John McCain is heading to near-certain defeat in the presidential election because American voters no longer trust Republicans on the economy, a strategist for the party warned yesterday.

Steve Lombardo, who has worked on Republican campaigns since 1992 and advised McCain's opponent, Mitt Romney, in the primaries, said it would take a major external event, such as a terrorist attack or a crippling error by Barack Obama, for McCain to make a comeback.

"Basically unless there is some external event the dynamics of this race are being driven almost entirely by the financial situation here in the United States and globally, and that works for Barack Obama," Lombardo told the Guardian.

"If there isn't some sort of event or, God forbid, a terrorist attack that moves the election on to foreign affairs or national security, it is unlikely that McCain can regain the lead, just because voters have decided that the base of the problems they face are the Republican party, George Bush, and, by extension, John McCain."

McCain last night tried to get past Obama's advantage on the economy by making a personal connection with voters, in the second of three presidential debates in Nashville, Tennessee.

Taking advantage of a town hall format, McCain walked up to the studio audience to make his pitch. "I know how to get American working again," he said.

But the outlook for Republicans did not look good. Yesterday saw Bush brought to a new low. The 25% approval rating was recorded just after Congress approved a $700bn (£400bn) economic bailout, suggesting the public gave no credit to the White House for its rescue plan.

The rating, a new nadir for a historically unpopular president, puts Bush one point ahead of Richard Nixon on the eve of his departure in 1974. It is three points higher than the poll's all-time low for any president, Harry Truman's 22% in 1952.

Lombardo laid out his misgivings in a memo obtained by the Guardian, in which he wrote that McCain's attempts to make the election about Obama's character were unlikely to work. The memo argues such attacks at this point seem "desperate"; the time to define the Democrats' character had been in August - before the presidential debates. "The economic situation has virtually ended John McCain's presidential aspirations and no amount of tactical manoeuvring in the final 29 days is likely to change that equation," the memo said. "There are more turns to come in this election and it is not over yet but it sure seems like it is."

The memo said McCain lost the election on September 15 - two days after Lehman Brothers filed for bankruptcy - when he told a rally in Florida: "The fundamentals of the economy are strong."

McCain saw fresh signs yesterday of the damage to his prospects in polls showing him trailing in four battleground states and fighting to keep Indiana and North Carolina. He suffered another blow when the wife of a retiring Republican senator seen as one of the Republicans' experts on national security officially endorsed Obama. "We're in two wars, two of the longest we've ever been in. We've run up a third of our nation's debt in just the past eight years. We're in the biggest financial crisis since the Great Depression," said Lilibet Hagel, whose husband, Chuck, is a senator from Nebraska.

With less than four weeks until election day, the slide in the polls brought an even more personal edge to McCain's attacks on Obama. The Democrats hit back with an ad released on cable networks yesterday, accusing McCain of being "out of ideas" and seeking to distract voters from America's economic problems. "With no plan to lift our economy up, John McCain wants to tear Barack Obama down," it said.

In the latest bad news for McCain, a Time magazine-CNN poll showed the Republican struggling to hold states Bush carried easily in 2004. In Indiana, Republican since 1964, McCain and Obama were tied among registered voters on 48%.

Palin, meanwhile, emerged as the attack dog. The vice-presidential candidate redirected her attack from Obama's association with 1960s radical Bill Ayers to Obama himself. "You mean he didn't know that he launched his political career in the living room of a domestic terrorist?" she asked a rally in Jacksonville.