RARELY HAS there been such a dramatic economic backdrop to a United States presidential election as the financial crisis which has engulfed its banking system in the last three weeks. After frantic bipartisan talks at the White House, involving both presidential candidates last week, an immense $700 billion rescue package was on the point of being agreed yesterday.
Given the profound dangers involved, not only for the US economy but for the entire international financial system, this is an appropriate response. It has been substantially improved in these negotiations by increasing congressional oversight and imposing better protections for the public interest.
Both Barack Obama and John McCain welcomed the outline deal. It figured prominently in their television debate last Friday night and its implications and fallout are bound to affect the result in five weeks' time. The economic issue has shot up the political agenda and now far outstrips the Iraq war, health and education in importance for voters. That gives Mr Obama a real advantage, insofar as responsibility for the financial crisis can be pinned on the Bush administration and how it hits ordinary Americans in their everyday lives. That this is indeed so, and that Wall Street's troubles cannot be insulated from Main Street, have now become established facts in political and media discourse.
Mr Obama has seized the opportunity to pin blame for the upheaval on Mr Bush and to link Mr McCain directly with the deregulation policies responsible for them over the last eight years. Mr Obama pressed home this case effectively in Friday's debate, giving him the definite edge in an otherwise more closely balanced encounter. Mr Obama makes a strong case that trickledown economics from Mr Bush's successive tax cuts for richer Americans have failed to lift stagnant middle- and working-class incomes. Mr McCain's effort to distance himself from the administration's economic policies was unconvincing.
That said, it would be a mistake to underestimate how much the last weeks of the campaign will sway undecided and independent voters who hold the key to the result. If the financial rescue package restores confidence, the economic issue may become less partisan, neutralising Mr Obama's current advantage. But that will not remove it altogether from the political equation. The package is a political compromise between a bailout for irresponsible bankers and congressional - mainly Democratic - insistence on ensuring the public interest is protected through oversight and help for homeowners. Such a huge state intervention is a political and ideological step too far for many Republicans. They know how vulnerable they are to such criticisms in the congressional elections.
The profound domestic uncertainty and rippling international effects of this crisis will make US voters aware that whoever they elect as president must be capable of handling it with leadership and authority. The victor will inherit not only a weak economy but severely constrained public finances.