Five days from their first presidential debate, Democrat Barack Obama has climbed in the polls as Republican John McCain fumbled his response to a looming U.S. economic cataclysm — one that threatened to match the financial catastrophe of the 1930s Great Depression.
The U.S. Congress and the administration of President George W. Bush were grappling with a proposed $700 billion bailout plan to save the U.S. economy from full collapse, feeding anxiety among voters who already were far more concerned about their financial futures than any other issue in the 2008 presidential campaign — including the intractable U.S.-led wars in Iraq and Afghanistan.
After withholding his response while the Bush administration put together its program, Obama on Sunday placed seven conditions on the rescue proposal which he said came with a "staggering price tag" but no plan to guarantee the "basic principles of transparency, fairness, and reform" to taxpayers who will pay for the huge bailout.
Administration pressing Congress
The Bush administration is pressing Congress to pass the bailout measure by the end of this week, even as Obama joined others in Congress in suggesting the proposal faced obstacles to quick enactment.
"This plan can't just be a plan for Wall Street, it has to be a plan for Main Street. We have to come together, as Democrats and Republicans, to pass a stimulus plan that will put money in the pockets of working families, save jobs, and prevent painful budget cuts and tax hikes in our states," Obama said during a campaign stop in North Carolina.
Treasury Secretary Henry Paulson, meanwhile, resisted the Democratic push to add additional help for households, saying financial markets remain under severe stress with an urgent need for Congress to act quickly without adding other measures that could slow passage.
"We need this to be clean and to be quick," Paulson said in an interview with ABC television. He told Fox television that America had been "humbled, humbled" by allowing its economy to slide into chaos.
On Saturday, as the depth of the U.S. financial crisis was settling in on the country, Obama declared McCain was in a panic, realizing that he and his Republican party were philosophically responsible for the near meltdown of the U.S. financial system. The Arizona senator, a 26-year veteran of Congress, shot back that his first-term Illinois Senate colleague was resorting to scare tactics.
McCain has history of deregulation
But McCain faces the daunting task of trying to square his long history of advocating corporate and financial deregulation — the sort of loose controls many blame for the turmoil on Wall Street.
Obama seized on that during a campaign appearance at Bethune-Cookman University in Florida.
"There's only one candidate who's called himself 'fundamentally a deregulator' when deregulation is part of the problem," Obama said.
McCain now says more controls are needed to prevent a repeat of the turmoil that sent the stock market plunging, as he tries to recover from a series of gaffes this week, starting with his Monday assessment that U.S. economic fundamentals were strong.
National polls indicate that McCain's edge in the U.S. presidential race has slipped since the market upheaval. The latest Gallup Poll daily tracking survey also showed Obama ahead, with 50 percent to McCain's 44 percent. Last Sunday, a day before stocks took a dive on Wall Street, McCain and Obama were in a statistical dead heat with McCain's 47 percent against Obama's 45 percent.
Both candidates are busy preparing for their first nationally televised debate on Friday at the University of Mississippi, which offers McCain a chance to reverse his recent slide in the polls.
McCain on the defensive
Obama has put McCain on the defensive by targeting some states that have been easy wins for Republicans in recent presidential elections. McCain's political director said Saturday the Republican nominee is increasing staff levels in North Carolina to defend a state that has not gone Democratic for more than three decades.
Obama's rise coincided not only with the financial meltdown but with his own more aggressive campaign stance.
"His solution was to blame me for it," Obama said Saturday, referring to the economic crisis. "I would say Sen. McCain is a little panicked."
The Democrat also criticized McCain's ties to lobbyists and his support for partial privatization of the Social Security pension system, and noted that McCain wrote in a trade publication that opening the health insurance market to more vigorous competition nationwide, as was done with the banking industry, would provide more choices.
"So let me get this straight," Obama said. "He wants to run health care like they've been running Wall Street. Well, Senator, I know some folks on Main Street who aren't going to think that's a good idea."
But Obama's characterization was a politically charged oversimplification of McCain's article for the American Academy of Actuaries. In the article, McCain wrote that people should be allowed to buy health insurance across state lines.
Deal may take more time
Obama's comments came as Bush defended a proposed multibillion dollar financial bailout designed to rescue struggling markets. The bailout will allow the government to buy $700 billion in toxic mortgages now held by financial institutions and would be the biggest government bailout since the Great Depression.
The White House had hoped for a deal with Congress by the time markets opened Monday, but Paulson's remarks suggested it could take more time.
The market fell steeply last Monday in response to the bankruptcy of storied Wall Street investment bank Lehman Brothers, the decision of a second powerful investment house Merrill Lynch to sell itself at a fire-sale price, and the Federal Reserve's intervention in insurance company American International Group Inc.
But Wall Street enjoyed a huge rally Friday after the government said it was creating a plan to rescue troubled U.S. banks from their souring debts. If such a plan is put in place, it could help alleviate the uncertainty that has been sending the markets into tumult over the past week.
McCain had a campaign stop slated in Baltimore, Maryland, on Sunday, while Alaska Gov. Sarah Palin, his vice presidential running mate, was to hold a rally in Florida.