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Wednesday, November 05, 2008

As Economic Crisis Peaked, Tide Turned Against McCain

As Economic Crisis Peaked, Tide Turned Against McCain
By MONICA LANGLEY
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The presidential race entered a critical three-day period in September when the economic crisis cast the candidates' differences in sharp relief.
On Sept. 24, with financial markets verging on panic and the economy thudding, Democratic Sen. Barack Obama placed a call to rival John McCain. He wanted to suggest they issue a joint statement on proposed financial-bailout legislation. As hours went by without a return call, Obama aides emailed each other, asking, "Have you heard anything?" One answered: "The McCain camp is cooking up something."
Later that day, Sen. McCain went before the cameras to say he was suspending his campaign to focus on helping craft the legislation. "What does that mean -- suspend the campaign?" Sen. Obama asked his staff on the trail, according to aides. At a news conference in Florida, he said, "It's going to be part of the president's job to be able to deal with more than one thing at once."
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Beyond the economic tumult, troubles in the McCain camp had contributed to the Republican's extraordinary move. These included a shaky performance by his running mate in a mock debate and an admonition to Sen. McCain by some major donors to quit blasting Wall Street and focus on solutions. Suspending the campaign, one McCain adviser recalls hoping, would let them "push the reset button."
The next day, while conservative House Republicans maneuvered behind the scenes to block the bailout bill, Sen. McCain sat largely silent at a crisis summit at the White House. Afterward, Sen. Obama called his staff from his car: "I've never seen anything like this," he said, according to several aides. "Some of the Republicans are clueless. Bush and I were trying to convince them."
The presidential candidates were essentially tied at the time, a Wall Street Journal/NBC News poll showed, with Sen. McCain just a point behind. But in the next few weeks, as the handling of the economic crisis overshadowed all other issues, Sen. Obama opened a 10-point lead. Although Sen. McCain began to gain some ground at the end, he never fully recovered from the pivotal late-September juncture.
Sen. Obama's recipe for victory, of course, had many ingredients: a record $640 million haul of donations, a vast network of campaign workers, his stance against the Iraq war, his success in portraying his foe as heir to an unpopular president. But after a total of roughly $1 billion spent by the two candidates over 21 months, the campaign came down to the unexpected.
For all the ads and debates and focus groups, voters also got a gut-check test of how each man would react to a crisis. Says Mark Penn, echoing an ad he had created for Sen. Hillary Clinton's presidential campaign about how presidents deal with emergencies: "The economy turned out to be the '3 a.m. call' to the White House."
How the candidates responded -- Sen. McCain's dramatic moves and sometimes-uneven temperament and Sen. Obama's more analytical reaction and calm vibe -- was a window into how they made decisions. And voters responded.
Mark Salter, a longtime confidant of Sen. McCain, said, "The markets' collapse would have hurt no matter what we did, unless [Sen. McCain] had come out against the bailout" plan proposed by the Treasury, which many voters opposed as a rescue for Wall Street. "But he believed that would have been irresponsible and hurt the country."
Heading into the general-election campaign in June, Sen. McCain had been in a good place. He had won the Republican nomination early enough to be rested and ready after the bitterly fought Obama-Clinton contest.
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But in a strategy session of five McCain advisers -- campaign manager Rick Davis, pollster Bill McInturff, strategist Steve Schmidt, ad-maker Fred Davis and strategist Greg Strimple -- the back and forth revealed a fundamental problem. Fred Davis posed a question designed to give the campaign a central focus: "Why should we elect John McCain?" Tellingly, after several hours of debate, the five couldn't reach a consensus.
"Without an overriding rationale, our campaign necessarily turned tactical rather than strategic," one adviser recalls. "We focused more on why Obama should not be president, but much less on why McCain should be."
By contrast, the Obama team hewed tightly to its original "framing theory," says David Axelrod, its chief strategist, who had worked with the Illinois Democratic senator for years. "From the start, we defined this election as about change versus more of the same."
At their Chicago headquarters, Mr. Axelrod and campaign manager David Plouffe set out "seven pillars" the campaign must do well: the vice-presidential choice, the convention, a European trip to meet with heads of state and the four debates. As an afterthought, he added, "Of course, we'll have to handle the unexpected."
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Sen. McCain soon did the unexpected, picking Alaska Gov. Sarah Palin as his running mate. The Obama campaign watched her rousing performance at the Republican convention and focus groups assembled to test the voter reaction. Obama advisers couldn't believe what they were hearing. "Sarah Palin is one of us" was an oft-heard refrain. "She can help John McCain shake up Washington" was another common theme.
