If there was ever any doubt the economy has moved to center stage in the Presidential campaign, this was the week that dispelled it. Coming on the heels of the Bear Stearns (BSC) rescue and deepening worries about the state of the housing and financial markets, all three contenders in the race, Senators Hillary Clinton (D-N.Y.), John McCain (R-Ariz.), and Barack Obama (D-Ill.) hit the hustings to give major speeches outlining their views on what needs to be done to revive the economy.
"It's getting to the point where I can't keep up anymore," says Daniel Clifton, head of Washington research for investment firm Strategas Research.
Indeed, in the rhetorical equivalent of one-upsmanship, Clinton gave not one but two major addresses. After a speech she gave on Mar. 24 in Philadelphia on the housing crisis, Obama was in lower New York on Mar. 27, at the Cooper Union, to offer his views on how to improve the broad regulatory structure governing the financial markets and stem the problems in the housing markets. And just a few hours later, Clinton was back again, this time outlining her plan to bolster training and education programs for workers who lose their jobs.
In between, McCain also laid out his views on the crisis hitting housing and the financial markets.
"The No. 1 issue"
"They are all trying to have an 'I feel your pain' moment with voters, although they're going about it in somewhat different ways," says Ann Mathias, the head of Washington research for the Stanford Group, an investment adviser.
The shift into high gear on the economy should come as little surprise: With each passing day, pollsters say, voters are becoming increasingly worried. "First and foremost, the economy is the No. 1 issue now," says Democratic pollster Peter Hart. And he argues it's no longer just a long-term or vague worry. Not only does the majority of the country believe the U.S. will go into a recession, if it is not there already, about 55% of those surveyed in March say the slowing economy has already affected them in a major way. Sixty-five percent say they have been greatly affected by rising gasoline and home heating oil prices, for instance, and 33% say the economy is having an impact on their retirement savings. "The problems are impacting real people's lives in real ways," says Hart.
Clinton's plan to help the unemployed
Those issues clearly play to Clinton's strengths with struggling working- and middle-class voters—a key reason she has upped the ante with a handful of proposals aimed at showing her leadership and command of policy detail. Analysts say such an emphasis could help increase her lead in the critical Apr. 22 Pennsylvania primary. If successful, that message could provide some momentum going into Indiana, North Carolina, and the other remaining states. While that alone wouldn't be enough to win her the delegates needed to beat Obama, Clinton is clearly counting on it to help in her fight to win superdelegates to back her campaign.
"For Hillary the economic issue is obviously a godsend," says Hart. "It gives her a way of relating to the voters she's done best with, a way of talking about their concrete problems."
That aim was on full display in her Mar. 27 speech. Having devoted her earlier talk to the housing crisis, this time Clinton used a broad speech on the economy to introduce new proposals to spend $10 billion over five years on improving education and training programs, particularly for displaced workers. Clinton pledged to expand current government retraining programs, which are now targeted only to those who lose their jobs due to trade, to be available to all workers, regardless of how they ended up unemployed.
Every dislocated worker would be eligible for basic training, job search benefits, and other assistance. Clinton also promised to expand the existing Pell Grant program, which provides federal financial aid to students, to workers who enroll in education or training programs to bolster their skills after losing their jobs.
"We may be competing in a new global economy, but our policies to equip American workers for the 21st century are stuck back in the 20th century," Clinton told an audience in Raleigh, N.C.
Obama favors a stricter regulatory environment
For Obama, the challenge was clear: Step up and offer voters a more detailed view of how he'd handle the current problems. "Hillary trumped him on the economy in recent days," says Clifton. "He has to regain the upper hand and say, 'Here's my solution.'"
Much of Obama's emphasis was on the measures needed to shore up the regulatory structure surrounding financial markets. In his New York speech, Obama called for new standards for transparency and improved oversight of the financial sector to prevent the sort of crisis now roiling the markets. He argued that the deregulatory emphasis of the last decade has left the economy vulnerable to bubbles and special interests that have shaped the economy for their own benefit.
"Under Republican and Democratic Administrations, we failed to guard against practices that all too often rewarded financial manipulation instead of productivity and sound business practices," Obama said. "We let the special interests put their thumbs on the economic scales. The result has been a distorted market that creates bubbles instead of steady, sustainable growth."
To reduce the risks that have been created as a result, Obama argued a new regulatory structure is needed that would include strengthening the liquidity and capital requirements for financial institutions, streamlining the overlapping regulatory agencies that oversee them, and increasing government oversight of the risks many institutions are taking.
To deal with the housing crisis, Obama renewed his support for legislation currently before Congress that would provide government backing for new mortgages if lenders agree to reduce the principal value to what the homes are currently worth. Nearly 9% of today's homes carry mortgages that are worth more than the house's market value, which raises fears that many homeowners will walk away from their mortgages. Obama also proposed a $10 billion Foreclosure Prevention Fund that would help homeowners who are victims of fraud refinance their homes. He called for a modification of bankruptcy laws to help victims of predatory lending remain in their homes and for a significant extension of unemployment insurance.
McCain dismisses expanded role for government
For all their efforts to differentiate themselves as the heated Democratic race continues, however, the two Democrats have strikingly similar approaches to the financial crisis. Moreover, pollster Hart says Clinton's recent heavy emphasis on lunch-bucket economics does not show signs of bolstering her polling numbers.
The real difference that is becoming increasingly obvious, says Mathias, is between the two Democratic candidates on one side, and McCain, the Bush Administration, and Treasury Secretary Henry Paulson on the other. In his Mar. 25 speech, McCain argued against an expansive role for the government in responding to the crisis. And in a statement on Mar. 27, he added he believed "the role of the government is to help the truly needy, prevent systemic economic risk, and enact reforms that prevent the kind of crisis we are currently experiencing from ever happening again."
McCain derided the Democrats' proposals as little more than multibillion-dollar bailouts for big banks and speculators. "There is a tendency for liberals to seek big government programs that sock it to American taxpayers while failing to solve the very real problems we face," he said.