-For the Cabinet, I could see Lieberman for State and keeping Gates for Defense. For the rest, I'd need to think about it a little longer, but I doubt McCain would want to keep any other Bush appointees.
-For his policies, I see some similarities and differences. I see are a smaller stimulus that is more focused on tax cuts (and thus unemployment would be higher right now). The bailouts would still occur out of fear that the economy would collapse otherwise. Iraq and Afghanistan would probably go as in RL. There would probably be no arms reduction treaty with Russia and friendlier policies towards Israel. America's international reputation would probably be somewhat worse as McCain would be perceived as more of a unilateralist than Obama. Healthcare reform would either not be passed at all, or a very watered down version would be passed with no public option (like the Wyden-Bennet bill). I see some watered-down financial reform and maybe some kind of global warming bill if McCain and Congress devote some time to this issue. McCain would probably handle Iran and North Korea about the same way, even though he might not have initially been as conciliatory towards them as Obama was. The deficit and debt would probably be larger in the long run since the GOP would be able to block any extension of the Bush tax cuts for the middle class if the Democrats refused to extend them for the rich.
-As for the 2010 midterms, I see the Dems picking up KY, MO, OH, NH, NC, PA (if Specter doesn't switch parties), and maybe FL if a competent candidate (like Betty or Kathy Castor) runs. In the House, I see the Democrats picking up between 30 and 50 seats. Keep in mind that I think unemployment in late 2010 would be 11-12% under McCain rather than the 9.5-10.0% that it is currently under Obama.
Policy-wise I think the stimulus would have been more focused and much smaller then what was originally passed. I also think that contrary to what has been said I think a McCain Administration would actually push for more regulations and oversight for reform on Wall Street, although ones that would be more flexible and business friendly as not to hurt Wall Streets role in a potential economic recovery.In addition, I think pork barrel spending and the deficit would be targeted more heavily also. Hell, with the Democrats in control of Congress and McCain moving more towards his bipartisan self may have even included tax raises on the wealthy and upper-middle classes and perhaps a repeal of some Bush tax cuts I think unemployment would overall remain the same or stagnant. I think McCain would have responded better and shown more leadership on the Gulf Oil Spill.
I agree with you on foreign policy, although I think McCain would have pursued the same multilateral approach on Iran and North Korea as well as Afghanistan. I could see McCain being much more critical towards Pakistan though In addition, I think he would have sought some sort of reset and understanding with Russia, although one less accommodating in policy then what Obama pursued.
The midterms I think would have been complicated with both parties gaining and trading losses.
