Financial Meltdown Could Help Barack Obama's Campaign

The nation's ongoing financial calamity is a potential game-changer in the presidential race that could give a big boost to Barack Obama and the Democrats.

Pollsters and a variety of strategists from both parties agree that voters are increasingly unsettled and fearful that the woes of Wall Street, coming on the heels of the sub-prime mortgage crisis and other financial problems, will spread through the economy. Everyday Americans worry that the turmoil will affect their jobs and wages in addition to housing prices, interest rates, and the availability of money to borrow.

Obama has jumped on the issue in hopes that he can finally break away from Republican presidential candidate John McCain in the national polls. He hopes the crisis plays to his strengths, since voters for many months have had more confidence in the Democrats to handle the economy. The issue helps Obama in two other ways—it gives him the opportunity to show that he will fight for the middle class, and it allows him to highlight the failure of government regulators under a GOP administration to anticipate the current crisis and do something about it.

McCain's comment on Monday that the fundamentals of the economy remain "strong"—when the news coverage of the financial meltdown suggested just the opposite— has caused him no end of political problems. James Carville, the Democratic strategist who guided Bill Clinton to an upset victory in 1992 on the strength of an "it's the economy, stupid" message, says McCain seemed out of touch. McCain also unintentionally tied himself to the unpopular administration of President George W. Bush, who has used similar language to describe the economy in the past.

Summing up the latest Democratic thinking, former President Bill Clinton told CNBC's Maria Bartiromo Thursday, "The latest polls had Senator Obama up a little bit. And I think partly that's a function of the current distress, economic distress, because I think the more people worry about the current set of circumstances, the more likely they are to change parties. I have always said that I thought Senator Obama would win this election because two thirds of the American people are having trouble paying their bills, and because...Democratic registration is up and Republican registration is flat, and because he has offered some very specific and sensible economic reforms and healthcare reforms. ..What typically happens in these elections—if you look throughout American history—when the country's in a fix and you know where we're going is not sustainable, then there is typically a breakthrough" for the opposition party.

But Karl Rove, the GOP strategist who guided President George Bush to two victories, in 2000 and 2004, said McCain's comments have been distorted. The GOP nominee actually was saying that American workers remain the fundamental strength of the economy, but greed and corruption on Wall Street have caused the current meltdown, Rove argued.

McCain spokesman Ben Porritt said Thursday, "Our economy is struggling, families are paying record prices on groceries and gas, yet Barack Obama is peddling higher taxes because, as his running mate [Joe Biden] claims, it is our patriotic duty. The Obama-Biden plan is a failed and backward economic scheme that will kill jobs and further hinder our economy. McCain-Palin will reform Washington by cutting taxes and prevent earmark addicts like Barack Obama and Joe Biden from wasting taxpayer dollars."

Obama spokesmen say Obama actually wants to cut taxes for the middle class while he raises taxes on the well-to-do.

In an E-mail sent to supporters Thursday afternoon, Obama used the crisis to solicit campaign contributions. "The economy hit a new low this week, and in every part of the country people like you are feeling it," Obama wrote. "The recent financial disasters—from the collapse of Fannie Mae and Freddie Mac to the historic drop in the stock market—are not just a string of bad luck. They are the result of years of bad decisions made in favor of big corporate special interests instead of America's working families. More than 600,000 Americans have lost their jobs since January. Home foreclosures are skyrocketing and home values are plunging. Gas prices are at an all-time high, and we're still spending more than $10 billion every month on a war in Iraq that should never have been waged."