Reforming the Welfare State – Reagan and Obama

In Britain a national election lasts just three weeks and spending by each candidate is strictly capped. Campaigning between elections is not permitted. Accepting so much as a hotel stay from a lobbyist is a resigning offence. As a result, our news is full of the American campaigns to make up for the deficit in newsworthy political conflict locally. I follow the American election, as does most of the world given the potential for good and ill that proceeds from it. Please indulge me in ruminating on one aspect of the Obama candidacy that intrigues me.

Ronald Reagan came to power on a popular backlash against the welfare state. It appears that Barack Obama may come to power on a similar backlash against the welfare state. The difference is the identity of the welfare claimants.

Ronald Reagan inflamed the public’s righteous anger against a stereotyped ghetto “welfare queen” who raised a brood of illegitimate, proto-criminal children on public funds. Barack Obama will inflame the public’s righteous anger against the corporate welfare queens who have raised a brood of profiteering executives and lobbyists in the generation since. Under Reagan and succeeding presidents, including Clinton, the K Street lobbying machine transformed Washington DC into a government by the lobbyists, of the lobbyists and for the lobbyists. Subsidies, market distortions, tax breaks, earmarks, selective protectionism, regulatory forbearance, cost-plus government contracts, relaxed accounting oversight, criminal and civil immunity, war profiteering and other policy depredations promoted a corporate welfare state beyond the dreams of ghetto avarice.

Ronald Reagan partisans demonised citizens who paid no taxes but claimed public housing, medical care and food stamps as their right. Barack Obama appears prepared to challenge corporations who pay no or nominal taxes (worth clicking through just for the graph) but claim government subsidies, earmarks and tax breaks as their right. Corporations have further stripped the US tax base by outsourcing or relocating jobs abroad, leveraged speculation rather than productive capital investment, and transfer pricing to avoid US tax. If Obama does parallel Reagan, both campaigns will tap a deep well of public anger against the perceived injustice of those who degrade the nation’s future prosperity while claiming too much from its taxpayers.

The bankers of Wall Street now toasting the Fed’s recent largesse from their Hamptons beach houses and yachts are the latest in a long line of American corporate welfare queens who have lobbied for and secured generous federal contracts, subsidies and regulatory forbearance. As noted two weeks ago in Looting the Vaults, more has now been lent to banks by the Fed under opaque new facilities than has been appropriated for the war in Iraq. Both the Fed’s new facilities and the war appropriations arguably benefit corporate welfare queens rather than serve the public interest.

The contrast between McCain and Obama on lobbyists alone is striking. Obama has banned contributions from lobbyists to his presidential campaign, even returning $500 donated by Thurgood Marshall, Jr. Instead, Obama has built a novel fundraising machine that reaches out to millions of working class Americans. McCain’s campaign relies almost entirely on wealthy contributors and lobbyists for finance. He has recently suffered a series of staff purges as high-ranking campaign officials – all of them lobbyists – were linked to large corporations and dictatorial regimes. Obama has committed to opening his fundraising events to the press pool. McCain insists on holding his fundraisers behind closed doors, no press allowed.

Obama as the presumptive Democratic nominee and party leader is preparing to drive the contrast home. Yesterday Obama enforced his opposition to special interest money on the wider party. Obama announced that from now on the Democratic National Committee will return cheques from lobbyists and political action committees, mirroring the Obama presidential campaign. This is a significant initiative in positioning the Democrats as the party to reclaim government from the corporate welfare queens.

The media pundits will use the reliable rhetoric of identity politics, religious strife, class war, patriotism and national security, but they are merely masking the fundamental policy conflict that divides the presidential candidates: Should government serve the people or the corporate elite? When Obama invokes Reagan, as he does very effectively in his elegantly crafted speeches, he is tapping the same vein of public outrage against a government promoting the comfort of those who contribute too little to the nation’s wellbeing.

A recession would clarify the public policy choices. When the economic pie is shrinking, fairness becomes a surer focus. The eyes of the hungry are watchful as the slices served get smaller.

Can Obama successfully challenge the K Street machine? He encourages us to hope, but we should be realistic. The K Street machine will not sit idly by as their unfettered control of the corporate welfare state is threatened by the upstart junior senator from Illinois who would not “wait his turn”.

