What is a free marketeer to do when the economy is in crisis? This past winter, John McCain's instinct was to do nothing, save letting the chips fall where they may. You may recall that after Bear Stearns collapsed in late March, the Arizona Republican proclaimed, "It is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers." As for stricter government oversight to avoid this sort of meltdown in the future -- well, forget it. McCain had earlier told the Wall Street Journal that as a general rule, "I'm always for less regulation." He conceded that "I am aware of the view that there is a need for government oversight," but, he added, "I am a fundamentally a deregulator."

Yet crisis tries one's principles, and McCain's have fallen by the wayside as losses mount. In April came the about-face on housing: his new HOME plan offered "every deserving American family or homeowner the opportunity to trade a burdensome mortgage for a manageable loan that reflects the market value of their home." Yesterday, with Merrill Lynch soon to become a division of Bank of America, Lehman Brothers in bankruptcy, and AIG teetering on the brink, McCain did a 180 on regulatory reform and took a position that is theoretically much closer to the one Barack Obama laid out in March. "The McCain-Palin Administration will replace the outdated and ineffective patchwork quilt of regulatory oversight in Washington and bring transparency and accountability to Wall Street," the campaign declared in a statement. "We will rebuild confidence in our markets and restore our leadership in the financial world."

Of course, neither the candidate nor his staff offered details of what that reform might look that, although one official told National Public Radio last night that it would entail updating the rules, not relaxing them. Today, McCain's top economic adviser continued that theme. "The goal would be to have a comprehensive regulatory reform, so that every transaction, whether it's done in a commodities future market, a financial futures market, a stock market, a bond market -- if it has the same economic transaction, it should have the same regulation," Douglas Holtz-Eakin told NPR. Currently, "there are transactions being treated differently, and obviously people will seek out the holes." But when pressed whether this would mean more or less regulation, Holtz-Eakin demurred. "We would expect that you'd have an efficient regulatory system. I think more and less is probably not the right way to think about it."

(These are hardly McCain's only policy revisions -- we won't call them "flip-flops" -- he's also, for instance, changed his thinking on health care and oil drilling. Nor are they the only times he's shown a willingness to curtail free market exuberance; other instances are cataloged here and here.)

The turnabout, though, was overshadowed by the gaffe (in the Kinsley sense) McCain delivered in a speech in Jacksonville, wherein he repeated his belief that "Our economy, I think, still -- the fundamentals of our economy are strong." Later in the day, in Orlando, he backpedaled to say that what he meant by "fundamentals" were "the American worker and their innovation, their entrepreneurship, the small business," and that these, while still strong, were actually "at risk." But it was too late; he'd already essentially cut of his own head and handed it to Barack Obama. The Obama campaign 1) immediately issued a statement that labeled the Republican "disturbingly out of touch with what's going in the lives of ordinary Americans;" 2) sicced Joe Biden on him ("But friends, I could walk from here to Lansing, and I wouldn't run into a single person who thought our economy was doing well, unless I ran into John McCain."); and 3) by this morning had produced a commercial that asked (as ominous "24"-style music thundered in the background), "How can John McCain fix our economy if he doesn't understand it's broken?"

Of course, none of this may actually help Obama. As John Dickerson points out in Slate, McCain has provided Obama with any number of opportunities to pound away at the Republican for being out of touch (think houses, or a nation of whiners), but McCain has closed the gap in polls on the ability to manage the economy. "Obama can be pushed around on the economy because voters don't know what he's for," writes Dickerson. That is, it may not be enough to simply post a video clip that mocks McCain's cluelessness. Obama will also have to produce an ad that explains what he would do if he were president.