updated 9/6/2008 3:58:03 PM ET 2008-09-06T19:58:03

As Americans were rocked by more bad news about the economy, presidential rivals Barack Obama and John McCain entered the final eight-week stretch run to election day with competing appeals to working-class voters in key swing states that could decide the outcome of the race.

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The economy has factored large for months in the U.S. presidential race, mostly eclipsing the Iraq war in the minds of voters.

Late Friday, sources reported that the government is expected to take over mortgage giants Fannie Mae and Freddie Mac as soon as this weekend. The monumental move is designed to protect the mortgage market from the failure of the two companies, which together hold or guarantee half of the nation's mortgage debt.

That news followed an earlier government report that the nation's jobless rate hit a surprising 6.1 percent in August.

While Obama campaigned Saturday at a fairgrounds in Indiana, McCain was introducing his surprise vice presidential pick, Alaska Gov. Sarah Palin, to voters in Colorado and New Mexico.

On Saturday, Obama made his first direct criticism of Palin, saying she pretends to oppose spending earmarks when she actually has embraced them.

Speaking to 800 people at the Wabash Valley Fairgrounds in Terre Haute, Ind., the Democratic presidential nominee ridiculed John McCain and his running mate, the Alaska governor, for describing themselves as agents of change at this week's GOP convention.

"Don't be fooled," Obama told the crowd surrounding him in a large barn. "John McCain's party, with the help of John McCain, has been in charge" for nearly eight years.

"I know the governor of Alaska has been saying she's change, and that's great," Obama said. "She's a skillful politician. But, you know, when you've been taking all these earmarks when it's convenient, and then suddenly you're the champion anti-earmark person, that's not change. Come on! I mean, words mean something, you can't just make stuff up."

McCain has vowed to wipe out earmarks, which are targeted funding for specific projects that lawmakers put into spending bills. As governor, Palin originally supported earmarks for a controversial Alaska project dubbed the "bridge to nowhere." But she dropped her support after the state's likely share of the cost rose. She hung onto $27 million to build the approach road to the bridge.

Obama also criticized McCain's approach to Social Security, saying the Arizona senator would undermine the government's program aimed mainly at retirees.

Obama also declared he would work to lower the cost of medicine for seniors by allowing the government to directly negotiate prices with drug companies and the reimportation of drugs from other countries, according to prepared remarks of his speech to a gathering of the AARP, an advocacy group for older Americans. He was addressing the group via satellite. McCain was also to speak to the group.

Campaigning Friday in Pennsylvania and Ohio, the Democrat who would be the United States' first black president, derided McCain for a nomination acceptance speech Thursday night at the Republican National Convention that Obama said did little to resonate with a country grappling with a mortgage crisis, high gasoline prices and a litany of credit woes.

Out of touch?
Obama said Republicans are woefully out of touch with the plight of America's middle class.

"If you watched the Republican National Convention over the last three days, you wouldn't know that we have the highest unemployment in five years because they didn't say a thing about what is going on with the middle class," Obama told workers at a specialty glass factory near Scranton, Pennsylvania.

Later, Obama vowed to fight Republican attacks on his character and background more fiercely than John Kerry did in his losing campaign four years ago.

"We're not going to be bullied, we're not going to be smeared, we're not going to be lied about," Obama told donors at a fund-raising dinner hosted by rock legend Jon Bon Jovi at his New Jersey mansion. "I don't believe in coming in second."

Obama's message to working class voters was underscored by his seasoned running mate, Sen. Joe Biden of Delaware, at campaign stops Friday elsewhere in Pennsylvania.

Biden said "the silence of the Republican Party was deafening" at its convention on the issues that matter to middle class Americans — health care, the environment and jobs. He said Obama's economic plan would cut taxes for all but the wealthiest Americans.

McCain, campaigning Friday with Palin, told supporters in Wisconsin, another battleground state, that the sagging economy had squeezed everyone in the country.

"My friends, a little straight talk, a little straight talk," McCain said. "These are tough times. Today the jobs report is another reminder these are tough times. They're tough times in Wisconsin, they're tough times in Ohio, tough times all over America."

He did not, however, say how he would fix the economy.

‘Change is coming’
"Change is coming, change is coming," McCain promised the audience at a rally in the town of Cedarburg, Wisconsin, borrowing the same theme that Obama has made the centerpiece of his run for the White House.

Palin praised McCain for being a maverick who is ready to shake up business as usual in Washington.

"John McCain doesn't run with the Washington herd," said Palin, who is seeking to become the first female vice president.

But McCain's effort to frame himself as a political outsider and rebel is complicated by the fact that he has served in the Senate for 22 years and solidly endorsed key elements of President George W. Bush's record, most notably the war in Iraq and hundreds of billions of dollars in tax cuts. McCain originally opposed the tax cuts but changed his mind as he sought the Republican presidential nomination.

After this weekend's joint campaign appearances, Palin is expected to return to Alaska just briefly and then go back to the campaign trail, perhaps on Monday.

But so far the McCain campaign has kept Palin out of the reach of reporters who might subject her to tough questions about her record in Alaska, including an ongoing ethics investigation into her firing of the state's public safety commissioner.

McCain, Obama and Biden were all scheduled to appear on Sunday television news interview shows, but not Palin.

The candidates were bearing down for the last weeks of campaigning up to the Nov. 4 election, after the Republicans ended their convention in Minnesota on Thursday, a week after the Democrats convened in Colorado.

Both candidates used their conventions — where they officially accepted their parties' nominations and rallied their troops — to address vulnerabilities in their campaigns.

McCain needed to strike a precarious balance, distinguishing himself from the unpopular presidency of fellow Republican George W. Bush while not alienating the party's conservative base, which remains loyal to the president and has been skeptical of McCain.

His selection of Palin, a fierce conservative, made that task easier. Conservatives were delighted with the selection and electrified by Palin's speech Wednesday. With their support now all-but-assured, McCain has greater freedom to highlight his reputation as a maverick and distance himself from Bush — as he did in his acceptance speech Thursday.

McCain hoped that his choice of Palin might appeal to disgruntled female supporters of Hillary Rodham Clinton, who lost to Obama in a marathon primary campaign.

Obama entered his convention needing to heal a party still divided after his bitter primary fight with Clinton. He got a boost when Clinton and her husband, former President Bill Clinton, gave him their unqualified backing in widely watched convention speeches.

Hillary Clinton in Florida
Hillary Clinton was set to arrive Monday in Florida to campaign as a surrogate for Obama, with a message honed on Americans' everyday economic concerns that helped her win 18 million votes, but not the nomination.

The selection of Biden, the scrappy chairman of the Foreign Relations Committee, addressed two of Obama's perceived weaknesses: his lack of foreign affairs and national security experience and his difficulty of relating to white working class voters.

Both McCain and Obama announced Saturday that they will put aside partisan politics for a joint appearance Thursday at ground zero to mark the seventh anniversary of the Sept. 11 terrorist attacks that killed nearly 3,000 people. The rival presidential candidates also agreed to suspend television advertising critical of each other on Sept. 11.

"All of us came together on 9/11 — not as Democrats or Republicans — but as Americans," they said. "We were united as one American family. On Thursday, we will put aside politics and come together to renew that unity."

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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