There's a debate raging inside the inner circle of the Obama campaign: What will it take for him to cast a vote in favor of the Bush administration's $700 billion bailout plan?
The original plan proposed by Treasury Secretary Hank Paulson does not meet the set of principles released by Obama over the weekend — which includes substantial help for Main Street as well as Wall Street; no windfall gains to the bankers who created the mess, as well is limitations on future abuses. But political support for Paulson has been eroding from Republicans as well as Democrats, by the hour. At today's Senate Banking Committee hearing, he has been in the role of punching bag.
The bill could well depend on Democrats' support, since Republicans are distancing themselves from Paulson — either because they reject the entire idea of a bailout, or because they don't like the Democratic add-ons, or because they need populist cover with their constituents, or because they expect the plan to fail and don't want the blame.
It now appears that Democrats have enough leverage to get the administration to agree to several kinds of amendments, so that the bailout serves Main Street as well Wall Street. They include:
Substantial mortgage relief for homeowners, not just bankers.
Some kind of independent supervisory board to which Paulson must report.
Some equity position for the government, in exchange for all this cash.
Some limits on executive windfalls for participating companies.
A second stimulus package as companion legislation.
Narrower legal immunity than Paulson requested.
Will that be enough for Obama? Probably. He loves the role of the progressive leader who bridges differences. He and the Democrats can justly claim credit for taking a bill designed to serve the bankers and insisting that it serve regular Americans as well.
But John McCain lately has been making himself over as a latter-day William Jennings Bryan. For his whole career, McCain fought for deregulation. One of his top economic advisers, former Senator Phil Gramm, was the senate's leading crusader for deregulation. Now McCain is blasting greed on Wall Street, calling for the resignation of the chairman of the SEC, even calling for a cap on executive pay of $400,000 for firms that benefit from the bailout.
McCain may well vote against the bill, even as amended by the Democrats. He has little to lose. If the economy keeps tanking, he can claim that he voted against a failed strategy, and that he is the real outsider and Obama the insider. If the plan works, he can say that it didn't go far enough to help ordinary Americans. And either way, it puts more distance between him and George W. Bush.
McCain as economic populist is one of history's great makeovers, but these are strange times. And whether the next president is named McCain or Obama, government is definitely back. Both economic circumstances and the outrage of ordinary people are demanding that government do more than just bail out Wall Street. The voters will have to decide which candidate is the more plausible agent of that change.