Ghetto welfare queens were powerless to forestall the legislative and regulatory reforms that cut their subsidies. Corporate welfare queens are very far from powerless. We see new evidence of their power to claim public funds and direct public policy every day as the credit crisis closes off private finance options and squeezes profits. Whether the American public can elect enough reform-minded representatives to successfully challenge the corporate welfare queens may be the political test of this generation and may well determine whether the American economy recovers its powerhouse status.

Also on Thursday, Obama introduced legislation on the floor of the Senate to expose the corporate welfare queens hiding in the federal budget:  The Strengthening Transparency and Accountability in Federal Spending Act of 2008 (pdf).

Is JP Morgan a welfare queen for the Fed subsidised Bear Stearns buy-out? Discuss.

Next week I promise to stick to economic and regulatory policy.

37 Responses to "Reforming the Welfare State – Reagan and Obama"

  1. Hellasious   June 6, 2008 at 4:00 am

    Contrast the costs of Wall Street bailouts with the US Food Stamp program.The Fed alone has rapidly committed over $400 billion from its balance sheet in savings its friends from financial hunger. Other agencies are also active in the effort, e.g. the FHLB.By comparison, participation in the food stamp program has just hit a record 27.9 million persons in March, up 230,000 in one month and up 1.5 million from a year ago. This is the highest number ever, except for the months immediately after hurricane Katrina.Total cost for providing desperately needed food aid to nearly 10% of the entire US population? In fiscal year 2007, it came to $30.4 billion.Now, who’s the Welfare Queen?Food stamp data at:http://www.fns.usda.gov/pd/34fsmonthly.htm

  2. globumedes   June 6, 2008 at 6:19 am

    Hallo"I. And as for the fact that the Americans have chosen the kind of constitution that they have, I do not think well of their doing this inasmuch as in making their choice they have chosen to let the corporate/lobby people be better off than the good. Therefore, on this account I do not think well of their constitution. But since they have decided to have it so, I intend to point out how well they preserve their constitution and accomplish those other things for which the rest of the Non-Barbares criticize them.1[2] First I want to say this: ..historical paraphrase of Old Oligarch (Pseudo-Xenophon)http://www.perseus.tufts.edu/cgi-bin/ptext?doc=Perseus%3Atext%3A1999.01.0158globumedes

  3. EuroGuest   June 6, 2008 at 7:11 am

    In Britain a national election lasts just three weeks and spending by each candidate is strictly cappedEven better, the current PM was not elected by anybody.Alas, the UK has no elected legitimate PM.Nobody would vote for Brown anyway.

  4. Guest   June 6, 2008 at 9:34 am

    "Is JP Morgan a welfare queen for the Fed subsidised Bear Stearns buy-out? Discuss."Well, since you bring the subject up. I am almost speechless this week over Mr Lacker’s comments (Fed member) that the bailout of Bear Stearns may introduce a larger degree of moral hazard … larger than some people may have realized.Perhaps Mr Lacker should realize that Americans do indeed understand the larger moral hazard that he is already referring to. It’s only the Fed that is catching up with this concept. Americans are wondering how JP Morgan could have taken on the Bear bailout – with very little risk to their company – while all the real risk was transferred to the US taxpayer. Americans are especially wondering about allegations about a large volume of put transactions that apparently occurred (on Bear stock) just a few days before the bailout. Americans are speechless at the suggestion that somehow the Fed’s powers of "regulation" could be expanded at this current time, while these outrageous practises are occurring. The issue is not the Fed waking up to the existence of larger moral hazard. The real issue may be members of the Fed waking up to find themselves amongst the growing number of Americans who are listed as "unemployed"!PeteCA

  5. London Banker   June 6, 2008 at 9:59 am

    I had fun writing this! It may be your election, but it’s a game we can all watch with interest. I’m off to cycle in the Thetford Forrest. I’ll check in as and when possible, but am glad to see some good comments on here.

  6. Medic   June 6, 2008 at 11:11 am

    LB,Nice piece. As a school-aged kid when Reagan was in office, I remember some of his followers who would complain about "the poor" who were robbing the country blind with their neediness and so on. Most of these folks were only just above the poverty line themselves and were of no concern to Reagan. The term "Reagan Democrats" came to mean "white, poor, racists from the South" to me. Interestingly enough, many are big Bush supporters.The only thing Reagan ever did for me was to die. I was working at the VA hospital the day they buried him and Dumb-Ass George made it a federal holiday which meant I got double time for my shift. That was actually the only thing either of these clowns did me – except piss me off.

