Economic turmoil toughened the task

Campaign says financial crisis changed game

Republican presidential candidate John McCain, with vice presidential nominee Sarah Palin in Phoenix last night. Doug Holtz-Eakin, McCain's domestic-policy adviser, said the nation's financial turmoil ''overwhelmed every other story.'' (Mike Blake/Reuters)

PHOENIX - John McCain last night emerged from a stone villa at the Arizona Biltmore, the Phoenix hotel where on February 5th he effectively became his party's nominee, to stand in a half-empty courtyard and concede his bid for the presidency.

"I don't know what more we could have done to try to win this election," said McCain. "I'll leave that to others to determine."

But long before that, McCain's closest advisers were convinced that victory was far from their grasp.

Many believed the race had been settled on Sept. 15, when some of the nation's most venerable financial institutions began to quake - and McCain responded reflexively to the news by saying that he thought "the fundamentals of the economy were strong."

"It overwhelmed every other story," said Doug Holtz-Eakin, McCain's domestic-policy adviser. "It was no longer a campaign that was going to be about national security questions, judgment, character. It simplified itself into the Republican-versus-Democrat dynamic of the race, and tied McCain back to Bush."

It was a connection that McCain, an erstwhile Bush antagonist long heralded as a "maverick" for his idiosyncratic legislative crusades, could not afford - and weeks earlier, it looked like he would not have to. McCain had ended his party's convention in St. Paul at the beginning of September convinced that he had shaken off the worst of his party label. He had given his party's moderates some of the night's most prominent speaking roles, and in his acceptance speech had emphasized bipartisan themes and his background as a prisoner of war.

McCain's ticket introduced itself to voters a "team of mavericks," as his new running mate, Alaska Governor Sarah Palin, liked to put it. Palin, who had challenged members of her own party in Alaska over reform issues and had no ties to President Bush, excited the party's conservative base (in a way McCain never did) and drew the curiosity of independents and some Democrats (as McCain had not been able to in a while).

Yet two weeks later, Lehman Brothers and then a series of other financial firms collapsed. As the markets plummeted almost daily, the effect became apparent in another set of numbers: The campaign's nightly internal-tracking polls, which had showed McCain with a steady lead in the mid-single digits since the convention, snapped quickly back to Obama's favor.

"It wasn't his campaign that was winning," said campaign manager Rick Davis. "It was the market that was beating us."

McCain formulated a response two days later, after frantic strategizing by aides. As legislators worked to fashion a response to the emerging credit crisis, McCain dramatically announced that he would suspend his campaign to play a role. He cleared his campaign schedule and returned to Washington, pledging to skip the first presidential debate if Congress did not reach a deal before then.

Aides said that the move demonstrated McCain's appeal as a "man of action," but his policy intentions were not clear. He expressed unease about a $700 billion financial-services bailout negotiated by congressional leaders of both parties and supported by both Bush and Obama, but eventually backed the proposal.

"One of the things you do as a senator is cast tough votes," said Holtz-Eakin. "He cast a tough vote while running for president."

The bailout vote may have presented McCain's last opportunity to separate himself from his party's political fortunes and to take an assertive stand against the "special interests" he attacked regularly in speeches, some advisers concluded. Yet McCain, a strong believer in the credibility of American institutions, was unwilling to stand in the way of a bailout he thought was necessary to avoid even greater economic troubles.

"I think the politics played out poorly for us, but he did the right thing," said Davis.

As economic issues dominated the debate for the next few weeks, McCain struggled to find a consistent voice on the disruptions to the global economy. As he sat in his hotel room with his wife, Cindy, and South Carolina Senator Lindsey Graham, auditioning lines for his final debate with Obama, on Oct. 15, McCain mentioned the damage that his opponent's tax plans would do to "Joe the Plumber" Joe Wurzelbacher, a self-employed tradesman who had publicly confronted Obama days earlier, faulting his tax policy.

At the encouragement of his wife and close friend, McCain invoked "Joe the Plumber" nearly two dozen times at that night's debate. For the duration of the campaign, McCain mentioned him at nearly every speech at one point calling him "an American hero. . . .and my role model" as a siren warning against Democratic fiscal policies McCain came close to calling "socialism."

"What he did was personalize a debate that we had been unsuccessful in making in intellectual terms," said Holtz-Eakin.

But he never changed the dynamic over economic issues. Exit polls reported that 60 percent of voters said yesterday that the state of the economy was their greatest concern. Of them, 60 percent preferred Obama.

"We did our absolute best in this campaign in really difficult circumstances," adviser Steve Schmidt told reporters on McCain's plane yesterday. "We had some tough cards to play all the way through, and we hung in there all the way."

Sasha Issenberg can be reached at sissenberg@globe.com