mr Duda has switched his registration from Republican to Democrat and has thrown himself into the struggle to have John Kerry elected President.

His views on the current President are withering. "Here in America we have people starving, people with no healthcare and seniors who have to choose: 'Do I buy drugs or do I eat today?' I'm always struck how, when Bush is asked how he intends to create new jobs, all he can say is 'tax cuts' or 'education'. But how do you tell that to a 55-year-old man who has just been made redundant? How does he pay his bills by going to college? Yes, there's some work around, but paying $8 an hour without benefits. How can these replace a $17-an-hour job with healthcare and pensions? Bush has no answer. He has no plan." On the President's tax cuts, Mr Duda is equally scathing. "What's a $300 tax rebate, when the cost of that tax cut is your job?" So he has turned to Mr Kerry. But like many rank-and-file Democrats, he is respectful, rather than enamoured, of the candidate. Mr Duda admits to a soft spot for Howard Dean, the blunt former Vermont governor who for much of 2003 led the chase for the Democratic nomination - back in the days when Mr Duda was a Republican.

Mr Kerry, he says "is a very intelligent individual, and he has plans. The bottom line is that Bush has no plans in place." Of course, not all Pennsylvania is like Wilkes-Barre, where the unemployment rate is 7.5 per cent, compared with 5.4 per cent nationally. Other parts of the state have adjusted more successfully to the decline of the coal and steel industries. There is a deep conservatism among its inhabitants. The rural centre of the state is moreover heavily Republican. Both Pennsylvania senators are Republicans and, thanks to some nifty gerrymandering, Republicans hold 12 of Pennsylvania's 19 congressional seats.

But in this presidential election, Wilkes-Barre has taken centre-stage. Everyone has been here. John Edwards was in town in August, when he met laid-off workers including Mr Duda, and explained how Mr Kerry would remove tax breaks for companies that take jobs overseas, strictly enforce international trade agreements, and provide money for new jobs in communities hit by plant closures.

Even though Wilkes-Barre is anything but natural Republican turf, Vice-President Dick Cheney paid a visit in September, while the President warmed up for his second debate with Mr Kerry at an invitation-only rally in Wilkes- Barre, launching a new stump speech that carried the assault on his opponent to new heights of scorn and invective.

The reason is obvious. Wilkes-Barre is an emblem of the "rust-belt states" of the north-east and upper Midwest where the election battle is especially fierce - Wisconsin, Michigan, Pennsylvania and Ohio (where Techneglas has another plant which is also closing). If Mr Kerry can win all four, victory will probably be his. Pennsylvania indeed is pivotal to almost any reading of the electoral arithmetic in 2004. There are three giant swing states: Florida, Ohio and Pennsylvania, with 68 electoral votes between them. The candidate who wins any two of them, runs the conventional wisdom, will win the White House.

In practice, it may not be so simple. But on 2 November, Pennsylvania will be the fifth largest single prize. Bill Clinton won here twice, and Al Gore narrowly carried the state in 2000. This President has paid more than 30 visits since taking office, more than to any other state. If he can capture it, then John Kerry will have a mountain to climb to win the White House.

Right now, however, the signs for the Democrats are encouraging. After a bad September, the Kerry-Edwards campaign is gaining momentum, both in Pennsylvania and nationally. A month ago, the Kerry campaign was all but written off by the commentariat, the candidate held to be over-advised, indecisive and incapable of staying with a theme for more than one campaign meeting at a time.

But his commanding showing in the three debates, in which he often looked more presidential than the President, has changed the dynamic of the contest. There is a new spring in the step of Demo-crats. Here in Pennsylvania, after leading earlier in the year, Mr Bush now trails by three or four points in state-wide polls. And as one political analyst, Stuart Rothen- burg, wonders: "Has a candidate, even an incumbent President, ever won an election after losing all three debates?" This year more than ever turnout will be crucial. As in other swing states, both parties have mounted intense drives to register new voters. Both are developing plans to get out the vote on 2 November itself with military precision.

For Republicans the secret weapon is the network of evangelical churches and other Christian groups working to mobilise social conservatives - some of them to be found among blue-collar and small-town Democrats, many of them Catholics. Pennsylvania indeed is classic territory for "Reagan Democrats" who became famous two decades ago, persuaded by the genial Great Communicator to put their conservative views on crime, abortion and "walking tall abroad" ahead of their obvious economic self-interest.

In 2004, Mr Bush - who is the first President to preside over a net loss of jobs during his term since Herbert Hoover at the start of the Great Depression - is seeking to pull off a similar trick. And who knows? Poor old Pennsylvania suffered hugely in the Depression. But in 1932 it was the only major industrial state to vote for Hoover in preference to Franklin Roosevelt.

But Democrats have their own network in organised labour and the Democrat-aligned America Coming Together group, which claims to have put in place "the largest voter-mobilisation effort in history". Here again Pennsylvania is a crucible for the broader national struggle - between the values-oriented campaign of Mr Bush, and a Kerry strategy that places the focus on the economy and other issues such as healthcare that resonate in places like Wilkes-Barre. As Trina Moss, another 25-year employee of Techneglas who has just lost her job, puts it: "Get off the war, the real issue is the economy." She may well be right. Barring some "October surprise" from the terrorists or from Iraq, the economy is likely to dominate the campaign's end-game.

Almost at the moment Mr Duda was inveighing against George Bush at CareerLink, the government in Washington was announcing a record trade deficit, a record federal budget deficit and dismal industrial output figures suggesting that the recovery may once again be running out of steam.

With 16 days to go, the outcome of the election is anyone's guess. In the debates, Mr Kerry cleared a vital credibility hurdle. But Mr Bush retains the considerable advantages of an incumbent: he is at least the devil you know. But the choice is clear, and political passions have rarely run higher. "This is the most important election in our country's history," Mr Duda says. Many Americans would agree.

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