    • Lib No More!   July 30, 2009 at 8:27 am

      What a mean-spirited, uninformed idiot you are. Please stay in Britain if you’re there or go there if you aren’t. I love to here people who can’t take of themselves tell everyone they’re selfish for not spending their hard-earned dollars to shore them up because they made stupid choice, beginning with not taking their free education as seriously as they could. There are all sorts of ways for the poor to go to college free and still people whine about the rich white guy holding them down…he’s the one giving you a JOB (if you’re willing to work at all). I’ve never gotten a job for a poor guy or gal, have YOU? True help when needed is completely different from raising apathetic generation after generation of other citizen’s money!

  7. OuterBeltway   June 6, 2008 at 11:27 am

    As much as I want to like Obama, I’m still skeptical of him. Today I read an article on CNN’s Money portal that said Obama’s received $8MM from Wall Street to date, which doesn’t square with LB’s assertions that Obama only takes money from the little guys. Here’s the link:Obama’s Contributions from WallstreetWhat’s especially interesting to me will be Obama’s selection of VP. If he chooses Clinton, I feel he’s pretty much given up on the "Change" concept – he is just a cleverly packaged sameness. If, on the other hand, he chooses someone like Chuck Hagel or Jim Webb, well, we’ve got something of a different sort on. Whoever is president of the U.S. faces massive challenges. Our country needs to literally re-invent itself, from the bottom up, and the only real service the president can do is to act with courage, accurately identify where we need to apply ourselves, speak the truth, and communicate effectively. LB, we’re all as hopeful as you are that the long, eight-year blight on America is coming to a close, but Bush really was just the front-man. Obama must set the example, but Everyman must do the fighting.BTW, have you read Jim Webb’s book yet? It’s a little boy-scoutish, but it’s a very clever positioning document, and it demonstrates some real political savvy on Webb’s part. He’s done his political thinking.If only either Obama, or McCain, or even the vaunted Mr. Webb knew something about building an economy.

  8. London Banker   June 6, 2008 at 3:42 pm

    Lovely evening, good dinner, excellent treacle toffee pudding. I’m feeling much too good to blog American politics! I’ll check in and reply to all tomorrow.

  9. Detlef Guertler   June 6, 2008 at 3:43 pm

    LB:You write: "The K Street machine will not sit idly by as their unfettered control of the corporate welfare state is threatened by the upstart junior senator from Illinois who would not “wait his turn”."That means IOW:"If Obama doesn’t only talk about change, but really wants to fight against Wall and K Street, he won’t survive this year."Or do you think they’ll find a Spitzer way to stop him?

  10. Guest   June 6, 2008 at 10:29 pm

    Medic, your gutter language concerning Ronald Reagan ironically seems to match, as is no surprise, your disrespectful, if shallow and mistaken, understanding of his contributions. By the way, talk like that concerning a living president might get you an interview with the secret service.

  11. Guest   June 6, 2008 at 11:10 pm

    Now that our fat-bellied, good ol’ boy Congress has squandered the public’s purse, it will feel little compunction about seizing the purses of the corporate welfare queens. There may be a dirty street brawl, but the U.S. Congress has the stamina of a bulldog and the tax bite of a pit bull.It may already be waylaying for the girls – on the Cayman Islands. This from Tom Sullivan’s column, “Fund of Information,” in Barron’s May 26:“The Cayman Islands, a tropical territory of the United Kingdom, may become less attractive for U.S. hedge-fund investors if a new tax goes through. The U.S. House of Representatives last week passed legislation that would hike taxes by as estimated $24.2 billion. The bill would prohibit them from deferring taxes on income from funds in Cayman and other countries with no income tax.“Cayman, located in the Caribbean, provides tax breaks and financial secrecy that have made it a magnet for these types of funds. Dare I say, Life’s a beach?”

