Year in Review: Top Political Highlights and Lowlights of 2008

As a new year approaches, it's time to take stock of the political issues, stories and characters that captivated our attention over the old one.

The presidential campaign was foremost, but behind that narrative a host of winners and losers emerged. FOXNews.com spoke with contributors and political analysts to compile a list of the most notable names and events of 2008.

Biggest Winner: Wall Street 

It may seem counterintuitive after the collapse of Bear Stearns, the bankruptcy of Lehman Brothers and the takeover and buyouts of other major financial institutions, but for those still standing, the government's $700 billion bailout was an unprecedented gift.

Hardly any strings have been attached to the funding and few of the financial institutions are willing to say how they are spending the money, half of which has already been doled out. Some CEOs have even taken advantage of a loophole around the ban on golden parachutes that aimed to prevent them from pocketing taxpayer cash.

"Between the bailouts, between the nationalization of our credit markets, between the Big Three, between this now-impending stimulus package ... I think we've seen in 2008 our government grow faster and get bigger and bigger at a rapid speed that we've never seen before," said Republican strategist Andrea Tantaros, who called "big government" the winner of 2008. "It's going down some uncharted territory."

Biggest Loser: John Edwards 

Alaska Sen. Ted Stevens faces jail time; former New York Gov. Eliot Spitzer left office after a prostitution scandal; and Illinois Gov. Rod Blagojevich faces impeachment and indictment. But of all the political scandals in 2008, none was more personally damaging than John Edwards' affair with his former videographer.

Four years ago, Edwards was a North Carolina senator turned vice presidential nominee. This year, he was a presidential candidate who placed second in the first-in-the-nation Iowa caucuses and was later floated as a potential Cabinet secretary in a would-be Democratic administration. But his outing as an adulterer who may have fathered a child with his mistress torpedoed any chance of a role in Washington, much less at the Democratic National Convention.

"The Rielle Hunter scandal really finishes him as a public figure," said Michael Barone, senior writer for U.S. News & World Report. "He's not really going to be a player again in politics. At the beginning of the year, he thought he could be president. ... That's a tremendous fall."

Best Strategy: Barack Obama's Presidential Campaign

It's hard not to recognize the electoral feat pulled off by Obama's campaign. Polls showed Hillary Clinton as the runaway front-runner, and few could have anticipated how well Obama's team would handle the minutiae of the Democratic primary process.

But Obama's aides saw the primary campaign for what it was: a delegate numbers game. The big-state wins sought -- and achieved -- by Clinton were not Priority No. 1 for the senator from Illinois. His team realized early that since Democrats don't operate under a winner-take-all system (as the Republicans do), Obama could stay competitive in the smaller caucus states.

"I think he would have lost the nomination ... if it hadn't been for that one insight," said Christopher C. Hull, adjunct professor of government at Georgetown University.

Obama's camp also had a game plan for the post-Super Tuesday primaries, and its mastery of the Internet as a campaign tool helped shore up support among enthusiastic young voters. On top of that, Obama's "no-drama" image served as an effective foil to his two major opponents' campaigns. Clinton suffered from staff shakeups and insider dissent, and Republican presidential candidate John McCain suffered from shifting tactics, but Obama stayed steady and focused on hope and change. That image paid off when news of economic uncertainty required a calming voice.

Worst Blunder: McCain Suspends His Campaign to Return to Congress 

With his boost in the polls already fading after his selection of Sarah Palin to be his running mate, McCain, who was viewed as the weaker candidate on the economy, knew he had to shake up the presidential race as Wall Street started to tumble.

But his decision to suspend his campaign to meet with lawmakers on a proposed financial rescue package ultimately played into Obama's portrayal of the Republican candidate as erratic and unsteady.

Democrats lashed out at McCain, blaming him for injecting presidential politics into the mix, after an initial White House summit on the rescue package fell apart.

McCain eventually showed up at the first presidential debate a few days later, though he had threatened to sit it out so he could focus on the bailout.

Tantaros said McCain showed poor judgment on the issue, especially after waiting "until the 11th hour" to talk about the economy. She said McCain could have shaken up the race by opposing the $700 billion bailout, differentiating himself from Obama while playing up his reputation as a watchdog of government spending, but instead he appeared to be following Obama's lead by supporting it.

Most Talked About Topic: Sarah Palin 

Love her or hate her, the Alaska governor blindsided political speculators when McCain picked her to be his running mate. She instantly became a sensation as well as a target.

In many ways, Palin broke the mold for traditional No. 2s, especially in the Republican Party. Not only was she the first female GOP running mate on a presidential ticket, but her story was captivating. The tale of a self-made hockey mom who hunts, is married to a "snow machine" champion and lives in America's outback seemed just the antidote Republicans needed to Obama's one-of-a-kind story of triumph over adversity.

"There was nothing quite like her," Tantaros said. "It was the same with Barack Obama. Both of them were so unique in their own right."

Palin ran into the same questions of inexperience that initially plagued Obama, but unlike the president-elect, she failed to overcome them with smooth and sharp responses to reporters' questions. But that doesn't mean she's finished. Palin is among an elite few promising young Republicans talked about as the GOP's hope for 2012.

