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"The fundamentals of our economy are strong."

—Sen. John McCain, Sept. 14, 2008

Back in the Reagan days, Republicans talked economics. We had problems; they had solutions. Tight money would cure inflation. Low taxes would stimulate saving and hard work. Small government would "crowd in" investment; free trade would make us efficient. Smart people believed this, and they had Milton Friedman to back them up. I never thought they were right—but they were serious. They were coherent. And they argued with passion and conviction, which commanded respect.

But now, real economic conservatives have disappeared from the Republican stage. Many will vote for Obama this year—they call themselves Obamacons. Though we still disagree on nearly everything, we're on the same side. This is curious, and there seemed to be a book in it; The Predator State is that book.

Real conservatives know that neither Bush nor McCain is one of them. Bush is a bread-and-circuses reactionary with a clientele of lobbies. McCain gets his economic ideas from Phil Gramm, the ultimate architect of the Enron culture, of libertine speculation and financial disaster. As for Sarah Palin, back in Alaska she took every dime of pork she could lay her hands on. This crowd deregulates and privatizes not because they think it might work out for the public but because they know it won't. What they care about is putting their friends in charge.

Under Bush, oil and gas, drug companies and defense contractors, insurers and usurers, banks and big media control the government of the United States. John McCain was a key member of the Keating Five and a lynchpin of the savings-and-loan debacle; then, as chair of the Senate commerce committee, he presided over Lobby Central; notoriously, his campaign is run by lobbyists to this day and until last week his policy could be summed up in slogans: he was a "free market" man, a "deregulator." Sarah Palin is an interesting case. What was she known for in Wasilla and Juneau? For trying to fire any public servant, from the town librarian to the state commissioner of public safety, who didn't toe her line. Bush and McCain are the predator state writ large, and she is the predator state writ small.

The predator state has no public purpose. Apart from a few empty slogans—smaller government, balance the budget, feel your pain—the connection between actual problems and actual policies has disappeared. It has become clear that, if the Republicans had their way, this election would not be about issues. It would be about anything else: personalities, associations, the politics of fear, and the life history of a long-ago prisoner of war.

But fate blew McCain's cover. On the morning that Lehman Bros. and Merrill Lynch fell, John McCain spoke the immortal words of Herbert Hoover: "The fundamentals of our economy are strong." He said it twice. It's a phrase with deep resonance in American politics. People understand it. No politician says "the fundamentals are strong" unless they know that they are not.

The Dow Jones average fell 504 points that day. As stocks crashed, suddenly people remembered that modern markets cannot exist without a cop on the beat. Every important market out there, from fresh food and safe drugs to autos and air travel to housing and health care, depends on government to maintain trust, and without it, none of them would survive. Without regulation, predators take over, and when they do, trust eventually collapses. Every important market is in peril now, precisely because of the predators in power these past eight years. And none more immediately than finance.

The Bush-Paulson bailout exposed the predator state in detail. Deregulation and desupervision were the origin of this crisis: the 1999 Gramm-Leach-Bliley Act repealing Glass-Steagall, and the Gramm-authored loophole legitimating credit default swaps in 2000. Bush's financial regulators brought chainsaws to press conferences, a clear signal to sub-prime hustlers that "anything goes." "Liar's loans," "neutron loans" and "toxic waste" became financial terms of art. When the crash came, Paulson and Bernanke were plainly not up to the job. The original three-page Treasury bill was less a power grab than a punt; it said to Congress: "there's nobody home over here."