  12. Medic   June 7, 2008 at 4:51 am

    @ Guest on 2008-06-06 22:29:22Lighten up. Reagan was not great – he was a good speaker and a great con-man. As for the current jackass in the White House, well respect for the office does not come automatically. I don’t give it unless it’s deserved and in Bush’s case, I can find no reason to give it. He will be regarded by me as the worst president ever. Reagan’s tax policies, destruction of social programs and massive increases in military spending have laid the path for others like Bush to destroy our country’s middle class and enrich the already wealthy. As for my unsurprising lack of understanding, I will take from that comment that you likely voted for him twice and defend him still the way devoted Bush people will do the same despite any mountain of evidence against their position. You are wonderfully open-minded and a proud American I am sure. Good for you. Life is usually better when you don’t ask questions.

  13. Psyops2   June 7, 2008 at 5:26 am

    "Whether the American public can elect enough reform-minded representatives to successfully challenge the corporate welfare queens may be the political test of this generation "No chance. Western representative democracies are history, just as the nation state and national controls on capital are history. The USA is too large a political entity, its populace too ill informed, impressionable and powerless, its political elites too corrupt, for the american political process to have any real power over the beast that has been unleashed. Democracy in the west is history, what we are watching can only be described as a farce.ps1. Which makes frequent references on the constituion and forefathers really mindboggling…as if that level of understanding and analysing our current condition has any validity, usefulness or relevance…like plutocrats care about the constitution when they scheme…ps2. didnt mean to be all that gloomy, but redistributing political power usually comes at a high price…elections are far too easy for that. If elections truely redistributed power and money, they would probably be a much more violent event. Sorry guys, hate to bring good people bad news but there is no easy way out of this mess…which rather explains our predisposition for denial…psyops2

  14. Psyops2   June 7, 2008 at 5:26 am

    "Whether the American public can elect enough reform-minded representatives to successfully challenge the corporate welfare queens may be the political test of this generation "No chance. Western representative democracies are history, just as the nation state and national controls on capital are history. The USA is too large a political entity, its populace too ill informed, impressionable and powerless, its political elites too corrupt, for the american political process to have any real power over the beast that has been unleashed. Democracy in the west is history, what we are watching can only be described as a farce.ps1. Which makes frequent references on the constituion and forefathers really mindboggling…as if that level of understanding and analysing our current condition has any validity, usefulness or relevance…like plutocrats care about the constitution when they scheme…ps2. didnt mean to be all that gloomy, but redistributing political power usually comes at a high price…elections are far too easy for that. If elections truely redistributed power and money, they would probably be a much more violent event. Sorry guys, hate to bring good people bad news but there is no easy way out of this mess…which rather explains our predisposition for denial…psyops2

  15. Guest   June 7, 2008 at 1:09 pm

    Whether Obama can bring that change depends on who he has in the govt to construct and support his policies against the Wall St (Clinton??!!)….also there is a fine line between regulating the Wall St and obstructing its growth, so we have to make sure that a Dem Govt doesn’t fully give up on the free market polices, the policies that made "America"

  16. hlowe   June 7, 2008 at 4:24 pm

    Thanks for this LB! I hope it can be fowarded on to other forums.

  17. Guest   June 7, 2008 at 4:29 pm

    L.B.: Excellent Obama/Reagan analogy; how can anyone not be tempted to offer a comment.I’m encouraged by Senator Obama’s attacks on corporate welfare. And there were many strong supporters of President Reagan’s anti-welfare campaigning. (Reagan/Obama? How’s that for a dream ticket?) President Reagan always said he didn’t leave the Democrat Party, it left him. And while I’m a former Republican (after that party left me), and while I’m not planning to be a Democrat, I’m leaning toward a vote for Obama. L.B., you’ve expertly outlined the full spectrum of “welfare queens.” And, of course, it’s still a long shot to expect elimination of “Welfare Central,” the massive, smothering, out-of-control leviathan that’s known as the American government. Total cost of running just the federal portion of this leviathan, says the Congressional Budget Office, will grow from 19 percent of GDP (in 2002) to 40 percent in 2075 if present trends aren’t derailed. Accrued national debt is $9 trillion, unfunded entitlement obligations are at $44 trillion, and the 2009 budget already is on track to go $500 billion over budget (and counting).And in addition to the swelling ranks of federal workers, we must tack on the swelling ranks of federal contract workers, all 10.5 million, up 2.5 million since 2002. American taxpayers must pay and pay to the parties of the Potomic…and it’s never enough. The hungry octopus of government stretches from the White House to the State House to the Courthouse. California, bound by a balanced budget amendment, is $17 billion short for its planned expenditures, but L.A. teachers were carrying signs yesterday demanding that Gov. Schwarzenegger cut somebody else’s piece of pie smaller (California usually ranks first or second in the U.S. for teacher salaries). Up north, San Jose police, at $103,391 per year, can’t bear to be less than top police earners in the area, backed by a union responsible for budget busting in recent contracts. Similar law enforcement packages in L.A. go for $82,752 per year, while New York police are at $66,000, according to today’s “San Jose Mercury.”President Reagan once tried to demonstrate government waste by standing next to a very large annual budget book and saying, “If they send me another one like this, I won’t sign it.” People liked what he said, even though he was never able to stop the big books from coming.The problem with government welfare, corporate and otherwise, is that both political parties want big government to handle different sets of friends. I’m under no illusion that Senator Obama, who refuses money from lobbyists, won’t give them plenty of ours when the time comes. But for the moment I’m just going to believe that this first-term Illinois senator might be able to change things. For one thing, his I.O.U. box is not nearly as full as Senator McCain’s. And he has pledged to stop the war.

