The economic crisis could not have come at a better time for Barack Obama, the Democrat presidential hopeful racing to the White House.

As recently as September, polls comparing Mr Obama and John McCain, the Republican candidate, on the issue of the economy and Wall Street, left the Democrat either tied or behind his rival. But all that changed with the banking crisis that erupted just seven weeks ago. As Lehman Brothers went bust, Fannie Mae and Freddie Mac were bailed out, and Washington Mutual collapsed, the financial tide turned for Obama.

While big business and Wall Street has been traditionally suspicious of the Democrats, known for raising taxes and increasing regulation, their concerns became largely irrelevant as leading banking institutions collapsed, threatening the financial lifelines to corporate America.

Professor Donald Kettl, of the University of Pennsylvania, said: “As a Republican, Mr McCain is associated with the policies of President Bush, which led to the crisis in the first place. McCain was also seen as being slow off the mark on the economy, and clumsy. It was the Democrats who were the champions of the $700 billion bailout.

“In this economic climate, things are so dire that it is not in the interests of big corporations to argue for tax cuts. Their traditional complaints have no traction in this environment and besides, it is the Democrats who are spearheading another fiscal stimulus package to boost spending. The institutions that Republicans would have turned to are now in disarray. Before the banking crisis, this was a tight race.”

Professor Larry Sabato, of the University of Virginia, added that the traditional electoral clout of Wall Street and corporate America has been undermined: “This is the time to be populist. Americans want to see some of those corporate moguls go to jail. They want to see ill-gotten gains seized. The candidates hear that.”

If the economy proves to have provided the critical last-minute lift for Mr Obama's campaign, it is his economic policy that will be of paramount interest should he succeed in tomorrow's election. It falls under two headings: tax cuts for Middle America and a bailout plan to help struggling borrowers to stay in their homes.

Mr Obama has pledged to cut the tax levy for anyone earning less than $200,000 (£124,000) a year, or any family on under $250,000 a year. He proposes to raise taxes substantially for Americans earning more than this sum. Under the Democrat plan, Washington will scrap tax cuts for businesses that ship jobs overseas and use the cash to help US-focused companies. Mr Obama also plans to increase corporation tax from 31 per cent. Capital gains tax will also rise, a move designed as a serious levy on Wall Street banks. Optimistically, the Democrats have sought to shame the wealthy and will ask them to return this year's tax rebates.

Many political experts doubt that Mr Obama will be able to make good his tax-cut promise because any plans to reduce income into the public purse will be ruled out by the budget deficit — set to touch $11 trillion by the time the next President takes office.

Professor Kettl says: “The easiest job in Washington is going to be the man who has to brief the new President. He will have to say: 'Congratulations, Sir. By the way, there's no money.' I expect tax cuts will get pushed aside and the only money spent will be on a new fiscal stimulus package and healthcare initiatives.”

Last month, Nancy Pelosi, the Democrat Speaker of the House of Representatives, began to devise a new fiscal stimulus package to provide additional unemployment benefits and to fund a more generous food stamp package. Food stamps are vouchers that lowincome families can spend at supermarkets. It is expected that the package — estimated to be worth about $300 billion — will be the first big move by any new Administration.

The other plank of Mr Obama's economic policy is bailing out homeowners behind with their mortgage repayments and who risk being evicted. He wants to force lenders to renegotiate the terms of mortgages and make the banks pick up the bill. Unlike Mr McCain, Mr Obama does not want to use taxpayer funds to buy troubled mortgages at their face value, which he claims would let irresponsible lenders off the hook for a bill of $300 billion.

If Mr Obama succeeds in tomorrow's election, he is widely expected to announce the name of his new Treasury Secretary — who will control the $700 billion investment fund used to bail out Wall Street — and his economic team by the Thanksgiving holiday in three weeks' time.

“Obama would want to give a strong signal of confidence and announce someone pretty much immediately,” Professor Kettl said.

The three favourites for the post are Tim Geithner, President of the New York Federal Reserve, Larry Summers, former US Treasury Secretary during the Clinton Administration, and Paul Volcker, the former Federal Reserve chairman.

Explore Economics

• Pre-Budget Report 2009

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive