Making it to the White House will be the easy part
Tuesday, 28 October 2008
Philip Stephens
THE hurricane sweeping through financial markets has changed the character of the US presidential contest. The consequences of the crash, political and economic, will have a still more profound effect on the course of the next presidency.
The failures of financial markets and the rehabilitation of John Maynard Keynes have handed Barack Obama a strong lead in the race for the White House. America is living through one of those rare moments when government is seen as the answer not the obstacle. The voters want shelter from the storms.
The national polls have been giving Mr Obama an average lead of about eight points. Democratic strategists say even this advantage understates the strength of his position in pivotal battleground states. Some Republicans privately concede Mr Obama's position may be impregnable. In a poll of Republican political consultants, the National Journal found that four out of five expected the Democratic candidate to win.
Not so long ago the election seemed likely to turn on Iraq. Mr Obama saw his pledge to end the war as a certain vote-winner. John McCain spotted an opening to frame the election around the experience needed in a commander-in-chief.
The Republicans had some initial success also with the tried and tested strategy of shining the spotlight on their opponent. The unspoken target was Mr Obama's "otherness": a catch-all embracing his African-American heritage, his alleged elitism and questionable patriotism. In choosing the homespun Sarah Palin as his running mate, Mr McCain emphasised Mr Obama's distance from country-and-western America.
All this has been swept away along with the $10m bonuses that Wall Street investment bankers had come to regard as a birthright. The polls show that more than two-thirds of Americans now think the economy the most important issue. Iraq still comes second, but, according to Gallup, only a little more than 10 per cent see the war as the determining issue.
It would be misleading to say that the candidates have risen to this new challenge. The economy, of course, takes centre-stage in every stump speech. The initiatives come thick and fast. The remedies, though, are palliatives.
Both men have concentrated on short-term economic stimulus programmes - tax cuts, spending programmes or both - to blunt the pain of the coming recession. Neither has been willing to talk about the sacrifices that will have to be made during the next four years if America is fundamentally to rebalance an economy drowning in debt.
Mr Obama is the most assured. His demeanour in the third and final debate this week spoke again of calm confidence. The exchanges were the most substantial of the three encounters. But they seem unlikely to change the course of the contest. Mr McCain finds it harder and harder to suppress his frustration.
You can see why. Mr Obama's many tax and spending pledges can scarcely be reconciled with the grim reality of the burgeoning budget deficit. The rising protectionist tone of his pledges to protect American jobs jars with the promise to restore the nation's standing in the world. That said, his speeches carry a professional sheen applied by a phalanx of economic advisers from the Clinton years.
Mr McCain, by contrast, has seemed to be snatching at solutions. The promise is of a tax cut here, another one there. The overall impression is of an absence of strategy. All the while, the bad economic news invites closer association with the dismal debt legacy of George W. Bush's administration.
You could sense Mr McCain's rising anger when he seemed to accuse Mr Bush of spending the last eight years "waiting for his luck to change". Ms Palin threw her own rocks at the president: "We don't want another big spender in the White House." Ouch. At this rate, people will soon start feeling sorry for the hapless Mr Bush.
All this said, the violent gyrations on the financial markets should be a caution as to how quickly things can change.
Mr Obama's supporters suffer from violent mood swings. At one moment they are convinced the Democrats are heading for a landslide; at the next, that the prize could yet be snatched from them in the final lap of the race.
In California, where I have spent the past few days, Democrats are haunted still by the so-called "Bradley effect". Tom Bradley lost the state governor's race in 1982 even though exit polls gave him a convincing lead. Mr Bradley was black.
What most strikes the outside observer, however, is the distance between the campaign rhetoric and the economic realities that will confront the new president. Both candidates have been talking about fixing the financial system; neither has admitted, perhaps even to themselves, that fixing the economy will be a much tougher project.
The global financial crisis has held up a mirror to the huge shifts in economic power in the world. One of the big lessons to be drawn by the next president is that the US cannot rely indefinitely on the rising economies of Asia to finance the nation's spending. They already have enough dollars.
Even before the cost of the bail-out of the banks and the stimulus programmes promised by the candidates are added to the accounts, next year's US budget deficit is forecast to top $500bn. It could turn out to be twice that very large number.
I have heard supporters of Mr Obama say "no matter". Once he has won, he can declare that things are a lot worse than they seemed. A Democratic Congress will trim its ambitions.
Even putting aside the political cynicism, this misses the scale of the challenge. Fixing the economy - persuading voters to consume less and save more and redirecting spending into investment in the nation's crumbling infrastructure - will demand a huge reservoir of moral authority. What will voters say when Mr Obama, if he wins, tells them that his health plan is unaffordable?
From the outset of the campaign, Mr Obama has promised that he would restore respect for US leadership in the world. The way to do that, he said, was to end the war in Iraq. That, as everyone knows, will be a lot harder than he admits.
Ultimately, though, America's authority rests on its economy. The next president will succeed only if he shows he has the political strength to restore it to good health. Bill Clinton was right. It really is the economy, stupid.
