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As the Federal Reserve Board assumes 80% ownership of AIG via an $85 billion loan and polls move sharply toward Barack Obama, the narrative of the 2008 Presidential Election now centers squarely on an issue that makes Democrats gleeful and Republicans frightful: The economy.
The same party that has bemoaned government involvement in matters related to the economy has watched (and supports) its Federal Reserve Board bailout insurance giant AIG. The move involves an $85 billion loan to rescue the floundering company - while at the same time placing nearly 80% ownership of AIG in the hands of the federal government.
The Federal Reserve ultimately decided that the markets could not endure the collapse of yet another failing financial institution. Tami Luhby, CNNMoney.com senior writer, pointed out the Fed's stance in her column today:
"A disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance," the Fed said in a statement.
Those are the developments with regards to AIG. Now, for the analysis:
Republicans have made careers out of demonizing regulation measures aimed at affecting the financial markets in the United States and abroad. The deregulation of the energy industry nearly collapsed the energy market in California several years ago thanks to Pete Wilson and his merry band of Republicans. It seems that the financial disasters and/or bailouts that have accompanied the collapse of Enron, WorldCom, Merrill Lynch, Lehman Brothers, and now AIG (with more likely to come) have placed a new emphasis on the need for regulation of the financial markets and their players.
What does this mean for the campaigns in the 2008 Presidential Election?
First and foremost, the collapsing financial market and skyrocketing energy prices mean that John McCain can kiss his hope for a national security/September 11/fear-mongering narrative goodbye. The United States economy is THE sole primary issue of the 2008 Presidential Election. There are simply too many struggling working class members, businesses (small AND large), and institutions salient to the financial success of our country to focus on anything else. This places the advantage directly in the lap of Barack Obama, as polls consistently indicate that the American public trusts his judgment on matters of economics far more than they trust John McCain.
The second ramification of this change of narrative is its impact on the forthcoming debates, which begin next Friday (9/26) at the University of Mississippi. No longer will John McCain be able to stand in front of an audience and blather on about his war record or scare up votes by throwing 9/11 into the fray. No longer will Sarah Palin be able to hide behind her good looks and avoid exposing her lack of knowledge and expertise on the issues of this campaign. The economy is numero uno on the public's list of areas of concern. It is an issue that favors Democrats by a large margin - and it stands to be front-and-center when the candidates are questioned and have to defend their policies.
The third and most damaging ramification of the change of narrative is the link it will highlight between the policies of Bush and those McCain are espousing. McCain will have to stand in front of the American people and explain why he believes that the same conservative principles of economics that led us to this catastrophic point in our economy are to be trusted to being it back from the brink of oblivion. At the same time, Barack Obama will have the grand stage to point out the vast differences between his vision and McCain/Bush's - while pounding home the similarities between Bush and McCain.
These realities are the election express for Barack Obama and Joe Biden. The election narrative now points to their greatest strength and the Republicans' greatest weakness. If they stay on message and keep the narrative focused on the American economy, they cannot and will not lose in November.