Debate One Wrap

Who won Friday's debate? As the front-runner, Senator Obama needed to avoid any major mistakes. Senator McCain needed draw clear distinctions and make the case that Obama is not ready to lead.

Americans must have been disappointed that neither candidate veered from their brief talking points on the current financial crisis. Hindsight is 20/20 and both found it useful to assign blame and name scapegoats. It was startling how neither had any insight or vision for resolving this crisis. It seems both are satisfied to stick the taxpayers with a $700 Billion tab in the name of bipartisanship without offering any specific adjustments to their current spending plans. McCain shifted the subject to earmark spending - an area of strength, but one that has marginal applicability to this crisis. Obama explained that he will bring relief to the middle class, by increasing taxes on their employers - this would be devastating in the current economic environment, and McCain should have hammered it.

Either candidate could have offered a Reader's Digest explanation of how mark-to-market accounting is creating an illiquid environment for many of our financial players. Behind every pool of securitized mortgages are tangible, hard assets - homes. Even if 100% of subprime mortgages are forclosed on, they are worth something. Instead of addressing this obvious point, both candidates seem content to create more Sarbanes-Oxley style regulations that have saddled American commerce post-Enron. This steers global jobs and investment away from the USA.

As the debate turned to foreign policy, Obama again used his 20/20 hindsight to assign blame, name scapegoats, and declare that he opposed the 2003 decision to invade Iraq from the safety of the Illinois legislature. He hammered McCain for proving to be wrong on a number of items regarding the 2003 invasion, but McCain effectively brought the "gotcha game" full circle with Obama's fierce opposition to the surge.

As expected, John McCain discussed Iran, Pakistan, and Russia with confidence and ease. Since the Democratic primaries Obama has deftly moved towards McCain's positions, which minimizes any McCain advantage for the swing voters who are just beginning to tune in. As an example, we learned last night that Obama is now in favor of extending NATO membership to Georgia and Ukraine. This is welcome news, but it's not altogether convincing when he passed on the opportunity to use his huge audience in Berlin to press the issue with the chief NATO obstacle - Germany.

There is still a huge opening for one of the candidates to take on the $700B Bush-Paulson-Frank bailout for Wall Street. Obama cannot take this kind of chance with his advantage in the polls. McCain could assert his Maverickness in a way that turns this race for good. The solution would be a detailed plan that outlines to the American people a pro-growth economic expansion focused on the future. It would eliminate earmarks and capital gains taxes. It would reduce marginal tax rates and promote a strong dollar. It would be a stark contrast to the Hoover and FDR interventionist policies that kept unemployment at 20% for ten years following the 1929 stock market crash. This week, it appears both candidates prefer the Hoover-FDR model.