The Candidates' Plans to Fix the Economy

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"We may be competing in a new global economy, but our policies to equip American workers for the 21st century are stuck back in the 20th century," Clinton told an audience in Raleigh, N.C.

Obama Favors a Stricter Regulatory Environment

For Obama, the challenge was clear: Step up and offer voters a more detailed view of how he'd handle the current problems. "Hillary trumped him on the economy in recent days," says Clifton. "He has to regain the upper hand and say, 'Here's my solution.'"

Much of Obama's emphasis was on the measures needed to shore up the regulatory structure surrounding financial markets. In his New York speech, Obama called for new standards for transparency and improved oversight of the financial sector to prevent the sort of crisis now roiling the markets. He argued that the deregulatory emphasis of the last decade has left the economy vulnerable to bubbles and special interests that have shaped the economy for their own benefit.

"Under Republican and Democratic Administrations, we failed to guard against practices that all too often rewarded financial manipulation instead of productivity and sound business practices," Obama said. "We let the special interests put their thumbs on the economic scales. The result has been a distorted market that creates bubbles instead of steady, sustainable growth."

To reduce the risks that have been created as a result, Obama argued a new regulatory structure is needed that would include strengthening the liquidity and capital requirements for financial institutions, streamlining the overlapping regulatory agencies that oversee them, and increasing government oversight of the risks many institutions are taking.

To deal with the housing crisis, Obama renewed his support for legislation currently before Congress that would provide government backing for new mortgages if lenders agree to reduce the principal value to what the homes are currently worth. Nearly 9% of today's homes carry mortgages that are worth more than the house's market value, which raises fears that many homeowners will walk away from their mortgages. Obama also proposed a $10 billion Foreclosure Prevention Fund that would help homeowners who are victims of fraud refinance their homes. He called for a modification of bankruptcy laws to help victims of predatory lending remain in their homes and for a significant extension of unemployment insurance.

McCain Dismisses Expanded Role for Government

For all their efforts to differentiate themselves as the heated Democratic race continues, however, the two Democrats have strikingly similar approaches to the financial crisis. Moreover, pollster Hart says Clinton's recent heavy emphasis on lunch-bucket economics does not show signs of bolstering her polling numbers.

The real difference that is becoming increasingly obvious, says Mathias, is between the two Democratic candidates on one side, and McCain, the Bush Administration, and Treasury Secretary Henry Paulson on the other. In his Mar. 25 speech, McCain argued against an expansive role for the government in responding to the crisis. And in a statement on Mar. 27, he added he believed "the role of the government is to help the truly needy, prevent systemic economic risk, and enact reforms that prevent the kind of crisis we are currently experiencing from ever happening again."

McCain derided the Democrats' proposals as little more than multibillion-dollar bailouts for big banks and speculators. "There is a tendency for liberals to seek big government programs that sock it to American taxpayers while failing to solve the very real problems we face," he said.

Sasseen is Washington bureau chief for BusinessWeek.