Financial crisis could benefit Democrats

With poll showing majority believes the country has entered depression, Obama's party is most trusted to handle national affairs.

WASHINGTON // Barack Obama may be calling it the "worst financial crisis since the Great Depression", but when it comes to his bid for the US presidency, the market meltdown could actually provide a boost.

The economic crisis that has swallowed two of the largest investment firms in the United States and caused share prices around the world to plunge has brought a new focus to economic issues on the campaign trail at a time when most US residents already say the troubled economy is the single most important issue in the election. And analysts say that could help Democrats, who traditionally are seen as the party more trusted to handle the economy and who already have laid blame for the turmoil at the Republicans' feet.

"The short-term impact is to give the Democratic candidate another reason to say: vote Democratic so we will not let this happen again," said Stephen J Wayne, a US government scholar at Georgetown University in Washington. "To the extent that the Democrats can paint McCain into Bush's corner, there will be advantage." As US residents awoke to a groundswell of alarming financial news on Monday morning - Lehman Brothers Holdings Inc was filing for bankruptcy and Merrill Lynch and Co was selling itself to Bank of America - Mr Obama was trying to do just that.

"Instead of prosperity trickling down, the pain has trickled up from the struggles of hard-working Americans on Main Street to the largest firms on Wall Street," he said. "This country can't afford another four years of this failed philosophy." Mr McCain had a different outlook on the matter. During a campaign stop in Jacksonville, Florida, he acknowledged the "tremendous turmoil", but said "the fundamentals of our economy are strong", a sentiment also offered on Monday by Henry Paulson, the treasury secretary.

Mr McCain, who has said the economy is not his strength, later sounded far less sure, remarking at his next campaign stop: "The American economy is in a crisis - in a crisis." His campaign also released an ad called "Crisis" about the country's economic woes. But Democrats had already taken his remarks and run, criticising the Arizona senator as being "out of touch". Speaking in St Clair Shores, Michigan, Joe Biden, the No 2 on the Democratic ticket, said: "I could walk from here to Lansing, and I wouldn't run into a single person who thought our economy was doing well, unless I ran into John McCain."

Just 10 per cent of respondents believe the economy is in good shape, according to a July 31 poll conducted by the Pew Research Center for the People and the Press. Close to two-thirds said they thought the country had already entered into a recession or even a depression. Historically, a poor economy hurts the candidate whose party has control of the White House and, on that score, it is Mr McCain who seemingly has a tougher job on the campaign trail: he must articulate how his economic policies would differ from the incumbent's.

Indeed, Democrats have deliberately tried to tie the Republican to the Bush administration and the barrage of bad economic news that has dominated headlines in recent months, including the real estate and credit crunch, high gasoline prices, rising unemployment and now, the collapse of two investment banks - and possibly more. The Dow Jones Industrial Average fell more than 500 points on Monday - its largest single-day drop since the markets reopened after the September 11 attacks in 2001 - and shares continued to be volatile yesterday amid news that the world's largest insurer, AIG, will lend itself US$20 billion (Dh73bn) to stay in business.

Mr Obama already enjoyed an edge in polls on the question of which candidate is better suited to handle the economy, despite gains of late by Mr McCain. But he has had trouble persuading some blue-collar, working-class voters that he is one of them and understands their concerns - and has the right plan to address them. Both candidates praised the US Treasury's decision not to bail out Lehman Brothers with federal dollars, and both supported the federal government's takeover of Fannie Mae and Freddie Mac, the country's largest mortgage holders, this month. But the candidates differ on how to strengthen the economy overall, with the discrepancies in their philosophies largely falling along established party lines.

As a Democrat, Mr Obama believes the government should play a bigger role in the economy, while Mr McCain believes in less government interference and less regulation of the private sector. Mr Obama has said he will not renew the Bush administration's tax cuts, which have reduced rates for taxpayers at every income level, but have offered the most benefit to the people at the top. He also plans to raise taxes on US residents making more than $250,000 a year.

Mr McCain, by contrast, said he would make Mr Bush's tax cuts permanent and lower the corporate tax rate to 25 per cent from 35 per cent. Mr Wayne of Georgetown said the recent economic news, and perhaps Mr McCain's response to it, could help Mr Obama score points with working-class voters on "bread and butter" issues, or issues that literally effect a voter's ability to put food on the table. "If those issues are not going to hit home in this election, they are never going to hit home," he said.

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