Gramm, a past presidential candidate, made the remarks more than a week ago. McCain immediately distanced himself from the comments, but they brought a steady stream of criticism just as McCain is trying to show he can help steer the country past its current financial troubles.
Gramm said in a statement late Friday that he is stepping down to "end this distraction."
"It is clear to me that Democrats want to attack me rather than debate Senator McCain on important economic issues facing the country," Gramm said. "That kind of distraction hurts not only Senator McCain's ability to present concrete programs to deal with the country's problems, it hurts the country. To end this distraction and get on with the real debate, I hereby step down as co-chair of the McCain campaign and join the growing number of rank-and-file McCain supporters."
The campaign of Democratic presidential candidate Barack Obama said Gramm's departure will make little difference to McCain's economic policies.
"The question for John McCain isn't whether Phil Gramm will continue as chairman of his campaign, but whether McCain will continue to keep the economic plan that Gramm authored and that represents a continuation of the failed polices of the last eight years," said Obama campaign spokesman Hari Sevugan.