On his weekly strategy call with Democratic senators after the Republican convention in early September, Obama Chief of Staff Jim Messina began, "Let me walk you through this week's events." He was cut off by angry senators calling for a more aggressive response to the Republican running-mate pick: "Go after Palin." "Define Palin." "Make the race about Palin." Mr. Messina was startled by the new nervousness in the party ranks.
In a Sept. 11 meeting in Chicago, Mr. Axelrod addressed his staff. They were worrying about a budding "Palin phenomenon." They had downsized some scheduled events in reaction to her and to ads that painted Sen. Obama as a celebrity. But "this campaign gets in trouble when we do little things; we're better at big things," Mr. Axelrod said. "This race is about the economy and change. For everyone panicking, calm down."
The next Monday, Sept. 15, Sen. Obama's campaign opened with big rallies, overflow crowds and sweeping rhetoric, to the effect that a McCain administration would equal a third Bush term. "The large events got us back to our energy and momentum," says senior adviser Anita Dunn. At the Colorado state fairgrounds in Pueblo, Sen. Obama addressed a crowd estimated at 13,500.
That same Monday, the Dow Jones Industrial Average tumbled more than 500 points, with Lehman Brothers Holdings Inc. in bankruptcy court and other financial firms, such as American International Group Inc., struggling. On the stump, Sen. McCain sought to reassure voters. "The fundamentals of the economy are strong," he said.
Sen. Obama attacked: "Sen. McCain, what economy are you talking about?" he said.
Sen. McCain fought back by slamming Wall Street for "reckless conduct, corruption and unbridled greed," even saying he would fire the Republican Securities and Exchange Commissioner, Christopher Cox.
A worrying sign for the Republicans now arose: Gov. Palin emerged from seclusion and faltered in the few high-profile TV interviews she gave.
Behind the scenes, she and her husband weren't entirely happy on the campaign trail, according to Republican operatives. Todd Palin expressed concern that overpreparation forced on his wife was part of the reason she was underperforming. He called McCain headquarters in Arlington, Va., with pointed questions about how they were isolating Gov. Palin from her own advisers and friends.
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The economic turmoil then took center stage in the campaign on Wednesday, Sept. 24 -- the start of a three-day stretch that proved pivotal. Congress was debating a bailout of the financial markets, proposed by the Treasury Department, costing hundreds of billions of dollars.
Sen. McCain and Gov. Palin were in New York for the United Nations General Assembly. In a hotel room, the Alaska governor went through her first mock debate. Word trickled out to a few Republican strategists that she wasn't ready to face the political veteran Sen. Obama had picked for his ticket, Sen. Joe Biden of Delaware.
She also gave an interview to Katie Couric of CBS News that made some Republicans worry. In a rambling answer to a question about handling the economy, Gov. Palin said: "Ultimately, what the bailout does is help those that are concerned about the health-care reform that is needed to help shore up our economy to help, uhhh, it's gotta be all about job creation, too."
Meanwhile, Sen. McCain was meeting with Wall Street supporters such as investor Henry Kravis, J.P. Morgan Chase Vice Chairman James B. Lee Jr. and Merrill Lynch Chief Executive John Thain, who told him the global credit markets could "seize up" without definitive action. Some chided the candidate for attacking all of Wall Street and suggesting financial CEOs shouldn't make more than the president's salary of $400,000.
In Clearwater, Fla., that Wednesday, preparing for a first presidential debate that was two days away, Sen. Obama waited for Sen. McCain to return his call about a possible joint statement on the principles that bailout legislation ought to reflect. The Obama camp was getting antsy. Aides didn't see any activities by Sen. McCain that would keep him from calling back.
In New York, the Republican spent the afternoon huddled with advisers Rick Davis, Mr. Schmidt and Mr. Salter and headed to the Morgan Library in New York to prepare for the approaching debate. Weighing how Sen. McCain should address the financial turmoil, the advisers offered three options, according to Mr. Salter: Keep your distance but monitor developments; be against the federal bailout package "because voters are;" or jump in to work on a government solution.
Mr. Schmidt suggested that the crisis presented a potential "leadership moment" for Sen. McCain: He could suspend his campaign and go to Washington to help negotiate bailout legislation. "If Kansas City blew up, you'd stop doing everything else," Mr. Schmidt told Sen. McCain, according to one adviser. Such an out-of-the-box idea appealed to Sen. McCain, a man who likes to shake up the status quo, another aide says.
Around 2:30 p.m., Sen. McCain called Sen. Obama to say a joint statement might be appropriate, adding that they should consider suspending their campaigns and postponing the coming debate to work on congressional efforts to ease the crisis.
After hanging up, Sen. McCain went before the media. "I will suspend my campaign," he said. He also said he and his Democratic counterpart should postpone the Friday debate to work on financial legislation being pushed by the Bush administration.