  18. Guest   June 8, 2008 at 12:19 pm

    The point is, LB, it’s a populace stand that works—both for Reagan and Obama. Democrats and Independents voted for Reagan by the millions: Republicans and Independents will vote for Obama. Obama is going into the presidential election with wind in his sails: McCain is weaving around like a bloated tugboat.

  19. Guest   June 8, 2008 at 12:37 pm

    In the NY Times June 7, 2008 –In a presidential election year in which the economy has emerged as a crucial issue, both major candidates used the employment data as an opportunity to criticize their opponent’s governing philosophy.“The wrong change for our country would be an economic agenda based upon the policies of the past that advocate higher taxes,” said Senator John McCain, Republican of Arizona, in a written statement. “To help families at this critical time, we cannot afford to go backward as Senator Obama advocates."Senator Barack Obama, Democrat of Illinois, called the labor report “a reminder that working families continue to bear the brunt of the failed Bush economic policies that John McCain wants to continue,” in a statement. “We can’t afford John McCain’s plan to spend billions of dollars on tax breaks for big corporations and wealthy C.E.O.’s…” Among the 8.55 million people who were unemployed in May, 1.55 million had been unemployed for 27 weeks or longer. Unemployment benefits now expire after 26 weeks.http://www.nytimes.com/2008/06/07/business/07econ.html?_r=1&adxnnl=1&oref=slogin&adxnnlx=1212945979-2zh7NahZwjOxhkx72LPYig

  20. Anonymous   June 8, 2008 at 1:22 pm

    Hallo"2008 Presidential Campaign USA: An Anti-Democratic Show""You will surely agree that current President George W. Bush does not have enough capacity to rule the country. He is a puppet hiding real power behind him. If US policy is not being decided within the walls of the Oval Office, why would that change next year? …"http://www.voltairenet.org/article157308.htmlglobumedes

  21. RebelEconomist   June 8, 2008 at 2:15 pm

    Outerbeltway (with apologies to the rest)I have been looking out for you. Checkout my blog (http://reservedplace.blogspot.com/2008/04/us-economic-policy-shot-in-foot-2.html) for an expansion of what the US might have done better with the foreign exchange reserves capital inflows, in response to the comment you made while I was on holiday.My regards to London Banker. I like Thetford Forest too. Grimes Graves are worth a look if you have not already done so.

  22. London Banker   June 8, 2008 at 2:30 pm

    What a weekend! I biked 15 miles in pouring rain on muddy trails in the Thetford Forrest yesterday (missed the caves, Outer Beltway) and then rowed three heats in the London Dragon Boat Races today in broiling hot sun (our team placing a respectable top ten out of 44 boats). I’m beat!I’m pleased to see so many interesting and cogent comments here this weekend, but you’ll excuse me if my top priorities are a beer and a bath.

  23. Gloomy   June 8, 2008 at 8:21 pm

    I’m an independent and will decide later in the campaign who I will vote for. But certainly John McCain has had a long record of being an opponent of special interests, something that has frequently gotten him into hot water in the past with them. Funny you should paint him with the same brush as the rest of Washington.

