Election 2008: The Economy and Iraq Dominate as Three-Way Battle Resumes in U.S.

Battle Resumes with All to Play For

At the moment there is a rare lull in the primary season, with over three weeks still to go before Pennsylvania votes on 22 April. This has given the candidates an opportunity to draw some breath and recharge. Democratic Illinois Senator Barack Obama returned yesterday from a short holiday in the U.S. Virgin Islands, and immediately threw himself back into the fray. The other two remaining hopefuls, Democratic New York Senator Hillary Clinton and Republican Arizona Senator John McCain, responded with major speeches and interviews of their own on two central issues: the economy and Iraq. Previous weeks had been dominated by the Democrats' sparring over their integrity and personal judgement, but this week the focus is back on policy themes.

A new poll from the Wall Street Journal (WSJ)/NBC News shows that the net effect of the Democrats' recent bickering has effectively been nil. Obama was widely presumed to have lost ground against Clinton after intense controversy over his former pastor's extreme outbursts, but the poll shows both candidates are on level pegging. Both have 45% among registered Democratic voters, compared to a 47%-43% Clinton lead two weeks ago. There are signs that both candidates have been similarly damaged in relation to McCain by the spats. The situation is a bitter disappointment for Clinton, who needs a strong lead in the final weeks to overcome Obama's existing advantage and set herself up as a strong contender vis-à-vis McCain. Moreover, the poll suggests that she is now losing some ground among her key female constituency. For the first time, the WSJ/NBC poll shows that more women view her negatively than positively. She also sees her lead among white Democrats shrink to eight points from 12 points in early March. It was thought that the controversy over Obama's pastor would help her among this group. Obama managed to defuse some of that controversy with a well-received speech about race.

Over the primaries and caucuses to date Obama is estimated by the Associated Press to have won some 1,617 delegates, compared to Clinton's 1,498. Neither can now win the nomination outright in the remaining contests, which means it could then be up to the so-called "super-delegates" to cast the deciding votes. They are made up of members of Congress and other important party figures, and there is much uncertainty over how they will vote. Many have committed themselves already, but this is not binding. On balance, it seems they will tend to follow the popular vote (which currently works in Obama's favour); there would be great controversy if they were seen to overturn the wider "will of the people". However, the Clinton campaign is working hard to exploit doubts over Obama's "electability" come November. She has had image problems of her own in recent weeks, however. There has been criticism of how her campaign has handled the race issue, and she has also been forced to admit that a visit to Bosnia was not as hazardous as she previously claimed. The Bosnia incident had been cited as evidence of her greater hands-on experience of foreign policy—a key weapon against the less experienced Obama.

McCain Enjoys Ringside Seat, Sticks to Iraq Message

With all his Republican rivals vanquished, McCain is in the enviable position of watching from the ringside as the Democrats tear each other to pieces. He has an opportunity to rise statesmanlike above the fray and bide his time before rolling out the big guns. This has effectively been his strategy to date, but he has intensified his campaigning in recent days. The fifth anniversary of the Iraq war has turned the spotlight on him as one of the most prominent backers of the administration's current strategy. President George W. Bush trumpeted the success of the recent "troop surge" in reducing violence in the Iraqi capital, Baghdad, and some other areas on the anniversary, and McCain has been keen to highlight his role in pressing for this. He portrays Obama and Clinton as reckless for advocating an accelerated withdrawal. However, McCain has always been taking a risk in backing Bush so strongly on Iraq. The war remains highly unpopular and in recent days an upsurge in major suicide attacks and fighting with militias in Basra has conflicted with the administration's sunny depiction of the situation.

While McCain might support the Iraq strategy, he is trying to distance himself from the administration's wider foreign policy record. In a speech in Los Angeles yesterday he stressed the need to work with allies rather than adopt a unilateralist approach. This suggests a change from the interventionist, pre-emptive ideology of the neoconservatives who used to dominate within the Bush administration. He acknowledged the damage that has been done to the United States' international standing and vowed to repair it. McCain has not been afraid to list climate change among key priorities, an area where the current administration has dragged its feet. McCain has not gone as far as Obama in promising to reach out to foes and talk to them directly, however. Interestingly, McCain yesterday indicated that his more conciliatory approach does not extend to Russia, which he would push to oust from the Group of Eight (G-8).

Candidates Spar over Economy

With the economy apparently in recession, this is a topic that is sure to be one of the dominant issues for the remainder of the year. Clinton spoke about the situation yesterday in an interview with the WSJ and said she feared the United States is slipping into a Japanese-style economic malaise that could drag on for years. She expressed doubt that the Federal Reserve is able to do enough and called on the administration to take bolder steps to ease the mortgage crisis. She argued that the government should be ready to buy troubled mortgages (where there is a negative equity situation) from investors and lenders, using the Federal Housing Administration. The administration has taken a number of bold steps already, but is unwilling to countenance this degree of risk. It also points out that negative equity does not necessarily mean the homeowner is unable to pay. It remains to be seen how Clinton's proposals are viewed by the electorate. She will hope that promises of help for homeowners play well in Pennsylvania, where such problems are especially acute. She now embarks on a six-day "Solutions for the American Economy" tour to underline her plans. It should be noted that Obama's proposals to date are very similar to Clinton's, so it will be more a matter of presentation.

On wider economic topics, Obama will today emphasise tax cuts for middle-class families, something Clinton does not endorse. McCain is meanwhile sticking to the tried-and-tested Republican formula of small-government and low taxes. This is in contrast to his past reputation as an opponent of the Bush tax cuts. His position allows him to portray the Democrats as high spenders and taxers. McCain now wants to extend Bush's tax cuts for the wealthy, which both Clinton and Obama have vowed to reverse. Another big economic topic is free trade. Clinton and Obama have both jumped on a quasi-protectionist bandwagon in recent months, attacking free-trade agreements such as the North American Free-Trade Agreement (NAFTA) for their supposed harm to U.S. manufacturers. Clinton returned to this theme yesterday, despite the widespread unease among businesses in the United States and the country's international partners. Clinton has suggested that she may pull the United States out of NAFTA (an agreement her husband forged in 1993) if president.

Outlook and Implications

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