Obama aides were apoplectic. "This is a gimmick," Communications Director Dan Pfeiffer told his staff. "It's tonally off. There's no outcry for the candidates to get involved. It reeks." He ordered a press release saying Sen. Obama had made the first move that morning by calling Sen. McCain for a joint statement.
When Sen. Obama arrived at his Florida hotel, his top advisers gave him the news. He kept his usual calm, though puzzled and incredulous. "One of us will win and have to deal with the economy -- and everything else," an aide recalls him saying. He wasn't budging on the debate.
Obama advisers told the University of Mississippi, the debate host, that their man would appear on Friday, with or without Sen. McCain. They explored converting the debate into a town-hall event if the Republican didn't show up.
A McCain adviser, Sen. Lindsey Graham of South Carolina, raised the idea of moving the debate into the slot for the vice-presidential debate a week later. Some in both parties took that as a signal that Gov. Palin needed more time to prepare.
On Thursday, both candidates attended a White House meeting on the proposed bailout legislation. Even as they did so, conservative House Republicans were maneuvering to block it with an alternative plan. Sen. McCain said little at the White House meeting, which was inconclusive.
Then, on the debate issue, he blinked: He said that progress was being made on a bailout bill, and he would attend the debate. Though neither candidate had been able to prepare much in the last two days, both arrived in Oxford, Miss., that afternoon.
Minutes before the debate began, Sen. Obama confided to Mr. Axelrod that he was "nervous," but after all of the debate over the debate, he wanted to get on with it. "Just give me the ball. Let's play the game," he said, according to Mr. Axelrod.
Polling afterward found that viewers thought Sen. Obama performed strongly. In the days following, his lead grew.
To several McCain advisers, Sen. McCain's public show of dealing with the crisis by trying to broker a bailout deal between the president and Congress had fallen flat. "We completely blew it," said one. "The execution of a potentially great move couldn't have been worse."
But Mr. Salter doesn't think briefly putting the campaign on hold was a mistake. "Even if John hadn't suspended his campaign, the unprecedented financial meltdown was going to help Obama," he says.
When voters were asked in a Wall Street Journal/NBC News poll about 10 days later which candidate would be better at improving the economy, 46% said Sen. Obama and 29% said Sen. McCain. Asked which presidential ticket was doing better in debates, the respondents favored Obama/Biden by 50% to 29% over McCain/Palin.
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While Sen. McCain struggled to recover, the Obama campaign kicked into high gear. Contributions poured in, adding up to $150 million in September. The campaign started airing expensive 120-second commercials so often that some worried they could be to the point of overkill, one operative says.
Obama field workers, mostly volunteers, reached nearly two million voters a week, according to national field director Jon Carson. The campaign already had deployed armies of lawyers to battleground states, after statisticians studying voter registrations predicted a huge turnout.
For their part, the McCain people worried about the potential for voter fraud. Campaign manager Rick Davis pushed for more attention to the voter-registration efforts of Acorn, a group allied with Democrats that was criticized for turning in voter registrations with fake names. "Hit this hard," Mr. Davis shouted on one conference call with senior staff.
As Sen. McCain's path to the Oval Office narrowed, some advisers wanted to bring up Sen. Obama's 20-year relationship with his controversial pastor, the Rev. Jeremiah Wright. Ad maker Fred Davis made a TV spot he wanted to unleash in the last week. It showed Sen. McCain as a Vietnam prisoner of war and then Sen. Obama with his Chicago minister, before switching to video of the Rev. Wright condemning America. It ended by saying: "Character matters, especially when no one is looking."
The ad was never approved, because on the stump months earlier, Sen. McCain had committed to not bringing up the Rev. Wright.
On the McCain campaign's last major strategy call, a dark mood prevailed as the campaign closed. The Arizona senator's advisers lamented that everything that could go wrong did go wrong, at a time when some 90% of Americans were telling pollsters the country was on the wrong track. Suggesting that Sen. McCain would be blamed for anything bad, chief strategist Steve Schmidt said in his nasal voice, "There's one event we forgot to plan for, the bubonic plague." No one laughed.
As Democrats and pundits began predicting an Obama victory, his campaign wouldn't tolerate the exuberance. A note on a bathroom door in the Chicago headquarters warned workers to remember how -- when they were on a high after winning the Iowa caucuses -- Hillary Clinton had shocked them with a primary victory. "If you feel giddy or cocky," the note read, "I have two words for you -- New Hampshire."
Sen. Obama himself kept pressing Tuesday, with a final campaign trip to the swing state of Indiana. Back in Chicago, he did a batch of TV and radio interviews for battleground markets, then grabbed the satellite schedule from an aide and autographed it, adding a flourish: "That's a wrap."

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