How the Economy Stole the Election

Two years ago it seemed that the election would hinge on Iraq, now it's the economy that's on voter's minds. Here's how that happened.

Summer/Fall 2006 - War at the Forefront

Iraq is voters' main concern and the economy seems strong, but the seeds of the crisis are being sown.

With the mid-term elections in full swing, the war is being hotly debated. October is the third-deadliest month for U.S. troops in Iraq. Defense Secretary Donald Rumsfeld resigns after Democrats make major gains at the polls in November.

On the home front, the economy seems strong.

July - Home prices hit an all-time high.

Market talk is that Fed will raise interest rates.

But trouble lurks.

New home construction continues at a brisk pace during the summer - chugging along at more than twice the current rate - after hitting its peak at the start of the year.

August - Home prices nationwide post first decline in 10 years.

Having briefly spiked over $3 a gallon following Hurricane Katrina a year earlier, gas prices now average $3 a gallon - and stay there for multiple weeks.

Spring/Summer 2007 - Cracks Appear

The war still tops the political agenda, but problems in the subprime mortgage market are emerging. The hope is that they won't spread to the rest of the economy.

April 2 - New Century Financial, the nation's largest subprime mortgage lender, files for bankruptcy.

July 17 - Investors are told two Bear Stearns hedge funds, heavy into mortgage-backed securities, are now worth nothing.

Aug. 10 - The Federal Reserve injects $38 billion into the banking system as fears of a freeze-up in the credit markets mount.

Aug. 22 - Countrywide Financial, a big mortgage lender, sells $2 billion in stock to Bank of America to raise cash as borrowers default on subprime mortgages.

Candidates focus on Iraq, healthcare, and taxes in campaign speeches.

A CNN poll shows voters see the war in Iraq as Issue #1 (31%), followed by the economy (23%), healthcare (17%) and terrorism (10%).

Summer/Fall 2007 - The Deluge Begins

Signs that the subprime crisis is infecting the broader economy emerge as declining home prices accelerate and jobs losses grow. The economy becomes issue #1.

Sept. 7 - The country loses jobs for first time in 4 years.

September - Same-store retail sales decline for first time in 5 years.

Sept. 17 - Barack Obama raises economic issues in a speech in New York, but stops short of linking problems in the finance sector with everyday people.

"These Americans and many others were already struggling before the problems on Wall Street arose," the Senator said. "We're all wondering whether this will spill over to the wider economy."

Sept. 18 - Fed cuts interest rates for first rate cut in 4 years.

Oct. 19 - Dow hits all time high of 14,198 as investors think rate cuts will keep the economy strong.

October - U.S. causalities in Iraq drop to one of their lowest points since the war began.

Nov. - Home prices fall by over 2% from the month before, the biggest drop since 1987, when Case-Shiller, Standard & Poor's most widely tracked home price index began keeping records.

Nov. 2 - In a CNN poll, voters say the economy is issue #1 for the first time in this election (29%), followed by Iraq (28%), healthcare (18%) and terrorism (12%).

Winter/Spring 2008 - Economy in Peril

Lawmakers grasp the severity of the problem and attempt to act. But it may be too little, too late as the first of the big banks goes belly up and consumers are squeezed at the pump.

Jan. 22 - Economic troubles headline an Obama speech.

"What started as a crisis in the housing market has now spilled over to the rest of the economy," the candidate told a crowd in Greenville, S.C. "People have less money to spend, higher bills to pay, and fewer opportunities for work."

Feb. 3 - Lawmakers approve the economic stimulus plan, sending $168 billion in cash to consumers in an attempt to revive the economy.

March 5 - John McCain centers a speech in California on falling home prices.

"There are 80 million family homes in America and those homeowners are now facing the reality that the bubble has burst and prices go down as well as up," the candidate told a Hispanic business association in Orange Country. "I am prepared to examine new proposals and evaluate them."

March 16 - Bear Stearns, a storied Wall Street investment bank, collapses.

June - Gas prices cross $4 for first time ever.

Summer/Fall 2008 - Bloodbath on Wall Street

Over half the voters now name the economy as issue #1 as trillions are lost from home values and retirement plans.

July 11 - California bank IndyMac fails, customers line up to withdraw money.

Sept. 7 - U.S. government seizes control of Fannie Mae and Freddie Mac, the nation's largest home mortgage lenders.

Sept. 14 - Bank of America buys investment bank 94 year-old Merrill Lynch.

Sept. 15 - Lehman Brothers, another big Wall Street bank, goes bust, leaving just two investment banks standing.

Sept. 16 - Federal government takes over American International Group, one of the world's largest insurance firms, in an $85 billion deal.

Sept. 25 -The government seizes Washington Mutual, the nation's largest savings and loan. Sells bank to J.P. Morgan.

September - Economy sheds the most jobs in five years, total losses for 2008 hit 760,000.

Oct. 3 - Lawmakers pass $700 billion Wall Street bailout.

Oct. 10 - Dow falls as low as 7,884, a 44% drop in one year, and millions of American's watch their retirement savings disappear.

Primary focus of campaign is the economy.

"We must pass legislation to address this crisis," McCain said in a speech Sept. 24, just prior to the Wall Street bailout. "If we do not...People will no longer be able to buy homes and their life savings will be at stake."

Sept. 5 - Over half the voters now list the economy as Issue #1 (58%), followed by healthcare (14%), terrorism (12%) and the war in Iraq (10%). It's one of the highest ratings the economy has received in any presidential election.

Seldom do so many people rank the economy as the most important issue during a presidential election, said Stephen Wayne, a professor of Government at Georgetown University specializing in presidential elections.

"It's not how it usually is, but then the economy isn't how it usually is," said Wayne. "The comparisons are to the great depression."