Obama, McCain, and the financial crisis

John McCain has the harder job of countering his support of Bush and his push for deregulation.

Chris Carlson/AP
Both presidential candidates have to state clearly and specifically how they’d deal with Wall Street’s troubles if elected. Most analysts think John McCain has the harder job. Above, Sen. Barack Obama greeted a rally in Charlotte, N.C., Sunday.
Gerald Herbert/AP
Senator McCain met supporters as he arrived at Independence Hall in Philadelphia, Sunday.

A week after the worst crisis since the Great Depression engulfed Wall Street, the presidential race has shifted perceptibly to Barack Obama’s advantage.

A bad economy always benefits the “out” party, no matter who is the nominee. And while both major party candidates initially offered cautious support for the Bush administration’s proposed rescue plan, which could cost taxpayers up to $700 billion, the onus has been on Republican nominee John McCain to show how his presidency would represent real change.

“Now he [McCain] is extraordinarily vulnerable to a 26-year history of being a strong proponent of deregulation, of getting government out of the way and letting markets manage economic growth,” says Cal Jillson, a political scientist at Southern Methodist University in Dallas. “That just won’t fly.”

McCain, as a sitting senator, faces the uncomfortable task of needing to cast votes on the Bush administration plan – where Republican Party unity will be expected – while at the same time distancing himself from an unpopular president of his own party.

Both senators are in a tricky spot, but for McCain it’s worse, because he’s under pressure to distance himself from Bush and support him at the same time. Obama does not face the same pressure.

Last Friday, McCain put out his own plan to reform Wall Street, but has done little to promote or explain it. On Sunday night, a McCain spokeswoman announced that the senator would call for creation of a bipartisan board to oversee the proposed Wall Street bailout.

McCain has also criticized Obama for not putting out a plan of his own, then sought to expand the conversation to foreign policy, an area where McCain enjoys more public confidence. “At a time of crisis, when leadership is needed, Senator Obama has not provided it,” McCain said Sunday in a speech to the National Guard Association in Baltimore. “We saw the same lack of leadership on Iraq.”

In the first presidential debate, which takes place Friday in Oxford, Miss., the focus will be on foreign policy. But Obama is expected to turn the discussion to the global economy, and the international reverberations of Wall Street’s meltdown, as much as possible.

Still, McCain is not without options going forward on the economy. By the end of a rocky week – in which he initially expressed confidence in the soundness of the American economy before changing his tune – he struck a more populist tone. In a New York Times interview, he called for a limit on the compensation of executives at bailed-out firms. Obama has echoed that idea.

McCain can also still benefit from the seniority gap with Obama, who is 25 years his junior and has far less experience in national policy matters. While voters tend to say they prefer Obama when asked who is better equipped to handle the economy, he does not enjoy a commanding lead.

“McCain has to hope – and it’s not entirely out of the question – that he can take his image as a guy who can help you navigate through a crisis and make that apply to economic conditions,” says Norman Ornstein, a resident scholar at the American Enterprise Institute. “But when you look objectively at who he has relied on for economic advice – it’s CEOs like Carly Fiorina [former head of Hewlett Packard] and Meg Whitman [formerly of eBay], who are unequipped to deal with a crisis involving financial institutions, along with Phil Gramm, who he has distanced himself from.”

Former Senator Gramm was a key author of a 1999 financial deregulation law that is now being blamed for the excesses that brought Wall Street to the point of collapse. Gramm took grief earlier this year for saying that Americans had “sort of become a nation of whiners” over the economy.

For Obama’s part, the task is to look calm and presidential, and to stand near major economic eminences as often as possible. The recent photo op of Obama standing next to former Treasury Secretary Robert Rubin, former chairman of the Federal Reserve Paul Volcker, former Treasury Secretary Lawrence Summers, and Laura Tyson, former chair of President Clinton’s Council of Economic Advisers, has done as much as anything to project the sense that, if elected, an Obama administration would put the economy in battle-tested hands.

“I would try to superglue Bob Rubin to my side for the next six weeks, if I were him,” says Mr. Ornstein.

Aside from adopting a more populist tone in recent days, McCain has also sought to reassert his image as a maverick. In an interview that aired Sunday on CBS’s “60 Minutes,” McCain said he would appoint Andrew Cuomo, the Democratic attorney general of New York State, to run the Securities and Exchange Commission. McCain also pledged to remove the political affairs office from the White House, a swipe at Bush and his political guru, Karl Rove, who prided themselves on running a permanent campaign from 1600 Pennsylvania Avenue.

Overall, the Realclearpolitics.com average of major polls shows Obama up by two percentage points, a gain from the postconvention period when McCain led by about the same amount. But two points is within the margin of error. A look at key swing states, many of which are in a dead heat, confirms that this race could go down to the wire, despite Obama’s advantages as the Democrat.

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