On the surface, the Wall Street crisis appears to favor Barack Obama's chances and to damage John McCain's.
Emory political scientist Alan Abramowitz makes the case succinctly:
"I don't see how this crisis doesn't play into Obama's hands....this issue seems to completely undermine the whole Republican argument that less government regulation is what the economy really needs. When people are hurting, they generally want the government to do more to help them and that almost always works to the advantage of Democrats, especially under a Republican administration."
"The safety net is certainly a Democratic strength," argues Catholic University's John White. "Overall, I think economic security is the new personal security issue. That works for the Dems this year, just as personal security (from terrorism) worked for Bush in 2004... The safety net is certainly a Democratic strength. Think of Bush's idea of privatizing a portion of Social Security. Who would buy into that idea now?"
Frank Levy of MIT also sees a Democratic advantage: "I think it depends on how much of a case Obama can make that he and Biden know more economics than McCain and Palin. McCain is Mr. Unregulated Market. I think a skilled orator can make a good case that we have known for a long time that totally unregulated markets are a recipe for disaster and the people who push hardest for them are the insiders who take their fees before things blow up."
Democratic strategist Jim Jordan, manager of Kerry's 2004 campaign, is similarly persuaded that the crisis redounds to Democratic advantage: "The CEO class has been exposed as not just mind bogglingly greedy and arrogant, but as shockingly stupid, as well. When Republicans and their allies win, it's on the perception of maturity and competence. There's nothing about Bush or McCain or any of their cronies that says competence to anyone. The public inclination - already strong -- will be refreshed and intensified."
Republican pollster Tony Fabrizio generally agreed: "The financial meltdown creates more downsides for McCain and the GOP than upsides. If we wanted to divert focus from the 'wrong track' numbers or the economy, this only feeds both of those and gives Obama the ability to tie McCain to the President -- especially if McCain keeps on talking about how the "fundamentals of the economy are strong."
The current rush to enact an unprecedented financial sector bailout is not, however, without substantial risk to the Democratic nominee.
First, the proposed $700 billion-plus plan revives -- in spades -- the left-versus-center conflicts within the Democratic coalition that have plagued the party for decades. Should the legislation penalize the CEOs in charge of the at-risk financial institutions? Should money be channeled directly to homeowners struggling to make mortgage payments instead of buying up bad Wall Street debt? These are issues that the left wing of the party is sure to raise in its struggles with the centrist, pro-business wing of the party.
The financial sector is one of the few pro-Democratic industries. It wields significant influence in the party, and Robert Rubin (Secretary of the Treasury, Goldman Sachs, Citigroup) has come to epitomize to the party's left flank the substantial influence of the securities industry. In terms of the presidential campaign, Obama has raised $9.9 million from officials in the 'Securities and Investment' industry compared to $6.9 million raised by McCain, according to the Center for Responsive Politics (CRP).
At the congressional level, according to CRP, individuals and PACs tied to hedge funds in 2008 gave $8.2 million to Democratic House and Senate candidates compared to $3.7 million to Republicans, a 69-31 ratio. Officials and PACS of equity and investment firms have given $8.3 million to Democratic candidates and $5.7 to Republicans, a 59-41 ratio.
The Democratic left would like to curb the power of Wall Street. Robert Borosage, president of the Institute for America's Future, has argued for reforms: "No contributions from Wall Street PACs or executives should be accepted by any legislator or candidate for national office. Paid lobbyists of Wall Street firms should be banned from any legislative contacts."
Notre Dame political scientist David Leege makes the point that "The Bush/McCain forces have been painting Obama as the captive of Wall Street managers and financial market manipulators because a lot of his principal funders and even advisors are real estate and financial sector people."
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There are a number of liberals and conservatives who doubt that proposals now under consideration will stem the bleeding.
"The real issue is that the rescue plan is very flawed and probably fundamentally misconceived," Robert Shapiro, chairman of the consulting firm Sonecon and Under Secretary of Commerce for Economic Affairs in the Clinton administration, told the Huffington Post. "If that becomes apparent over the next five weeks, and Obama has endorsed it, he becomes very vulnerable on this issue. Yet if he distances himself from the plan and criticizes it, he looks like a lone wolf not pitching in."