  24. Guest   June 8, 2008 at 8:30 pm

    Do tell, about John McCain. He’s supposed to be a "maverick". I’ve heard that he is actually not, according to his voting record. Am I wrong?

  25. Masheeoon   June 8, 2008 at 8:37 pm

    @LBI caught you at the boat races. In fact got quite a little clip which I’ve attached. Three heats?! I’ll beat you’re beat, time to drink that well deserved beer. In a sippy cup, yes? :>http://youtube.com/watch?v=Qakk3BXc0Bs

  26. Guest   June 8, 2008 at 9:33 pm

    The “maverick” façade about McCain will be wiped away, eventually. IMO. At the moment, he’s flipping back and forth on all the issues, and though he’s supposed to be a “straight talker,” he’s a crooked talker. He votes against, and later he votes for. You can’t trust him. He’s been so close to so many lobbyist for so long, that lobbyists had to start resigning from his staff when he said he’d distance himself from lobbyists, in response to Obama’s stance. But, I’m willing to listen.

  27. London Banker   June 9, 2008 at 6:41 am

    Here’s real YouTube from yesterday’s races. Although my team isn’t featured in this race, it gives a great idea of the pace and excitement.http://youtube.com/watch?v=Dn6Hoea3VV4

  28. DC   June 9, 2008 at 8:48 am

    Bernanke Cries "It’s all China’s Fault!" By Mike_Whitney http://www.marketoracle.co.uk/Article4994.html He’s at it again. Bernanke, that is. Thursday the Fed chief delivered a rambling 45 minute speech at the International Monetary Conference in Barcelona, Spain laying out all the reasons why the Federal Reserve is NOT responsible for the present crisis in the financial markets. That’s a pretty long-winded way of saying the Chinese are to blame for everything that’s gone wrong in the markets for the last 10 months. But is it true? Ask yourself this, dear reader; do "savings" cause massive equity bubbles or are bubbles the result of low interest rates and rotten monetary policy? It is universally agreed that Greenspan created the housing bubble by dropping rates below the rate of inflation for 31 months following the dot.com bust. This sparked a multi-trillion dollar speculative frenzy in real estate. Artificially low interest rates distort the market; bubbles appear. "Savings" had nothing to do with it; Bernanke is just trying to dodge responsibility by blaming the Chinese. It’s the old "dog ate my homework" routine. The Fed is also responsible for the surge in oil prices. As Frank Shostak points out in his recent article "The Oil Price Bubble": "There is a high likelihood that the massive increase in the price of oil that we are currently observing is the manifestation of a severe misallocation of resources — a large increase in nonproductive activities. It is these activities that have laid the foundation for the oil-market bubble, which has become manifest in the explosive increase in the price of oil. The root of the problem here is the Fed’s very loose monetary policy between January 2001 and June 2004. (The federal funds rate was lowered from 6% to 1%.)"

  29. BK   June 9, 2008 at 12:15 pm

    @Written by OuterBeltway on 2008-06-06 11:27:07"…the only real service the president can do is to act with courage, accurately identify where we need to apply ourselves, speak the truth, and communicate effectively."Isnt this just good advice for any manager whom seeks the best from his staff?

  30. OuterBeltway   June 9, 2008 at 9:23 pm

    @BK on 2008-06-09 12:15:48Yes. It’s just plain common sense, for a manager. However, politics intrudes: there are many powerful people that either don’t care what’s best for the nation, or honestly believe in things that really aren’t good. Power = control. That means the leader has to have both the knowledge of what’s best (and be right) and the knowledge of how to over-rule the obstructor – who may be quite powerful. This is one of the everlasting challenges of politics. Reagan’s genius is that he had the speaking and acting skills to "go to the people" and enlist their support in rolling over his political opponents. To tackle the challenges this nation faces, the next leader is going to really need to connect with, and call upon the whole nation, or we’re really going to struggle.

  31. OuterBeltway   June 9, 2008 at 9:23 pm

    @BK on 2008-06-09 12:15:48Yes. It’s just plain common sense, for a manager. However, politics intrudes: there are many powerful people that either don’t care what’s best for the nation, or honestly believe in things that really aren’t good. Power = control. That means the leader has to have both the knowledge of what’s best (and be right) and the knowledge of how to over-rule the obstructor – who may be quite powerful. This is one of the everlasting challenges of politics. Reagan’s genius is that he had the speaking and acting skills to "go to the people" and enlist their support in rolling over his political opponents. To tackle the challenges this nation faces, the next leader is going to really need to connect with, and call upon the whole nation, or we’re really going to struggle.

