Does McCain Have a Chance in an Election About the Economy?

Democrats are frustrated and Republicans are amazed: Barack Obama is not running away with the presidential race.

This is the presidential election, we have been told, that a Democrat can’t lose. The economy is in decline, with unemployment on the rise, President Bush’s approval ratings in the basement and virtually everyone convinced that America is “on the wrong track.” But the race remains tight, at least according to the polls.

The McCain camp would no doubt like to keep the focus of the coverage where it was for most of last week, on story lines far from the economy. The narratives were the ones they dictated: Obama’s presumptuousness, the success of the surge and the Democrats’ opposition to offshore drilling (which has popularity ratings approximately double that of Bush and Congress combined.)

But that’s not a luxury the McCain campaign will have going forward. The economy will be an issue, and no incumbent party in recent times has held the White House in faltering economic times.

If McCain is to have a chance once the discussion shifts back to the No. 1 concern for voters, he’ll have to simultaneously destroy voter confidence in Obama’s ability to manage the economy and separate himself from some of the most unpopular elements of his own party.

So how can he do it?

First, McCain and his surrogates argue that if things are bad now, Obama will only make them worse. By focusing on Obama’s ideas for tax increases (and there are a few of them) and his protectionist hype from the primary, McCain will be invoking memories of Smoot-Hawley, George McGovern and Walter Mondale. If the choice is fiscal conservative versus old-fashioned tax-and-spend liberal, McCain may level the playing field.

The problem: Obama is already sliding away from his self-described “overheated” protectionist language and suggesting he may delay planned tax increases. It makes it hard to paint Obama as a traditional liberal when he’s sounding more like Robert Rubin and less like Robert Reich every day.

Second, McCain takes a few pages from the populist playbook usually employed by Democrats (and more recently, by Mike Huckabee). McCain is not about to run as a defender of big business and unbridled market capitalism. His new ad declares: “Only McCain has taken on big tobacco, drug companies, fought corruption in both parties. He’ll reform Wall Street, battle Big Oil, make America prosper again.” Not exactly your average Republican appeal.

That and similar lines in speeches may give the editors of the Wall Street Journal hives, but McCain’s intention is to separate himself from traditional big business Republicans and reach out to those blue-collar voters, many of whom liked the feisty Hillary Clinton who was going to “fight for them.” The dual challenge for McCain here is prevent a revolt on the right and convince voters that there is something more than rhetoric behind his defense of the “little guy.”

Still, it’s far from clear whether McCain can win on an up-or-down vote on economics against Obama. Polls show that voters trust Obama to manage the economy by margins as great as those by which they favor McCain as commander in chief. Sometimes you can only move the needle so much.

McCain may (as he has done on Iraq) make the pitch on this subject that the real issue is leadership, not just the economy. He likes to stress that he’s the one who stands up to special interests (in opposing earmarks), sticks to unpopular stands (running as a free-trader) and talks straight (about those Detroit auto jobs).

The appeal will be based on the very credible premise that the next president will face tough choices – cutting entitlements (or raising payroll taxes), chopping popular programs and delivering stiff medicine to Wall Street. McCain’s argument will be that what’s needed is a tough guy who doesn’t care how popular he is.

That formulation — the economic grown-up to straighten out the knotty fiscal and structural problems we’re now in — is the best McCain has at his disposal. If leadership is the issue (or Obama’s own economic proposals), rather than a referendum on the Bush economic legacy, McCain stands a fighting chance. But it’s a big “if.”

Does McCain Have a Chance in an Election About the Economy?