THE hurricane sweeping through financial markets has changed the character of the US presidential contest. The consequences of the crash, political and economic, will have a still more profound effect on the course of the next presidency.
The failures of financial markets and the rehabilitation of John Maynard Keynes have handed Barack Obama a strong lead in the race for the White House. America is living through one of those rare moments when government is seen as the answer not the obstacle. The voters want shelter from the storms.
The national polls have been giving Mr Obama an average lead of about eight points. Democratic strategists say even this advantage understates the strength of his position in pivotal battleground states. Some Republicans privately concede Mr Obama's position may be impregnable. In a poll of Republican political consultants, the National Journal found that four out of five expected the Democratic candidate to win.
Not so long ago the election seemed likely to turn on Iraq. Mr Obama saw his pledge to end the war as a certain vote-winner. John McCain spotted an opening to frame the election around the experience needed in a commander-in-chief.
The Republicans had some initial success also with the tried and tested strategy of shining the spotlight on their opponent. The unspoken target was Mr Obama's "otherness": a catch-all embracing his African-American heritage, his alleged elitism and questionable patriotism. In choosing the homespun Sarah Palin as his running mate, Mr McCain emphasised Mr Obama's distance from country-and-western America.
All this has been swept away along with the $10m bonuses that Wall Street investment bankers had come to regard as a birthright. The polls show that more than two-thirds of Americans now think the economy the most important issue. Iraq still comes second, but, according to Gallup, only a little more than 10 per cent see the war as the determining issue.
It would be misleading to say that the candidates have risen to this new challenge. The economy, of course, takes centre-stage in every stump speech. The initiatives come thick and fast. The remedies, though, are palliatives.
Both men have concentrated on short-term economic stimulus programmes - tax cuts, spending programmes or both - to blunt the pain of the coming recession. Neither has been willing to talk about the sacrifices that will have to be made during the next four years if America is fundamentally to rebalance an economy drowning in debt.
Mr Obama is the most assured. His demeanour in the third and final debate this week spoke again of calm confidence. The exchanges were the most substantial of the three encounters. But they seem unlikely to change the course of the contest. Mr McCain finds it harder and harder to suppress his frustration.
You can see why. Mr Obama's many tax and spending pledges can scarcely be reconciled with the grim reality of the burgeoning budget deficit. The rising protectionist tone of his pledges to protect American jobs jars with the promise to restore the nation's standing in the world. That said, his speeches carry a professional sheen applied by a phalanx of economic advisers from the Clinton years.
Mr McCain, by contrast, has seemed to be snatching at solutions. The promise is of a tax cut here, another one there. The overall impression is of an absence of strategy. All the while, the bad economic news invites closer association with the dismal debt legacy of George W. Bush's administration.
You could sense Mr McCain's rising anger when he seemed to accuse Mr Bush of spending the last eight years "waiting for his luck to change". Ms Palin threw her own rocks at the president: "We don't want another big spender in the White House." Ouch. At this rate, people will soon start feeling sorry for the hapless Mr Bush.
All this said, the violent gyrations on the financial markets should be a caution as to how quickly things can change.
Mr Obama's supporters suffer from violent mood swings. At one moment they are convinced the Democrats are heading for a landslide; at the next, that the prize could yet be snatched from them in the final lap of the race.
In California, where I have spent the past few days, Democrats are haunted still by the so-called "Bradley effect". Tom Bradley lost the state governor's race in 1982 even though exit polls gave him a convincing lead. Mr Bradley was black.
What most strikes the outside observer, however, is the distance between the campaign rhetoric and the economic realities that will confront the new president. Both candidates have been talking about fixing the financial system; neither has admitted, perhaps even to themselves, that fixing the economy will be a much tougher project.
The global financial crisis has held up a mirror to the huge shifts in economic power in the world. One of the big lessons to be drawn by the next president is that the US cannot rely indefinitely on the rising economies of Asia to finance the nation's spending. They already have enough dollars.
Even before the cost of the bail-out of the banks and the stimulus programmes promised by the candidates are added to the accounts, next year's US budget deficit is forecast to top $500bn. It could turn out to be twice that very large number.
I have heard supporters of Mr Obama say "no matter". Once he has won, he can declare that things are a lot worse than they seemed. A Democratic Congress will trim its ambitions.
Even putting aside the political cynicism, this misses the scale of the challenge. Fixing the economy - persuading voters to consume less and save more and redirecting spending into investment in the nation's crumbling infrastructure - will demand a huge reservoir of moral authority. What will voters say when Mr Obama, if he wins, tells them that his health plan is unaffordable?
From the outset of the campaign, Mr Obama has promised that he would restore respect for US leadership in the world. The way to do that, he said, was to end the war in Iraq. That, as everyone knows, will be a lot harder than he admits.
Ultimately, though, America's authority rests on its economy. The next president will succeed only if he shows he has the political strength to restore it to good health. Bill Clinton was right. It really is the economy, stupid.