  32. KJ Foehr   June 10, 2008 at 12:51 am

    I am an Obama supporter, contributor, and worked briefly as a campaign volunteer. IMO, his nomination is not the result of a backlash against corporate welfare. While that may be a minor factor, in my view the primary reasons are,1. He is charismatic, eloquent, and he projects the kind of idealism that excites young people. 2. He is new and fresh on the national scene: unencumbered by the baggage of the Clintons and the lawyerly slickness of John Edwards.3. Many young people also like him because he is young and black (or more correctly half black). Young whites have embraced black culture in a way no previous generation has. Further, they perceive older generations as clinging to racism, and, therefore, they see the election of a young, black man as a way to defeat and eliminate racism forever. 4. Many people see Obama as a uniter who will transcend the increasingly hateful partisan bickering that dominates political discourse, especially on TV “news” programs, radio talk shows in recent years.5. Many people, especially the young, like him because he has always opposed the Iraq war. The war is very unpopular among many young people who would be protesting in the streets by the hundreds of thousands if we had a draft now as we did in the Vietnam era.6. Educated, progressive adults like him because he is intelligent and progressive.IMO, the economy, corporate welfare, and moral hazard were not even on the radar screen of most Obama supporters during much of the primary season. He may use these anti-corporatism issues in the general election, and if so, it may be very effective. But, I think he still faces serious difficulties in the general election. Obama was nominated by a subset of a minority who voted in Democratic primaries. As a result, his nomination was probably an anomaly of the Democratic primary system. He outperformed in caucus states where an energized minority can out organize less motivated voters to win, and he under performed in larger states with election primaries. However because delegates are assigned proportionally, rather than on a winner-take-all basis as in Republican primaries, Obama was able to garner enough delegates to win the nomination while losing many large important states. The defective primaries in Florida and Michigan may have also helped Obama by depriving Clinton of more delegates.Obama’s nomination reminds me of George McGovern in 1972, when an active minority of very liberal, anti-war voters gave him the nomination, but he was too liberal to be accepted by many moderate Americans, and he won only Massachusetts and D.C. in the general election. I fear Obama will face similar difficulties because not only is he black, which I think must still be seen as a handicap, but he, like McGovern is very liberal. The right will paint him as a dangerous, anti-American extremist and liberal elitist. Further, if W starts a war with Iran, it may bolster McCain’s chances because a great many Americans will be too fearful of giving the presidency to an anti-war liberal after W, et al, have whipped up the fear level among Americans to near hysteria levels. The extent of the right wing fear mongering and propaganda is not to be underestimated: I heard one talk show host last Friday say that Obama was a communist (after going to great lengths to say that he never called anyone a communist before, but felt compelled to do so in Obama’s case because he is so flagrantly communistic). Then on Saturday I heard a female radio talk show host saying that the liberals are making it impossible for the government to interrogate “terrorists who want to kill your children”. Can you imagine? She didn’t say kill “our” children or just kill children in general, she said kill “your” children. Now if that isn’t hysterical fear mongering, then I don’t know what would be. The bottom line is, Obama is going to have a very difficult time garnering enough support among mainstream American’s to win a majority because he is both quite liberal and black. I fear that, even though young Americans may accept blacks unequivocally and perhaps even prefer to have a black president at this point, a majority of Americans, especially white men, may not vote for a black man for president. However, according to the latest Gallup Poll Daily tracking update Obama leads McCain by 48% to 42%, and that sounds good, but I would be more confident if he was over 50%. Obama’s nomination will make this the most interesting election since JFK versus Nixon in 1960. The economy and anti-war feeling will be strongly in Obama’s favor, but his blackness and his rather far left ideology is still going to make him a long shot, IMO. But perhaps the disgust with the mess the Republicans have created both at home and in foreign affairs will be enough to outweigh the concerns about Obama. And, IMO, that would be a very positive development for the USA: even if they elect a (half) black man president by voting against Republicans rather than for Obama, the result would still go very far in removing the curse we have borne since the days of slavery.One final comment, I wish we had the British system: if we had only three weeks of campaigning with a cap on spending, then I don’t think there would be enough time for propaganda to distort public perception sufficiently to enable people such as W to be elected president. I don’t have any personal knowledge of the English system, but it seems the selection of leaders would be more based on individual merit, past performance, experience, intelligence, and articulation, rather than on propaganda and brainwashing that is driven mostly by money and media. And that seems like a profound difference to me.

