True, we thought the American people elect presidents based on how they "connect" with the candidates. But our epic financial crisis has changed all that. The snap polls after Friday's Presidential debate suggest that this time, political economics are trumping personal connection.
Five weeks before a crucial presidential election, private financial institutions that got around regulations on mortgage lending have imploded. Now they are about to be rescued, and we the taxpayers could foot a huge bill for the deregulation model that failed. Going beyond their statements about the crisis itself, Obama and McCain hold very different views on how to solve the current problem and avoid future failures. The reason for this is simple: they have different philosophies of government's role in regulating markets.
For the forty minutes Obama and McCain debated economic policy, their different approaches to government came across loud and clear. Obama laid out his program of re-regulating the financial sector and using taxes for greater economic fairness and public investment in health care, education, and alternative energy. McCain laid out the traditional Republican deregulatory package of cutting taxes and spending. He even called for putting a freeze on all non-military outlays. There it was. Voters, take your choice.
McCain's arguments in the debate were authentic McCain. He was and is an unrepentant deregulator -- a believer in keeping the government out of the market's way. No maverick on that score, he shares this political philosophy with George Bush, the vast majority of Republicans in Congress, and the current majority on the Supreme Court. A quick glance at McCain's economic platform, health care plan, education platform, energy strategy, and his hints on privatizing part of social security, all make this abundantly clear. It's no accident that he lacks specifics on how government should fix the financial markets. If anything, he would tend to side with the House Republican plan of putting no public money into the financial system, no matter the regulatory and equity participation conditions government imposes on the bad asset buyout. His underlying philosophy has consistently been for the separation of economy and state.
Likewise, Obama's message in the debate was true to his political philosophy, one where free markets prevail but government policies protect the public from market excesses and help meet broader social goals.
Four years ago, the Bush/McCain view of government barely carried the day. But times have changed.
We are at end of the great experiment with market deregulation that began in the 1970s. Republicans successfully pushed the new faith, convincing most Americans that the New Deal was dead and the free market king. They argued that by giving tax breaks to the rich and removing business oversight, economic growth would increase and the rising tide would lift all boats.
The argument was powerful enough to hand Republicans five of the last seven presidential elections. Yet the economic results have been dubious. Americans families work longer hours, but the purchasing power of their income is only about 10 percent higher than it was in 1979 (and all of the gain was in the Clinton years). A tiny one percent of Americans have become very well off in the past thirty years, but the vast majority have hardly made any headway. America is a much more economically unequal place than it was when the experiment began, and ironically, many of the core Republican base -- less educated whites living in small and medium size towns in the South and Midwest -- were among the biggest losers under Republican Presidents.
As the post-debate polls show, the political scales have tilted. Most voters are more than ready to accept Obama's political economic model. Americans want the government to oversee private companies so that they don't pollute or lie about what's in their products, don't threaten the health and safety of their workers, and don't engage in activities that threaten the public at large. They also want the government not only to provide military security, but to secure retirement income, guarantee access to comprehensive health care and high quality education, build good roads and bridges, help them when hit by natural disasters, and use taxes and subsidies to stimulate private investment in certain directions, such as alternative forms of energy, more fuel-efficient cars, and rapid transit, and reduce it in others, such as cigarette production and dirty coal plants.
September's financial shock makes Obama's philosophical message appealing to a much larger fraction of the electorate. More important, it has forced McCain to engage in the debate at this policy level instead of the Entertainment Tonight version of U.S. presidential elections. Result: Obama and the vast majority of the American public could be the winners.