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Meanwhile, U.S. policy makers are still balking when it comes to doing what’s necessary to contain the crisis.

It was good news when Mr. Paulson finally agreed to funnel capital into the banking system in return for partial ownership. But last week Joe Nocera of The Times pointed out a key weakness in the U.S. Treasury’s bank rescue plan: it contains no safeguards against the possibility that banks will simply sit on the money. “Unlike the British government, which is mandating lending requirements in return for capital injections, our government seems afraid to do anything except plead.” And sure enough, the banks seem to be hoarding the cash.

There’s also bizarre stuff going on with regard to the mortgage market. I thought that the whole point of the federal takeover of Fannie Mae and Freddie Mac, the lending agencies, was to remove fears about their solvency and thereby lower mortgage rates. But top officials have made a point of denying that Fannie and Freddie debt is backed by the “full faith and credit” of the U.S. government — and as a result, markets are still treating the agencies’ debt as a risky asset, driving mortgage rates up at a time when they should be going down.

What’s happening, I suspect, is that the Bush administration’s anti-government ideology still stands in the way of effective action. Events have forced Mr. Paulson into a partial nationalization of the financial system — but he refuses to use the power that comes with ownership.

Whatever the reasons for the continuing weakness of policy, the situation is manifestly not coming under control. Things continue to fall apart.

CNN: What do you think caused this crisis?

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Zakaria: We did, all of us. Since the 1980s, Americans have consumed more than they produced, and they have made up the difference by borrowing. Not only on the personal consumer level but in how our government runs.

Every city, every county and every state has wanted to preserve its many and proliferating operations and yet not raise taxes. How to do that? By borrowing, using ever more elaborate financial instruments.

Easy money plus leverage equals financial crisis.

CNN: OK. So what do we do now?

Zakaria: In the short term, all the solutions require that governments take on more debts and larger obligations. This is inevitable and necessary. But that doesn't mean we should, as some noted economists advocate, stimulate the economy with more tax cuts.

That would be only one more way to keep the party going artificially, like asking a drunk to go to AA next year but in the meantime to have even more whiskey.

A far better stimulus would be to announce and expedite major infrastructure and energy projects, which are investments, not consumption, and therefore have a much different effect on the country's fiscal fortunes.

But Palin didn't cut the size of government as mayor of Wasilla, and she hasn't done so as Alaska's governor, city and state budget records show. Spending in fast-growing Wasilla increased by 55% during her tenure from 1996-2002, records show. In nearly two years as governor, she has presided over a 31% spending hike by a state government that sought earmarks from Washington even as it reaped billions from higher oil prices and Palin-backed tax increases on oil companies.

Eliminating waste in government spending is a Good Thing (although if the candidates were serious they'd start with the Pentagon budget, the largest source of waste, fraud and abuse, not the domestic side). But we can't duck the reality: we're headed into a deep recession and we're going to need a healthy dose of deficit spending to get out of it.

The $700 billion bailout of Wall Street isn't enough. Belatedly, Treasury Secretary Paulson has stumbled toward a sensible position on the bailout -- giving taxpayers a stake in the upside while providing banks with new capital. (But NB: he didn't demand the deal that Warren Buffett got from Goldman Sachs. That's not because he isn't a good businessman; it's because he's still conflicted about whether his client is the American taxpayer or the Wall Street club).

We've got a debate that focuses on what cannot happen -- cutting domestic spending and balancing the budget, and slights what must happen -- a large, bold plan to rebuild America, put people to work, and get the economy going.

Obama clearly gets this, but doesn't want to buck the austerity consensus. He's put forth various programs -- including aid to cities, extended unemployment, investment in energy and infrastructure, and a blister of tax cuts -- that add up to about $150 billion. That is not likely to be enough.

So in the debate tomorrow night, rather than hector candidates about what they'd cut to reduce the deficit, ask how the candidates plan to get us out of the swoon we are in, and what it will take to get the blood moving through this economy once more.

"The non-U.S. wealth-holders I've talked to, in India for example, were feeling very negative on Obama. And all of sudden the Palin thing has flipped that because as naive as Obama looked they think Palin looks more so," he said.

He said wealthy individuals in India are highly critical of Obama's willingness to strike against terrorists in Pakistan without approval from Islamabad.

"They would say 'oh, Obama is terrible.' I just kept running into that when I was there. But when McCain chose Palin, they said 'oh Palin.' They just don't understand the whole culture around her, the 'hockey mom' idea."

According to Taylor's findings, the wealthy view McCain more favorably on foreign policy and even the economy, an area where Obama enjoys a perceived edge in recent national opinion polls during the current turmoil in financial markets.

"What Obama wins is an understanding of and sensitivity toward people," he said. "And as a general rule, people have agreed at the wealthy end they can afford some more taxes."

Richard Feurtado, head of wealth management at BlackRock Inc, the largest publicly traded U.S. asset management firm, said about 50 percent of his ultra-high net worth clients are Obama supporters. "People do things for all sorts of reasons, and maybe one of them is financial but there are many other reasons for the way people vote," he said.

The billionaires and others in the wealthiest strata of U.S. society traditionally vote Republican, but that's changing this year, say advisers to the wealthy.

Despite plans to boost tax rates for the wealthiest 5 percent of Americans, Sen. Barack Obama is making the deepest inroads into wealthy voters in more than a decade for any Democratic presidential nominee, suggesting the November 4 election could mark a fundamental shift in voting patterns.

"McCain does not enjoy the kind of plurality in the wealthy space that Republican candidates have enjoyed in the past," said Jim Taylor, vice chairman of the Harrison Group, a market research and strategy firm in Waterbury, Conn.

Taylor, who produces a quarterly "Survey of Affluence and Wealth in America," said the wealthy were once a solid Republican majority. "It's not anymore," he told the Reuters Wealth Management Summit on Tuesday, citing the findings of his latest survey of 614 affluent individuals taken September 19-23.

That showed McCain had 40 percent of the "affluent and wealth vote," compared with 33 percent for Obama, and given the recent stock market slide Taylor says he would be surprised if Obama's support hadn't risen further in the past few weeks.

In the 2000 and 2004 presidential elections, in contrast, about 80 percent of the wealthy supported the Republican nominee, Taylor said.

For the wealthiest American households, who have at least $1.6 million set aside each year for discretionary spending, McCain was favored over Obama by 49 percent to 28 percent.

He said the limits on the so-called golden parachutes for chief executives, which he pushed to be a part of the first government bailout plan, remain a key point.

“I am concerned that the way that they structure this new mechanism that we are cracking down on excessive CEO pay –- that I think should be part of the deal,” Mr. Obama said. “And I’m also concerned that taxpayer shares -– that they are purchasing or they are receiving as a consequence of this injection of equity –- is a good deal for tax payers. I think that if tax payers investing in Goldman Sachs, they shouldn’t get a worse deal than when Warren Buffet invests in Goldman Sachs.”