  33. Anonymous   June 10, 2008 at 7:18 am

    KJ foehr,Very interesting insight about Obama.I don’t know if he’ll be elected.I’m italian and, As Old European, I share many criticism about US policy, economy etc.I also appreciate so much LB analysis.But, as Italian and considering the very poor quality of our politicians (You know, italian elections were attended a couple of month Ago with the triumph of 72 years old, plastic made, incumbentTV tycoon Berlusconi over an even worse leftist party), let me tell you that Europe isn’t able to take to presidential election a black, 40 years old, immigrant. This is a great sign of vitality of USA and a hope for all the world.

  34. KJ Foehr   June 10, 2008 at 11:46 am

    Anonymous on 2008-06-10 07:18:22“But, as Italian and considering the very poor quality of our politicians (You know, italian elections were attended a couple of month Ago with the triumph of 72 years old, plastic made, incumbentTV tycoon Berlusconi over an even worse leftist party), let me tell you that Europe isn’t able to take to presidential election a black, 40 years old, immigrant. This is a great sign of vitality of USA and a hope for all the world.”Thanks for your comment.Yes, vitality is the keyword.IMO, the keys to the USA’s success are,Pioneer and entrepreneurial spirit.Largely free market system with a strong rule of law.Immigration resulting in a brain gain from all over the world.Innovation resulting from brain gain.Dynamism (vitality), open mindedness resulting from diversity.Dynamism and flexibility resulting from democracy.Plentiful natural resources.USA’s problems going forward:Globalization is reducing brain gain.The law has become to extensive leading to a loss of dynamism as thrombosis increasingly sets in throughout business and society. (overly litigious, fear of lawsuits, too many rules and regulations)Xenophobia is beginning to stifle immigration, negatively impacting the benefits of diversity: new blood / thinking.Pioneer / independent spirit is being replaced with a feminization of our culture.ROW problems, especially Asia:Xenophobia / racism leading to stagnation – “one billion hearts, one mind”.Stagnation caused by traditions and social / cultural norms accumulated over thousands of years.Poor rule of law, political instability, and insufficiently free markets / economies in many countries.IMO, the greatest economic threat to the USA is China, because it appears to be, somewhat ironically, the most able to break free of its cultural stagnation into dynamism. This is because the upheavals of the communist revolution and the cultural revolution broke down many of the cultural traditions China had accumulated over the previous 4000 years. This has created a more dynamic society (much more dynamic than Japan or Korea) that is now experiencing another revolution: capitalism. But is it enough dynamism? Or will the “one billion hearts, one mind” mentality prevail, returning China to mediocrity brought about by too much conformity and group think. Actually, I think the latter is likely as the desire for consensus and conformity still appears VERY powerful in Chinese society.BTW, Obama will be 47 on August 4 this year.

  35. Amnon Portugaly   June 15, 2008 at 12:37 pm

    LB In an otherwise a very interesting article, you made an error in "more has now been lent to banks by the Fed under opaque new facilities than has been appropriated for the war in Iraq" with reference to “Looting the Vaults” "Since the credit crisis was first diagnosed last fall, the Federal Reserve has advanced more cash and Treasuries than the entire five year cost of the Iraq war – over $400 billion"According to various sources, the total appropriations for the wars in Iraq, Afghanistan and the “war on terror.” is $700 billion. Of those $700 billion, Iraq will have received $526 billion by mid-2008. http://middleeast.about.com/od/iraq/f/me080225b.htmhttp://www.nationalpriorities.org/costofwar0508This does not distract from you main point, but there is no need to give ammunition to your opponents by using inaccurate figures.Amnon Portugaly

  36. Anonymous   June 17, 2008 at 2:33 pm

    having numbers never seems to solve conflict, i trust my eyes that witness the widening worldwide wealth gap. rnrn "threat to the USA is China" i don’t agree since the drive has been for objects and consumerism. the chinese work long hours because they have to compete against each other. i think they are a greater threat to each other. rn