Hope amid the rubble for Barack Obama

Amid the embers of the meltdown on Wall Street - one of the most devastating in the nation's history as Lehman went broke, Merrill Lynch was swallowed up by Bank of America and AIG tottered to the Fed, begging bowl in hand - John McCain insisted that "the fundamentals of our economy are strong". He called for a commission to probe the root causes of the country's financial mess.

Thus does the man who tells his crowds he wants the McCain-Palin ticket to shake up Washington opt for one of Washington's oldest ploys for fending off trouble: appoint a bipartisan commission run by safe insiders, set them up with a big staff and tell them to take their time. Point one: the fundamentals of the US economy are not sound. Point two: we don't need a commission to tell us how the country got into this mess.

Over the past quarter-century the US manufacturing economy went offshore. Lately the so-called new economy of the 'Information Age' has been moving offshore too. Free trade has left millions without decent jobs or prospects of ever getting one above the $15 an hour tier.

Below a thin upper crust of the richest people in the history of the planet, there's the rest of America which, in varying degrees of desperation, can barely get by. Millions are so close to the edge that an extra 25c on a gallon of fuel is a household budget-breaker.

Wages have stagnated. For decade after decade the bargaining power of workers has dwindled. We've had the macabre spectacle of US-based workers ordered to train their overseas replacements before being fired.

Bipartisan ruses like the Clinton-inspired exclusion of energy and food costs from the measures of 'core inflation' ensure that social security payments don’t keep up with real inflation, which, if you take in the soaring costs of groceries and fuel for heat and transport, is double the official rate - the same way real employment, now officially just above six per cent, is actually around 12 per cent.

We've had 30 years worth of deregulation - the neo-liberal mantra preached by both major parties, the establishment press and almost every university economics department in the country. It is central to the current disasters. And if you want to identify a central figure in the legislated career of deregulation, there's no more resplendent a culprit than the man at McCain's elbow - Phil Gramm.

In 1999 John McCain's friend and now his closest economic counselor, then a senator from Texas, pushed through the Gramm-Leach-Bliley Act. It repealed the old Glass-Steagall Act, passed in the Great Depression, which prohibited a commercial bank from being in the investment and insurance business. President Bill Clinton cheerfully signed it into law.

A year later Gramm , chairman of the Senate Banking Committee, attached a 262-page amendment to an omnibus appropriations bill, voted on by Congress right before a recess. The amendment received no scrutiny and duly became the Commodity Futures Modernisation Act which OK-ed deregulation of investment banks, exempting most over-the-counter derivatives, credit derivatives, credit defaults and swaps from regulatory scrutiny.

Thus were born the scams that produced the debacle of Enron, a company on whose board sat Gramm's wife Wendy. She had served on the Commodity Futures Trading Commission from 1983 to 1993 and devised many of the rules coded into law by her husband in 2000.

Somewhat stained by the Enron debacle  Gramm quit the Senate in 2002 and began to enjoy the fruits of his own deregulatory efforts. He became a vice-chairman of the giant Swiss bank UBS's new investment arm in the US, lobbying Congress, the Federal Reserve and the Treasury Department about banking and mortgage issues in 2005 and 2006, urging Congress to roll back strong state rules trying to crimp the predatory tactics of the subprime mortgage industry. UBS took a bath of $20bn in write-offs from bad real estate loans this year.

Acknowledged for years as one of the  most mean-spirited men ever to reach Congress, utterly charmless, Gramm kept close contacts with the man dubbed McNasty when he was at the Naval College in Annapolis. Aside from their affinities in viciousness of character, Gramm had access to big campaign funders in Texas, necessary for McCain's bid. He became campaign chair and chief economic advisor.

Gramm is exhibit A in any list of the architects of the current economic mess. At the behest of the banking industry he wrote the laws that enabled the huge balloons of funny money debt that exploded this year. His deregulatory statutes prompted Wall St's looting orgy in the subprime thievery.

After Gramm declared that America was suffering merely a "mental recession", and was becoming "a nation of whiners", McCain had to reposition him as an unofficial economic adviser,  but they still remain close and Gramm has even been touted as a possible Treasury Secretary in a McCain administration.  If McCain does win and picks someone else for that job, then maybe he'll chair the commission charged with figuring out what went wrong.

But maybe he won't get the chance. The meltdown offered Barack Obama his September surprise and a eagerly awaited chance to change the tempo of the campaign. On the stump, he's been ridiculing the Republican ticket's efforts to pose as economic reformers. The US press, irked by attacks on their supposed partiality to the Democratic ticket, have been highlighting the well-founded charges that McCain and Palin's campaign ads are chockful of lies.

At the moment the race is a dead heat. In Washington and Oregon McCain has pulled level, showing the enthusiasm of female undecideds for Palin. If Obama doesn't show an upswing in the next few days, then the upcoming debates will be the Democratic ticket’s last remaining chance, plus Obama's war chest and organisation on the ground. ·