Election 2008

Craig Litten/AP

Analysts Examine McCain and Obama’s Responses to Wall Street Woes

September 23, 2008 08:50 AM
by Josh Katz
As Americans become more concerned with the apparent economic meltdown, each candidate is struggling to convince the population why he can heal the wounds.

Candidates Respond to Bailout Plan

Although both candidates have said Congress should give “speedy, bipartisan consideration” to Bush’s $700 billion economic rescue plan, they both have their objections, according to The Washington Post. Ariz. Sen. John McCain is worried that the plan puts too much power in the hands of Treasury Secretary Henry Paulson, whereas Ill. Sen. Barack Obama fears that the plan might not provide enough security for taxpayers, homeowners and Wall Street. Obama has also said that the bailout plan should include another economic stimulus package.

But the rapid developments of the economic crisis appear to have thrown the candidates a curveball. “The events are bigger than the candidates,” said Phil Singer, a former aide to Hillary Clinton, Politico reports.

Opinion & Analysis: Responding to the new top issue

Commentators seem to agree that the economic situation has transformed the political campaigns and taken center stage. Most analysts also concur that Sen. McCain has lost the momentum he had a few weeks ago, thanks to the turbulence on Wall Street. But Sen. Obama has not capitalized, they say, as he has chosen to keep a fairly low profile.

Both candidates have been “vague about their solutions” to the financial emergency. But vague ideas about mending the economy may not be a bad thing, according to Michael Barone in the Boston Herald. Average Americans do not understand the current state of the economy, he argues, which is mainly concerned with the financial sector.

Instead, Americans understand taxes and Republicans still hold the edge on that issue. Even though Obama has said he would lessen the tax burden on the middle classes, Barone points to recent polls that illustrate voter distrust over the Democratic candidate’s tax policies. “The old rule that economic distress moves voters toward Democrats doesn’t seem to be operating,” he writes.

Kevin Hassett, director of economic-policy studies at the American Enterprise Institute and a McCain adviser, contends that the blame for the current state of the economy is not so evenly dispersed between the parties. The mishandling of mortgages by Fannie Mae and Freddie Mac is the main culprit of the economic meltdown, Hassett argues, and the Democrats balked at a reform bill a few years back that would have “required the companies to eliminate their investments in risky assets.”

Hassett says the Democrats turned the bill into a partisan fight, and Obama had received large financial contributions from Fannie and Freddie in the past. On the other hand, “Senator John McCain was one of the three cosponsors of S.190, the bill that would have averted this mess.”

Jonathan Darman of Newsweek stresses the importance of advocating party values in the election. He acknowledges that presidential elections in the last half-century have demonstrated that the U.S. is “center-right.” The Republican Party’s dominance has been clear, and the even Democrat Bill Clinton won his position by staying away from the far left. But, “Barack Obama belongs to a different era than Carter and Clinton, and in many ways he has a more interesting opportunity. The past eight years, after all, have brought the shortcomings and inconsistencies of the center-right consensus to the fore.”

The conservative government’s decision to bail out Wall Street shows the country is changing, he argues. If Obama wants to win this election, according to Darman, he needs to embrace the traditional Democratic view on the economy and not move to the center of the political spectrum.

In a New York Times op-ed, Thomas Friedman expressed a slightly different view, however. This is a time for bipartisanship and practicality, he argues, not party divisions. For example, McCain should have chosen Michael Bloomberg for his vice presidential running mate, not Sarah Palin. Instead of finding a moderate, market expert to fill the role he opted for the conservative governor.

Friedman also thinks that Obama should offer automakers and autoworker unions a bailout, but only if they work together. And to help heal the economy, Obama should keep Treasury Secretary Henry Paulson at the helm because, according to Friedman, he’s doing a good job. Friedman argues that the candidates should challenge their bases, like Clinton did, “when he reformed welfare and created a budget surplus with a fair and equitable tax program.”
Obama came out on top last week in his response to the Wall Street mayhem, according to Albert R. Hunt on Bloomberg.com. McCain was victorious in the first round, censuring Wall Street’s “greed and corruption.” But then he waffled on the importance of regulation. Hunt claimed that one of the most crucial recent developments has been the candidates’ choice of economic advisors.

He argues that Obama opted for the greater experience and expertise of former Federal Reserve Chairman Paul Volcker, and former Treasury Secretaries Robert Rubin and Larry Summers. Furthermore, “Obama called for the overhaul of the financial-regulatory system and tougher enforcement well before this past week's traumas.”

An editorial from the New Republic disagrees with Hunt, fashioning a similar argument as Darman of Newsweek did. The publication claims that Obama has been pursuing the wrong strategy because he is not doing everything in his power to associate McCain with failed economic policies from the Bush administration that have “stripped away financial security for the middle class while bestowing the rich with even more riches.”

McCain has been trying to distance himself from Bush for this very reason, the New Republic argues. Obama appears to be actively avoiding comparisons among Bush’s economics, Republican economics and McCain economics, according to the editorial.

History has not been friendly to Democrats, but just like Darman said, “maybe times are changing,” according to the editorial. Greater regulation may be the wave of the future, and following the era of Bush tax cuts, “the case for making the tax code more progressive again is ironclad.”

Ed Rollins, former Reagan political director and Republican strategist, argues on CNN that both candidates are failing to help themselves with their responses to the economic situation. Palin gave McCain the momentum following the convention, but he has since demonstrated his lack of economic knowledge. First he opposed bailouts, then he changed his mind, and then he did it once more.

Meanwhile, Obama “took no position but jumped on McCain for saying things were OK.” According to Rollins, “There were no profiles in courage last week from the political campaigns.” Suddenly, the economy has trumped the Iraq war as the main campaign issue, Rollins claims, and the candidates have to take a stand.

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