Today, Democrats, supported by their interest groups, go out of their way to pay tribute to markets but argue that fairness and principle demand regulation and some degree of income redistribution. They use the rhetoric of populism to appeal to voters' sense of fairness. Republicans call Democrats "liberal" and oppose interventionist fiscal policy. Democrats call Republicans heartless; Republicans call Democrats "liberal."
Here's Obama, calling for tighter regulation of the financial markets:
"...the American experiment has worked in large part because we have guided the market’s invisible hand with a higher principle. Our free market was never meant to be a free license to take whatever you can get, however you can get it."
Here's John McCain's campaign, responding to Obama:
"No amount of rhetoric can hide Senator Obama's clear record of embracing the liberal tax and spend, big government policies that hit hardworking American families at a time when they're most vulnerable, and are certain to move America backward.
Well -- during a recession, raising taxes is usually contraindicated, along with cutting spending. McCain will face enormous pressure from conservatives to keep spending under control, while Obama (or Clinton) would face enormous pressure from liberals to find ways to pay for more government spending. With state governments cutting their own spending, the federal government will face pressure from governors conservative and liberal to fill in the gaps.
Obama and Clinton both criticized McCain for not proposing any specific policies to ameloriate the housing crisis, although McCain's statement today, very carefuly written, includes a suggestion that he is "open" to any and all policies. (McCain's economic team is wary of any federal intervention that would reduce risk-taking, which they see as essential to the credit market's recovery. But what does McCain have to say that those Americans whose homes are worth less than their mortgages?
As George Will has noted, Americans seem to embrace conservative arguments about the economy (rhetorical conservatives) but vote and act as if they were operationally liberal. It's not clear whether the "liberal" tax argument works in presidential races, particularly those occuring during recessions.
Trade is one issue where the polarization within each party is less than the polarization between the two, and McCain plans to make free trade a centerpeice of his economic arguments going forward; he proposed yesterday a free trade agreement with Europe, for example.
McCain faces a challenge in that conservatives seem to identify themselves by and organize around social and cultural (and now, increasingly, security) principles, rather than around a set of economic issues. It's counterintuitive: cutting taxes and reducing spending have always been linchpins of Grover Norquist's leave-us-alone coalition, but when it comes to evaluating candidates (rather than policies or referenda or ballot initiatives), conservatives tend to prefer the categories of morality and social values. I would bet that independent voters, when evaluating conservatives, are more likely to do so on national security than any other single variable.