For months, the top presidential candidates have focused on showing a war-weary public that they have what it takes to be the next commander in chief. But on Monday, as the Iraq war entered its sixth year, they faced a test with far more relevance to the everyday lives of Americans: whether they could serve as economist in chief.
With turmoil growing in financial markets that rely on trust and public confidence, each of the three candidates claimed to have ideas to guide the country through this complex and risky time.
That meant shifting gears quickly. Presumptive Republican nominee John McCain was in Iraq, a trip intended in part to add to his foreign policy credentials. Democrat Hillary Rodham Clinton was in Washington to deliver what her campaign called a “major speech” on the war. And Barack Obama, her party rival, was preparing to give an address on race and politics in Philadelphia today.
Though McCain, Clinton and Obama have talked often about taxes and spending cuts, discussing the tools available to the Federal Reserve to stem financial crises did not appear to be natural terrain for any of them.
On Monday, the three applauded the Fed’s weekend move that paved the way for the buyout of Wall Street brokerage Bear Stearns. But none of the candidates offered specific economic policy proposals beyond their past statements addressing the months-old housing mortgage crunch.
Clinton issued a broad call “to be vigilant; to do everything in our power to maintain confidence in our financial system.” Obama noted that when the nation faced adversity in the past, “we have summoned a spirit of cooperation and innovation to emerge stronger and more prosperous than we were before.”
All of the candidates signaled an openness to consider at least some type of government intervention, such as increased regulation of financial markets. It was a noteworthy stance for McCain, who has staked out a more free-market approach to economic policy.
But comments from his chief economic advisor underscored the need for McCain to draw a distinction between himself and President Bush, who was the target of criticism Monday over what Democrats called his lack of leadership during the current economic crisis.
Asked whether McCain would consider heightened regulation to address the financial turmoil, advisor Douglas Holtz-Eakin said the candidate would not rule that out.
“He is interested in hearing a broad range of views, and he’s interested in getting it right,” Holtz-Eakin said. “This is too big a moment for the typical American family.”
The upheaval in the financial markets has provided a pointed lesson in how little control candidates have at times over their campaigns’ agendas and atmospherics. As much as they wanted, or expected, the 2008 race to hinge on the war or the demand for expanded healthcare coverage, the economy is now the No. 1 issue -- and it is forcing the candidates to formulate responses to problems without obvious solutions.
The increased focus on the economy may work to Democrats’ advantage. Polls have shown that voters generally have more faith in Democrats to lead on that issue. And McCain, who has been supportive of Bush administration policies, has presented himself as a wartime military leader and even joked that economic policy was not his strong suit.
“Nothing looks good for McCain,” said William Niskanen, an economist and chairman of the libertarian Cato Institute.
Sen. Charles E. Schumer (D-N.Y.) drew a direct parallel between the debate over commander in chief credentials and the candidates’ abilities to lead on the economy, alluding to a Clinton campaign ad that asked whom voters would want answering the call when the White House telephone rings in the middle of the night. That ad suggested Clinton was more capable than Obama. But Schumer used the same idea to compare Democrats, who tend to see a role for government in regulating markets, to more laissez-faire Republicans.
“The red phone rang; it is ringing at 3 a.m., and the president is not picking it up,” Schumer said. “He is straitjacketed by his ideology, which says ‘No government involvement.’ ”
Both of the Democrats have backed legislation aimed at helping homeowners who obtained mortgages at temporarily low rates and are now at risk of foreclosure.
Clinton has proposed easing mortgage refinancing for some people, providing federal aid to communities to prevent foreclosures, and imposing temporary rate freezes and foreclosure moratoriums on sub-prime mortgages. When asked to lay out what the candidate would do beyond her previous proposals, however, aides demurred.
Obama, during a news conference in Pennsylvania, suggested that a review of financial regulations was necessary. “Part of how we got here was that we did not have a regulatory system that was in place that ensured transparency in the markets,” he said. “We have a whole new global financial market, and our old regulatory system has not caught up.”
Experts said that growing public anxiety could force the candidates to confront more difficult questions about how and whether to regulate the financial services industry, a powerful lobby that gives money to politicians.
Both parties have shown a reluctance to support aggressive regulation.
“The economy being front and center forces candidates to flesh out their vision in more detail than they might have done,” said Michael Franc, a policy analyst at the conservative Heritage Foundation.
Even as McCain’s top economic advisor said that he was open to some new regulation, the campaign signaled that he planned to adhere to conservative orthodoxy. In a statement, Holtz-Eakin said that “no government program or policy is a substitute for a good job.”
Robert D. Reischauer, president of the Urban Institute, said that all of the candidates “really have been Johnny-come-latelies” in focusing on the nation’s economic turmoil. “It could be the issue that dominates the first six months of the next president’s term in office.”