The financial crisis on Wall Street could send John McCain's election strategy skidding off the rails.
The Republican candidate faces an uncomfortable truth: Incumbent parties seeking re-election during economic downturns rarely succeed.
That's why, at a campaign rally in Florida, Monday, Mr. McCain sought to take ownership of the issue, by calling for regulatory reform. He may regret, however, his choice of language.
“The fundamentals of our economy are strong, but these are very, very difficult times,” he told supporters, “so I promise you: We will never put America in this position again. We will clean up Wall Street.”
The Democrats pounced on those economy-is-fundamentally strong remarks, which echo the mantra that then-president Herbert Hoover repeated as the Great Depression steadily worsened in the early 1930s.
“Senator McCain, what economy are you talking about?” presidential nominee Barack Obama asked, rhetorically, at a rally in Colorado. “What's more fundamental than the ability to find a job that can pay the bills and can raise a family? What's more fundamental than knowing your savings are secure … and you have a roof over your head?”
Mr. Obama faulted the Republicans for subscribing to a “philosophy that says even commonsense regulations are unnecessary and unwise; one that says we should just stick our heads in the sand and ignore economic problems until they spiral into crises.”
Mr. McCain, perhaps sensing he had misspoken, offered this clarification later in the day.
“The American worker and their innovation, their entrepreneurship, the small business, those are the fundamentals of America, and I think they're strong,” he said. “But they are being threatened today. Those fundamentals are being threatened today because of the greed and corruption that some engaged in on Wall Street, and we have got to fix it.”
The financial crisis will certainly have the political consequence of reinforcing the primacy of the economy as the dominant issue in the campaign.
In a recent USA Today/Gallup poll, two thirds of respondents said the economy was their top concern. In the past, more voters have said Mr. Obama is best qualified to manage the economy, but as support for Mr. McCain has increased in recent weeks, confidence in the Arizona senator's ability to handle economic issues also has increased.
That rise in the polls is partly the result of Mr. McCain's choice of Sarah Palin as his running mate. And the Alaska governor was busy Monday burnishing her outsider credentials at a rally in Colorado.
“Guys and gals, our regulatory system is outdated and it needs a complete overhaul,” she said to enthusiastic applause.
“Washington has been asleep at the switch and ineffective. … So John McCain and I, we're going to put an end to the mismanagement and abuses in Washington and on Wall Street.”
Both Mr. Obama and Mr. McCain agree on the need to impose a new regulatory regime on financial markets to prevent the kind of unsound lending practices that precipitated the crisis.
The question is to what extent voters will hold Mr. McCain's Republican Party responsible for the cascade of business failures that have shaken the American economy.
A postwar recession contributed to the Democrats' defeat in 1920; the Great Depression brought down Herbert Hoover; stagflation helped Jimmy Carter defeat Gerald Ford and Ronald Reagan defeat Jimmy Carter. The “economy, stupid,” did in George H. W. Bush and the collapse of the dot.com bubble was bad news for Al Gore.
That said, Mr. McCain may be right. Despite the troubles precipitated by the discovery that financial institutions had offered billions of dollars in mortgage loans to buyers who could not afford them, the U.S. economy has thus far avoided recession.
Annual growth, as of the last quarter, was a healthy 3.3 per cent. Unemployment has risen steadily to 6.1 per cent, but that's still quite low by 1970s standards, and housing prices in many markets have started to recover.
But in politics, perception often trumps reality. And most Americans fear their economy is tanking. Unless markets stabilize over the coming weeks, financial uncertainty could imperil the Republican message, however much Mr. McCain insists that he is a candidate outside his party.
