This week, historians will record, was a game-changer in two key respects.
First, the free-market chickens finally came home to roost.
Treasury Secretary Hank Paulson, who came to Washington from Wall Street with an elaborate agenda of further deregulation the better to enable firms like his own Goldman Sachs to operate ever more baroque casinos, was seen flitting from ad hoc bailout to ad hoc bailout. Not long ago, conservatives were whacking progressives who wanted more investment in public infrastructure, or solar technology, as presuming to "pick winners and losers." But there was Paulson, with no shred of a transparent process, deciding, "Lehman, I think not...A.I.G., maybe no, oops, maybe yes." Talk about picking losers. It wasn't just Lehman Brothers that was revealed as bankrupt, but the whole ultra market formula.
And this was the week when Barack Obama recovered that voice that gave so many of us so much hope. As readers of this blog will know, I have been very harsh on Obama and his handlers lately for sticking to a stale script of wanting to "move beyond left and right", and blaming "Washington" generally, and using rather tame and generic criticisms of McCain as insider. As the Palin surge showed, it wasn't working. Even something as superficial as a celebrity Moose-mom being added to the Republican ticket was enough to shift momentum to McCain. But Palin, who doesn't know her Fannie from her Freddie, now becomes a liability in a financial crisis.
McCain began the week with a big stumble -- his Hooveresque howler about the fundamentals being sound and his not terribly credible attempt to recover by explaining that he was talking about workers. Even less credible was McCain's makeover as a born-again Teddy Roosevelt-style regulator.
But it wasn't so much McCain's stumbles that began the turnaround. It was Obama sounding like a compelling leader, and connecting the dots between Republican ideology, Republican policy, carnage on Wall Street, and wreckage on Main Street--and taking it directly to McCain. And just in time. Here's the voice we've been waiting for, as heard in Obama's speech yesterday in Elko, Nevada.
The events of this week have shown that the stakes in this election couldn't be clearer.
We are in the midst of the most serious financial crisis in generations. Three of America's five largest investment banks have failed or been sold off in distress. Our housing market is in shambles, and Monday brought the worst losses on Wall Street since the day after September 11th. Monday brought the worst losses on Wall Street since the day after September 11th, and today we learned that the Fed had to take unprecedented action to prevent the failure of one of the largest insurance companies in the world from causing an even larger crisis.
While we do not know all the details of the arrangement with AIG, the Federal Reserve must ensure that the plan protects the families that count on insurance. It should bolster our economy's ability to create good-paying jobs and help working Americans pay their bills and save their money. It must not bail out the shareholders or management of AIG.
Everywhere you look, the economic news is troubling. But for so many Americans, it isn't really news at all.
600,000 workers have lost their jobs since January. Home values are falling. Your paycheck doesn't go as far as it used to. It's never been harder to save or retire; to buy gas or groceries; and if you put it on a credit card, they've probably raised your rates. In so many cities and towns across America, it feels as if the dream that so many generations have fought for is slowly slipping away.
I have every confidence that we can steer ourselves out of this crisis. That's who we are. That's what we've always done as Americans.
But the one thing I do know is this--we can't steer ourselves out of this crisis by heading in the same, disastrous direction. And that's what this election is about.
It's been an interesting week for John McCain. It's been really interesting to watch him respond to this economic news. His first reaction to this crisis on Monday was to stand up and repeat the line he's said over and over and over again throughout this campaign--quote--"the fundamentals of our economy are strong."
Now, his campaign must've realized that probably wasn't a smart thing to say on the day of a financial meltdown, so they sent him back out a few hours later to clean up his remarks.
But it sounds like he got a little carried away, because yesterday, John McCain actually said that if he's president, he'll take on the -- quote -- "ol' boys network" in Washington. I am not making this up. This is someone who's been in Congress for twenty-six years -- who put seven of the most powerful Washington lobbyists in charge of his campaign -- and now he tells us that he's the one who will take on the ol' boy network. The ol' boy network? In the McCain campaign, that's called a staff meeting.
I have a sense that hearing himself speak in a stronger voice, and watching his standing recover in the polls, will be a real tonic for the candidate, his campaign, his supporters, and the late deciders. And not a moment too soon.
Robert Kuttner, co-editor of The American Prospect and Distinguished Senior Fellow at Demos, has just published Obama's Challenge: America's Economic Crisis and the Power of a Transformative Presidency (Chelsea Green). He is blogging daily about the election and the economic crisis at www.obamaschallenge.com.
Follow Robert Kuttner on Twitter: www.twitter.com/rkuttner