Election 2008, Economy

Faltering economy takes center stage in Presidential Race 08

WASHINGTON (AP) - Barack Obama said John McCain was in a panic and used his rival's words against him to hammer home the point that the Republican is part of the mindset that led to last week's crisis on Wall Street, and cannot be relied upon to fix it.

McCain's campaign accused Obama of resorting to scare tactics to win votes.

The economy has overtaken other issues such as the war in Iraq as the main concern on voters' minds, and McCain has been battling to differentiate himself from the unpopular Republican President George W. Bush and his economic policies.

McCain also is trying to square his long history of advocating deregulation - the sort of loose controls many blame for the turmoil on Wall Street - with voter concerns about the financial crisis, a fact that Obama seized upon on Saturday.

“There's only one candidate who's called himself 'fundamentally a deregulator' when deregulation is part of the problem,” Obama said during an appearance at Bethune-Cookman University in Florida.

McCain now says more controls are needed to prevent a repeat of the turmoil that sent the stock market plunging, as he tries to recover from a series of gaffes this week, starting with his Monday assessment that U.S. economic fundamentals were strong.

National polls indicate that McCain's edge in the U.S. presidential race has slipped since the market upheaval. The latest Gallup Poll daily tracking survey also showed Obama ahead, with 50 percent to McCain's 44 percent. Last Sunday, a day before stocks took a dive on Wall Street, McCain and Obama were in a statistical dead heat with McCain's 47 percent against Obama's 45 percent.

McCain, battered by last week's crisis, has accused Obama of contributing to the economic problem by accepting campaign contributions from Fannie Mae and Freddie Mac, the mortgage companies rescued by a government takeover earlier this month.

“His solution was to blame me for it,” Obama said Saturday at a rally in Jacksonville, Florida. “I would say Sen. McCain is a little panicked.”

Obama also criticized McCain's ties to lobbyists and his support for partial privatization of the Social Security pension system, and noted that McCain wrote in a trade publication that opening the health insurance market to more vigorous competition nationwide, as was done with the banking industry, would provide more choices.

“So let me get this straight,” Obama said. “He wants to run health care like they've been running Wall Street. Well, Senator, I know some folks on Main Street who aren't going to think that's a good idea.”

But Obama's characterization was a politically charged oversimplification of McCain's article for the American Academy of Actuaries. In the article, McCain wrote that people should be allowed to buy health insurance across state lines.

Obama's comments came as President George W. Bush defended a proposed multi-billion dollar financial bailout designed to rescue struggling markets. The bailout will allow the government to buy $700 billion in toxic mortgages now held by financial institutions and would be the biggest government bailout since the Great Depression.

The White House hoped for a deal with Congress by the time markets opened Monday; top lawmakers say they would push to enact the plan as early as the coming week.

The market fell steeply Monday in response to the bankruptcy of storied Wall Street investment bank Lehman Brothers, the decision of a second powerful investment house to sell itself at a fire-sale price, and the Federal Reserve's intervention in insurance company American International Group Inc.

But Wall Street enjoyed a huge rally Friday after the government said it was creating a plan to rescue troubled U.S. banks from their souring debts. If such a plan is put in place, it could help alleviate the uncertainty that has been sending the markets into tumult over the past week.

Meanwhile, a new AP-Yahoo News poll finds that one-third of white Democrats harbor negative views toward blacks, a finding that could cost Obama, who would be the U.S.'s first black president, the election in a close vote.

The poll, conducted with Stanford University, suggests that the percentage of voters who may turn away from Obama because of his race could easily be larger than the final difference between the candidates in 2004 - about two and one-half percentage points.

More than a third of all white Democrats and independents - voters Obama can't win the White House without - agreed with at least one negative adjective about blacks, according to the survey, and they are significantly less likely to vote for Obama than those who don't have such views.

Also Saturday, the McCain campaign announced that McCain's running mate, Alaska Gov. Sarah Palin, would meet with Afghan President Hamid Karzai next week in New York.

Karzai and other world leaders will convene in New York for the opening of the U.N. General Assembly. Both McCain and Palin planned to be in New York during that time, in part so McCain can introduce the Alaska governor, who has been criticized as having a lack of foreign policy experience, to the foreign dignitaries assembled there.

McCain, a former prisoner of war in Vietnam, took an afternoon away from the campaign trail Saturday to travel to the U.S. Naval Academy for his 50th class reunion.

He spent much of the morning at campaign headquarters preparing for Friday's nationally televised debate with Obama. It will be their first.