July 28 (Bloomberg) -- John McCain and Barack Obama, after a week of trading charges on Iraq and foreign policy, are turning their attention to the U.S. economy in their presidential battle.

Obama, back from his tour of the Middle East and Europe, is meeting in Washington today with such economic powerhouses as Robert Rubin, Paul Volcker and Warren Buffett. He also will campaign this week in Missouri, Iowa and Florida.

Obama said before convening the meeting that the ``deteriorating economic situation'' is ``not an accident of history.''

``There were some irresponsible decisions that were made on Wall Street and in Washington,'' he said. ``We have learned an essential truth that in the long run we can't have a thriving Wall Street if we don't have a thriving Main Street.''

McCain, who has a lock on the Republican nomination but struggled for attention amid last week's Obama media blitz overseas, will hold town-hall meetings in Nevada and Wisconsin. He will emphasize the economy and the need for independence from foreign oil, spokesman Tucker Bounds said.

In a weekend radio address, McCain noted that he spent last week moving around the country and speaking ``with voters about how to get the American economy running at full strength again.''

McCain, 71, may have created political troubles for himself by altering his position on raising taxes to fix Social Security, the pension system projected to run out of money by 2041. He said in an ABC News interview yesterday that he is open to all options.

Everything `on Table'

``Everything has to be on the table if we're going to reach a bipartisan agreement,'' McCain said when asked if he would consider raising payroll taxes.

McCain previously has opposed tax increases to save Social Security and his Web site says, ``We may meet our obligations to the retirees of today and the future without raising taxes.'' He favors supplementing the system with personal accounts, an idea President George W. Bush backed without success.

The Arizona senator's latest Social Security comments drew a rebuke from the anti-tax Club for Growth. ``We're very disappointed,'' said group spokeswoman Nachama Soloveichik. ``In the past he's unequivocally ruled out raising taxes.''

Obama, 46, favors extending payroll taxes, which now apply to the first $102,000 in income. Obama would levy the tax on income over $250,000 as well.

Job Losses

Record gasoline prices, plunging home values and shrinking credit access have thrust the economy to center stage. The Labor Department this week may report a seventh straight month of job losses.

The new president also will face a deep budget hole. The U.S. budget deficit is projected to widen to a record of about $490 billion next year, an administration official said. That's far higher than the $407 billion the Bush administration forecast in February.

Senator Obama of Illinois is calling for a second stimulus plan to include at least $50 billion for another round of tax rebates and a $10 billion foreclosure-prevention fund.

Obama's trip abroad included visits to U.S. troops and meetings with military commanders and foreign leaders. Obama has proposed withdrawing combat forces within 16 months of taking office in January, though while overseas he said he reserved the right to alter his plans if conditions change.

McCain, who has criticized the Bush administration's handling of the war in Iraq while supporting the ``surge'' in U.S. troops last year, opposes a specific withdrawal timetable.

As for the economy, the next president probably will be faced with what to do about Fannie Mae and Freddie Mac, the government-created mortgage finance companies that together buy or back half the U.S.'s $12 trillion in home loans.

While neither candidate has spent much time discussing the issue, Congress last week sent to Bush a plan that may be signed into law this week to help the mortgage-financing giants.

Obama said today's meeting of his advisory group, his first in the next few months, would focus on job losses, wage declines and low consumer confidence, the credit crunch and rising food and fuel prices.

``I believe we need a second round of economic stimulus, but I think this is something that I'd like to discuss with all of you,'' Obama said.

Besides billionaire investor Buffett and former Federal Reserve Chairman Volcker, the advisory group included Rubin's successor as Treasury secretary, Lawrence Summers, New Jersey Governor Jon Corzine, former Bush administration Treasury secretary Paul O'Neill and Google Chief Executive Eric Schmidt.

Economic Strains

Underscoring the strains within Obama's economic circle was the presence of former Labor Secretary Robert Reich, AFL-CIO President John Sweeney and Anna Burger, secretary-treasurer of the Service Employees International Union.

Rubin and Summers promoted President Bill Clinton's policies of free trade and reducing the federal budget deficit. Union officials said that approach favored Wall Street at the expense of American jobs sent overseas.

Obama says he supports free-trade agreements with stronger worker and environmental protections.

McCain has traveled to Colombia, Canada and Mexico to defend trade deals that are political kryptonite back home. He also favors offshore oil drilling as Republicans try to portray Democrats as unconcerned about gas prices and unwilling to combat the reliance on foreign oil.

``With the Obama trip over, everybody's focus will return to the economy, energy and domestic issues,'' said Stuart Rothenberg, editor of a political report that bears his name.

To contact the reporters on this story: Julianna Goldman in Chicago at jgoldman6@bloomberg.net; Matthew Benjamin in Washington at mbenjamin2@bloomberg.net

Last Updated: July 28, 2008 14:34 EDT