Most Underreported Topic: Success of the Troop Surge in Iraq

The success of the surge in Iraq was a story the media did not want to cover, Barone said. "They were into the template of Vietnam. They were reporting it as another Vietnam, and this was going against the template."

On the advice of his revamped defense team, President Bush decided in early 2007 to deploy  30,000 more troops to Iraq to try to quell inner-city violence among ethno-religious factions. The yearlong effort ended up cutting Iraqi civilian deaths by more than 80 percent, and car bombs and homicide attacks dropped by as much as 90 percent in some regions.

In May 2007, 131 U.S. servicemen and women died in Iraq. In July 2008, the number was 15. The strategy enabled Bush to announce this summer that troop rotations would be reduced from 15 months to 12 months. U.S. troops are also expected to move out of the cities by next summer to let Iraqi security forces protect their own communities.

Though the declining violence did not merit the same level of coverage as rising violence in Iraq in the years preceding the surge, its success did have an unintended consequence: it ended up fulfilling the pledge offered by McCain, who supported the surge, that he would rather win the war than win a political campaign.

Biggest Bad Boy: Illinois Gov. Rod Blagojevich 

The allegations against Blagojevich make for classic political drama. No other bad boy -- or girl -- could compete with the still-unfolding saga of the Illinois governor accused of trying to sell Obama's vacant U.S. Senate seat.

But that's not all Blagovich is accused of doing. He is alleged to have tried to goad the president-elect and his team into trading favors in exchange for their choice of appointment to Obama's seat. In wiretaps Blagojevich can allegedly be heard cursing out Obama after learning the president-elect's camp was not willing to play ball.

He also is accused of trying to get Chicago Tribune editors fired and holding back money for a children's hospital in exchange for campaign contributions.

Impeachment proceedings are underway, but Blagojevich is holding on to power and claiming he did nothing wrong. He even named Obama's replacement on Wednesday, though his lawyer Ed Genson said less than two weeks earlier that he would not do so.

"It's almost as if he's disconnected from reality," said Philip Molfese, Chicago political consultant and president of Grainger Terry, Inc. "He's very defiant, and his own allies have sort of run for the hills."

Worst Political Leak: McCain Camp Turns on Palin

Signs of disunity in the McCain camp started to accelerate after Politico.com published a report saying the Republican National Committee had spent more than $150,000 to clothe and accessorize Palin and her family after McCain picked to her to be his running mate.

The article was followed by claims from within the McCain camp that Palin was a "diva" and a "whack job" and was "going rogue." Newsweek quoted one aide describing the wardrobe spree as "Wasilla hillbillies looting Neiman Marcus from coast to coast."

The recriminations lasted up to and through Election Day, and they are given partial credit for the losing campaign. Aides also told FOX News that officials had serious doubts about Palin's preparedness, in part because she supposedly did not realize that Africa was a continent and not a country, and that she could not name the three nations that had signed the North American Free Trade Agreement.

Hull called the leaks, which Palin brushed off, the mark of a "circular firing squad." He said they "signaled a sense of disunity within the campaign and a certain sense of either disloyalty ... or a lack of respect for the campaign."

Best Political Photo Op: Big Three CEOs in Hybrids

The heads of the Big Three automakers were blasted after they flew to Washington in private jets in November to request billions of dollars in taxpayer bailouts at congressional hearings.

So during the next round of appeals, the CEOs wanted lawmakers on Capitol Hill to know they had learned their lesson. What followed was one of the most drawn-out photo ops of the year, as the heads of General Motors, Chrysler and Ford drove fuel-efficient company cars from Detroit to the nation's capital.

Richard Wagoner of GM drove a Chevy Volt; Ford's Alan Mullaly navigated a Ford Escape Hybrid; and Chrysler's Bob Nardelli took an electric-powered Jeep.

Camera crews jockeyed to film the automakers as they arrived to testify in what were supposed to be models of their innovation but ended up looking more like symbols of desperation. The very public act of contrition wooed the House but failed to convince the Senate, which killed the bailout. Ultimately, the Bush administration stepped in and offered GM and Chrysler $17 billion in loans.

Best Political Theater:  Ron Paul's 'Counter Convention' at the GOP National Convention 

Texas Rep. Ron Paul was in top contention with Ohio Rep. Dennis Kucinich for gadfly of the campaign trail. But while Kucinich eventually dropped his primary bid, re-entered the fold of the Democrats and gave a lively address at his party's national convention, Paul never quite assimilated with the Republicans.

So while the Republicans held their national convention in St. Paul in early September, Paul staged his own counter-convention down the road in Minneapolis. He said he felt "slighted" by the organizers of the main event, since they gave him "second class" access and denied him a speaking role.

Paul's convention had all the trappings of the real thing, plus a hard rock band paying anthems for Paul and libertarian-laced rhetoric. Mock delegations from all the states assembled on the floor of the Target Center, and guest speakers filled the program.

With more than 10,000 Paul supporters in the mix, the rally almost seemed more enthusiastic than the big show in St. Paul. That may have been because Paul held his counter-convention right after the GOP canceled most activities on the opening day of the Republican National Convention, as Hurricane Gustav bore down on the Gulf Coast.