Will the Financial Crisis be Enough to Elect Obama?

When Henry Paulson, Treasury Secretary of the outgoing Republican administration, requests the Democratic Congress to give him $700 billion (€476 billion) of credit to take over “rotten investments” from Wall and Street and prevent credit paralysis, the two presidential candidates, Barack Obama and John McCain, have a dilemma: approve of the plan and be accused of spending taxpayer money to bailout earnings-crazed bankers, or oppose it and take responsibility for the potential catastrophe that could follow.

The unraveling of the financial system brings the economy back to the forefront of the American presidential campaign, an issue considered favorable for the Democrats. Polls have confirmed that fact; according to a study conducted by CNN, 47 percent of Americans blame the financial crisis on the Republicans, while 24 percent blame the Democrats. Obama is thought to be more capable of handling the crisis by a number of 53 percent against 39 percent for McCain, according to a poll from the Washington Post and ABC.

Several surveys place blame for the financial crisis on the party who has held the White House since 2001 and has controlled the Congress from 1994 to 2006. Republicans have adopted numerous deregulation measures, making the risky operations that Americans are now paying for possible. An unwavering confidence in the market and in the benefits of research for profit is chiseled in the credo of the “conservative revolution” party that, since the dawn of the eighties, has worked to minimize the influence of the state, dismantle regulations and spread out the field of competition. Obama has said that the financial crisis is the result of an “economic philosophy to which McCain adheres.

The meltdown on Wall Street also impacts on social welfare. Americans need to resolve two problems: the financing of their retirement system by allocation, Social Security, which faces difficulties due to an extended lifespan; the increase costs of health insurance, to where it becomes inaccessible for an increasing number of workers, and which deprives over 40 million people. In the two instances, the Republican candidate speaks out on behalf of personal savings. Or, like Neil House, a Republican expert on public opinion, “the period is perilous,” in order to propose what some type of privatization will do.

The Democrats promise to maintain Social Security’s financing through taxes and creating a health insurance collective. But the cost of the interventions of the Treasury to bail out distressed credit establishments will reduce the next president’s budgetary breathing room.

In a volatile financial economic environment with rising unemployment rises (6.1 percent in August) and in spite of a growth rate superior to Europe’s, the two candidates are sensitive to the effects their declarations could have on the market. In addition, if the administration is Republican, the Congress for over two years has been in the Democratic majority. Obama can’t dissociate himself from the efforts launched through executive and legislative power to achieve a consensus that circumscribes the credit crisis and allows the market to still function.

McCain hesitates less to distance himself from George Bush by accusing the presidency to have put in place an era of racketeering and corruption in Washington. He boasted that if he had been in the White House, he would have fired the head of the Securities and Exchange Commission, protector of the stock exchange – a former Republican deputy. With no offense to Paulson, he has become concerned with the secretary’s power if the Congress hands him $700 billion. Newt Gingrich, former Speaker of the House of Representatives, advised McCain to refuse “the Bush-Obama plan.” The senator from Arizona hasn’t followed that advice. He has preferred to play the cards of national unity and offer house Republicans cover in voting for the plan, by asking Bush to bring Obama and himself to the White House.

Collusion with Wall Street

All congressmen return to face the voters on Nov. 4, as do some of the senators. If they accept the plan, will their constituents congratulate them for having saved the economy or blame them for coming to the banker’s aid according to Paulson’s terms, himself the former head of the investment bank Goldman Sachs, and by Ben Bernanke, president of the Federal Reserve?

The Democrats want to add to Paulson’s plan a system of checks on the Treasury’s operations, a cap on CEO pay from corporations that will benefit from the government’s assistance and measures in favor of holding loaning at variable rates, threatened by foreclosure because they couldn’t pay their monthly payments. In addition, some assess that the Treasury should receive some stock in the businesses that will receive assistance.

A group of Republicans tried to free themselves of the problem by accusing Democrats of collusion with Wall Street. Wasn’t it during Bill Clinton’s presidency that “irrational exuberance,” according to Alan Greenspan’s formula, was seized by the markets? Hasn’t Obama received more contributions from the financial sector than McCain? The revelation that the head of the Republican campaign was a paid lobbyist for Freddie Mac, one of the housing credit giants recently nationalized, reduced the effectiveness of that argument.

The subject isn’t what will be discussed in the first debate between the two candidates, on the night from Sept. 26 to 27, European time. But Americans will look to face themselves on international politics and national security, in wondering which of the two they trust with their jobs, their economy and their retirements.