Candidates put heavy focus on economy

September 17, 2008 5:19:01 PM PDT
With economic anxiety rising, Republican John McCain and Democrat Barack Obama scrambled Wednesday to adjust their messages to connect more directly with financially struggling voters. Obama talks directly into the camera in a new, two-minute television ad on how he'll fix an economy in which "paychecks are flat and home values are falling." McCain and running mate Sarah Palin softened opposition to government bailouts, accepting the U.S. takeover of the nation's largest insurer as unfortunate but necessary to protect ordinary Americans.

"The shot that has been called by the Feds - it's understandable but very, very disappointing that taxpayers are called upon for another one," Palin told reporters during a visit to delicatessen in Cleveland.

Both McCain and Obama advocated cracking down on freewheeling Wall Street practices and for tough new regulations on financial institutions.

Obama ridiculed McCain's calls for more regulation as an eleventh-hour conversion for one who has long championed deregulation.

Too many in Washington and on Wall Street "weren't minding the store. They sat on their hands until it was too late," Obama told a rally in Elko, Nev. He challenged McCain's vow to take on the "old boy's network...He hasn't taken them on for the last 26 years."

The increased emphasis on the faltering economy came on a day when stocks resumed their downward plunge following Tuesday night's government takeover of American International Group Inc. with an $85 billion two-year loan from the Federal Reserve in return for a majority stake in the company.

"The focus of any such action should be to protect the millions of Americans who hold insurance policies, retirement plans and other accounts with AIG," McCain said in a statement. "We must not bail out the management and speculators who created this mess."

The turnabout came a day after McCain strongly opposed additional government relief and praised the government's decision not to rescue Lehman Brothers after it had intervened to help investment bank Bear Stearns and mortgage giants Fannie Mae and Freddie Mac.

His Democratic rival addressed the AIG takeover in Elko, saying the government acted "to prevent an even larger crisis." Arguing that the U.S. housing market was "in a shambles," Obama said it was important now for the Federal Reserve to ensure that families with AIG insurance are protected. "It must not bail out the shareholders or the management of AIG that were making big profits when times were good."

Obama, in his own change of tactics, speaks directly to voters in a new commercial to air Wednesday on national cable and in some battleground states.

"In the past few weeks, Wall Street's been rocked as banks closed and markets tumbled. But for many of you - the people I've met in town halls, backyards and diners across America - our troubled economy isn't news," Obama says in the ad, taped Tuesday in a living room-like setting.

"Paychecks are flat and home values are falling. It's hard to pay for gas and groceries and if you put it on a credit card, they've probably raised your rates," he adds.

Obama also laments rising health insurance costs. He details major elements of his economic plan, including its proposal for a $1,000 tax cut for working couples, steps to reduce reliance on imported oil, bringing a "responsible end" to the war in Iraq and ending an "anything goes culture on Wall Street."

"Doing these things won't be easy. But we're Americans," Obama says.

Obama also discussed the AIG takeover.

McCain campaigned in Michigan, one of the states hardest hit by eight straight months of rising unemployment.

At the General Motors Orion assembly plant, he told workers: "We are going to fight the special interests and corruption in Washington. We are going to fight the greed and irresponsibility on Wall Street."

While both presidential candidates have called for tougher regulation of financial institutions and cracking down on Wall Street abuses, neither has come up with a detailed plan, nor gone so far as to endorse a proposal for the kind of massive federal intervention that took place in the savings and loan crisis of the late 1980s and the early 1990s.

Then, the Resolution Trust Corp. was established by Congress to acquire the real estate, mortgages and other assets of thousands of failed S&Ls.

Some lawmakers suggest such a strategy may be needed to stabilize financial markets, rather than the ad hoc interventions the government has been doing.

A day after extending a helping hand to AIG, the White House on Monday called the U.S. economy a mixed picture that would ultimately weather the current turmoil. Press secretary Dana Perino said help for other endangered companies would be considered on a "case-by-case basis."

Both candidates have been adjusting to keep pace with a fast-changing situation in which financial markets have been buffeted by one jolt after another.

The weak economy would normally be expected to benefit Democrats, since voters often punish the party in the White House for bad economic times, and McCain's Republican party has been in power for the past eight years.

But an Associated Press-Yahoo News poll conducted last week suggests McCain and Obama now are trusted equally on the economy, with 34 percent of voters saying each would do a better job. Previously, Obama had held a solid advantage on the issue.

Meanwhile, an advocacy group for older Americans questioned McCain's recent railing against Wall Street excesses at the same time he supports a plan to allow younger workers to divert some of the Social Security payroll tax they would pay into private investment accounts, much as President Bush would do.

McCain "continues to support plans to turn Social Security money over to the same Wall Street financiers he now criticizes," said Barbara B. Kennelly, president of the National Committee to Preserve Social Security and Medicare.

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