By Perry Bacon Jr. and Dan Balz
Washington Post Staff Writers
Friday, March 28, 2008
Sens. Barack Obama and Hillary Rodham Clinton yesterday sharply criticized presumptive Republican presidential nominee John McCain's views on the housing crisis, illustrating a wide gap between the two parties on how to fix the ailing economy.
Sen. McCain and the Democrats long have sparred over U.S. policy toward Iraq, but the collapse of the subprime lending market and subsequent softening in other sectors of the economy have opened a second front in the competition among the presidential rivals.
In an economic speech on Tuesday, McCain (Ariz.) said he supports government assistance for Americans facing home foreclosure because of the turmoil in financial markets. But he declined to embrace the kind of government intervention for individuals and institutions favored by Clinton and Obama, arguing that "it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers."
Obama (Ill.) and Clinton (N.Y.) have pounced on that quote in an effort to paint McCain as indifferent to the problems of ordinary Americans. Speaking in New York yesterday, Obama characterized McCain's views as amounting to "little more than watching this crisis happen." Clinton, appearing in Raleigh, N.C., said McCain prefers to ignore the crisis or simply blame families for their problems.
"Sometimes the phone rings at 3 a.m. in the White House and it's an economic crisis," Clinton said, alluding to an ad she ran against Obama weeks ago. "And we need a president who is ready and willing and able to answer that call." McCain's plan, she said, does virtually nothing to ease the credit or housing crisis. "It seems like if the phone were ringing, he would just let it ring and ring and ring," she said.
Stung by the Democrats' rhetoric, the McCain team fought back yesterday. Carly Fiorina, the former Hewlett-Packard chief executive who was recently tapped by McCain to head the Republican National Committee's 2008 victory fund, accused the Democrats of "mischaracterizing" McCain's remarks, calling their criticisms "politics of the worst sort."
In a statement aimed at blunting the Democrats' attacks, McCain said, "We have a responsibility to take action to help those among them who are deserving homeowners." But he reiterated his opposition to big bailouts for undeserving speculators or financial institutions. "There is a tendency for liberals to seek big government programs that sock it to American taxpayers while failing to solve the very real problems we face," he said.
The argument over the housing crisis illustrates broader differences in economic philosophy between McCain and his Democratic rivals. On taxes, McCain has reversed his opposition to President Bush's 2001 tax plan and now supports making the cuts permanent. Obama and Clinton want to return income tax rates for the wealthiest Americans to the levels of the 1990s.
On health care, Obama and Clinton would spend around $100 billion to provide universal coverage and would provide the option of buying into the same plan used by federal workers and lawmakers. McCain has emphasized a more limited plan of tax credits for people to buy private insurance.
On trade, the Arizona Republican has been a vocal proponent of international trade pacts such as the North American Free Trade Agreement. Obama and Clinton have pledged to renegotiate NAFTA if elected.
While all three candidates backed an economic stimulus plan signed by President Bush last month that will send checks of up to $600 to individuals over the next few weeks, Obama and Clinton have argued for much more to be done, both in housing and in the overall economy.
Obama -- who was introduced at Cooper Union college by New York Mayor Michael R. Bloomberg, an independent whose endorsement all three candidates covet -- outlined what he called a second stimulus package that would cost about $30 billion and include assistance to individuals and areas hit hard by the housing crisis. It would also extend unemployment insurance for those who have lost their jobs. "If we can extend a hand to banks on Wall Street, we can extend a hand to Americans who are struggling," he said, referring to the government-engineered rescue last week of investment bank Bear Stearns.
Obama blamed the turmoil in the subprime market on the deregulation of financial institutions, which he said was "aided by a legal but corrupt bargain" between Washington lobbyists and lawmakers. "In doing so," he said, "we encouraged a winner-take-all, anything-goes environment that helped foster devastating dislocations in our economy."
He also set out a series of principles for stiffer federal oversight of financial markets and institutions. "The American economy does not stand still and neither should the rules that govern it," he said. "The evolution of industries often warrants regulatory reform -- to foster competition, lower prices or replace outdated oversight structures. Old institutions cannot adequately oversee new practices. Old rules may not fit the roads where our economy is leading."
In North Carolina, Clinton set out an agenda for workers who are laid off from their jobs, proposing additional funding for training jobs and Pell Grants that can help for retraining for a new position. McCain and Obama have both proposed similar ideas.
Earlier in the week, Clinton proposed giving cities and states $30 billion to help people who can no longer afford their mortgages. Clinton and Obama have argued that since the government spent that much money on a Wall Street firm, it should also spend at least that on low- and middle-income homeowners who need help.
Douglas Holtz-Eakin, McCain's top economic adviser, derided this approach as "throwing money at problems." But he associated McCain with some of the ideas Obama put forth yesterday on financial regulation, even though McCain had warned Tuesday against undue governance.
"They are wonderful words and they are words that you could hear out of a Republican or a Democrat," he said of the Obama speech. "I don't think there is any grand disagreement about the need for effective regulation. The bottom line that Senator Obama came up with is what Senator John McCain said on Tuesday."
That apparent moment of agreement prompted one more rejoinder from Obama's campaign. McCain, said Obama spokesman Bill Burton, was attempting "a do-over" on his Tuesday speech, one that he argued still fell short of what is needed to help struggling families.
Staff writers Alec MacGillis and Krissah Williams contributed to this report.