Along similar, if less apocalyptic, lines, Columbia political scientist Robert Erikson noted, "The Wall Street crisis might have given Obama the trump card he needs to win the election. But it could also be a wild card with spiraling effects that we cannot fully anticipate today."
In a counterintuitive analysis, Harvard economist Richard Freeman argues that if McCain has the nerve, he could wrest the issue of the Wall Street implosion away from Obama and turn it to his own advantage:
"McCain's first response pins down the big problem for Obama: McCain can rage against Wall Street and the bailout without offering any responsible plan, while Obama sounds like part of the establishment in seeming to agree to have taxpayers bail out the Wall Street dingbats with a demand that Main street get something also. As the costs seep in more and we realize that the plan seems to be for government to simply buy bad loans, the danger to Obama is a populist reaction that McCain might be able to tap. At some point, there will be a populist response that this is the Wall Street crowd saving their skin without bearing the cost. If I was McCain, I would put Obama and Paulson and Bush in the same boat and play the angry maverick: they are stealing your money. Like Nixon going to China, a Republican might be able to do it in the way a Dem could not."
The Obama campaign appears to be partially aware of these dangers, and on Sunday issued a emailed "statement of principles" on the bailout designed to cover as many bases as possible: "There can be no blank check.... We cannot abet and reward the unconscionable practices that triggered this crisis....Taxpayers should be protected....[It should] help homeowners stay in their homes."
Howard Wolfson, former senior adviser and communications director in Hillary Clinton's campaign, argues that "[T]he current crisis has the potential to shatter the myth -- as the crash of '29 did -- that Republicans are better stewards of the economy than Democrats. Democrats and Republicans have been jousting over the proper role of government in the economy for a century -- over the last generation the Republicans have been winning that argument. This last week the public saw the chickens of GOP-backed deregulation come home to roost, and on George Bush's watch."
McCain, Wolfson said, has failed to live up to the standard set by his hero, Teddy Roosevelt, and "instead doesn't know what to think and veers back and forth from praising the economy to calling for reform that he opposed as a senator."
Justin Wolfers, Wharton Professor of Business and Public Policy, argued that images of the GOP as the fiscally responsible party have been out of date for over a generation - ever since Ronald Reagan took over the presidency. "The 1960s views of Republicans as the party of economic orthodoxy and Democrats as the party of redistribution has become a myth, and it's been a myth since 1980."
Many Democrats argue that Obama can strengthen his position in the current climate of economic anxiety by surrounding himself with the men and women associated with the years of economic growth under President Clinton in the 1990s.
"You could not have seen a more reassuring picture for American consumers then financial heavyweights like Larry Summers, Bob Rubin [two former Treasury Secretaries], Gene Sperling and Laura Tyson [former National Economic Advisers to Clinton] standing by and advising Senator Obama. That team has a proven record of navigating the global economic sea in a way that creates growth and improves the lives of middle class Americans," said Boston-based Democratic strategist Charles A. Baker III.
"If I were Obama, I would not go anywhere without Rubin at my side," said Norman Ornstein, of the American Enterprise Institute.
A recent picture of Obama with Rubin and Summers on one side and Volker and Tyson on the other does not reassure all Democrats, however.
"Look at the guy sitting directly to Obama's left. Yes, that's Bob Rubin," left Democratic activist-gadfly David Sirota wrote, demonstrating the potential of the fiscal crisis to produce conflicts within the Democratic base. "This guy - a person who had a very clear hand in getting America into this crisis - is the guy who Obama is relying on to help him get America out of the crisis....[T]here's Lawrence Summers and Laura Tyson - both top economic advisers in the Clinton administration when it backed the financial deregulation that is fueling this crisis."
At the same time, the momentum behind deregulation of financial institutions first gained strength during the Reagan administration when trust in free markets reached an apogee and when regulatory agencies were systematically deprived of the power to intercede in behalf of those disadvantaged by market competition.
The next five weeks will be a minefield for both presidential candidates and for the two political parties. The problem for all the participants is that not only are there no effective detectors to learn where the mines are located, but no one can predict what will set them off and when, if at all, they will explode.