Argentina's taxes on food exports
Killing the pampas's golden calf
A contender for the dottiest tax around—and its use is spreading
FEW countries are as blessed by nature as Argentina. Plant wheat or soyabeans in the fertile pampas and they will produce bounteous crops. Turn a cow loose and you will have some of the world's best beef. So at least goes the stereotype. In fact, Argentine farmers are among the world's most nimble and efficient. They need to be: few countries have been as badly governed as Argentina. Over the past 70 years it has often been the farmers and their exports that have rescued the economy only to see populist governments in Buenos Aires plunder the Pampas to placate their urban voters.
That pattern is repeating itself. This week Argentina's farmers have been blocking roads in protest at what they see as a punitive rise in a tax on their exports (see article). With world prices for wheat and soyabeans at record levels, Argentina's president, Cristina Fernández de Kirchner, reckons that the farmers ought to share their windfall with the rest of the country. And the idea is catching. With stocks of some staple foods suddenly in short supply, governments around the world are slapping taxes or quotas on agricultural exports in the hope that this will stop prices from rising at home (see article).
Virtually every tariff is a little piece of economic madness; but one aimed at hobbling your best exporters would seem to take the galleta. Like many crazy ideas, it began as a temporary (and not wholly mad) scheme. In 2002 Argentina was felled by financial collapse, debt default and a massive currency devaluation. Half the population descended into poverty and unemployment reached 21%. But exporting farmers received a windfall from devaluation, augmented when world prices for farm commodities promptly began to rise. So the government imposed export taxes, initially of 20% or so. As an emergency measure this could be justified on two grounds. First, it discouraged farmers from leaving the local market unsupplied, which would have pushed prices up for newly impoverished urbanites. Second, it contributed to a fiscal surplus, helping the government stabilise the economy.
Gauchos grilled
With farm exports growing regardless of the taxes, Argentina bounced back strongly. But instead of getting rid of the taxes, Néstor Kirchner, Ms Fernández's predecessor and husband, intensified them. He even banned beef exports for six months, wrecking years of patient brand- and market-building abroad and encouraging farmers to switch to crops. His public-spending binge has turned robust economic recovery into wild overheating. Inflation is eating into urban incomes and exporters' competitiveness. At their new punitive levels of up to 40%, the export taxes are likely to trigger a decline in farm output and, eventually, a fresh balance-of-payments crisis. And if prices fall, farmers will be in a poor shape to cope.
All this applies even more in other countries with less efficient farmers than Argentina and without the excuse of its recent social emergency. If they curb food exports, governments may buy short-term relief for consumers—but at the cost of lowering output and domestic incomes and switching resources into producing other things. It is the political equivalent of a gaucho lassoing himself with his own bolas.
Business last week
JPMorgan Chase increased its recent offer for Bear Stearns to $10 a share from $2 to win the support of Bear's many unhappy investors. JPMorgan, which stepped in to rescue its rival during a run on its assets amid bankruptcy rumours, was praised by some for raising the price to keep a deal afloat. Others questioned the arrangement and the Federal Reserve's part in it. The central bank is backing $29 billion of Bear's illiquid assets, which critics argue amounts to bailing out a company that took reckless risks. See article
Britain's Financial Services Authority recommended improvements to its oversight of the banking industry after the collapse of Northern Rock, a mortgage lender stricken by the credit crisis and later nationalised. The FSA admitted to failures in supervising the bank; it promised to recruit extra staff and work more closely with financial institutions. But its mea culpa didn't go far enough for critics of the debacle, who want a review of the Bank of England's role. See article
Two private-equity firms trying to buy Clear Channel, America's biggest radio-station network, filed lawsuits to force Wall Street banks to supply the funding they had arranged for the $19.5 billion deal. It is one of the biggest recent buy-outs to face collapse because of credit woes.
Citigroup agreed to pay $1.66 billion to Enron's creditors, settling the last of the “mega claims” brought against 11 banks and brokerages for their alleged involvement in the energy trader's collapse.
If at first you don't succeed
Motorola said it would split its mobile-phone business from its networking division and that the two would trade as separate companies. Motorola's handsets, such as the RAZR, have lost market share to more sophisticated devices and been a drag on earnings. Carl Icahn, a veteran investor who pushed Motorola to spin off the division, recently reignited his battle to nominate directors to the board.
The long-awaited sale of Ford's Jaguar and Land Rover to Tata Motors was announced; the Indian company is paying around $2.3 billion for the luxury-car brands. Ford acquired Jaguar in 1989 and Land Rover in 2000, but is now restructuring its business around its more basic models. See article
Not this time
Vale, a Brazilian mining company, abandoned its plan to combine with Xstrata, its Swiss rival, after talks failed to produce a deal that would have created a mining giant. BHP Billiton is persevering with its offer for Rio Tinto.
BP's joint venture in Russia ran into more bother from the authorities. TNK-BP acknowledged it was having trouble renewing visas for 148 mostly British and American employees. In addition, the interior ministry said it was investigating alleged tax evasion at a former subsidiary of the company. A low-level worker at TNK-BP was also recently charged with industrial espionage. Last year, TNK-BP responded to threats to its licence to operate in a gas field by agreeing to sell its stake in the project to Gazprom, the state gas company. See article
The state government of São Paulo cancelled an auction that would have privatised CESP, an energy group that provides 10% of Brazil's electricity, when the potential buyers backed away over regulatory concerns. But São Paulo's governor also speculated that the bidders would have had trouble raising the 6.6 billion reais ($3.8 billion) price in the credit markets.
Sunbelt blues
House prices in 20 American metropolitan areas fell by 10.7% in January compared with a year earlier, according to an index from Standard & Poor's and Case-Shiller; annual growth rates were at a record low in 16 of the 20, most notably in the south-west. A despondent housing market did receive some good news. Existing-home sales rose in February at an annual rate for the first time in seven months, according to the National Association of Realtors.
The proposed merger between XM and Sirius, announced in February 2007, was approved by the Justice Department. This combination of the only two satellite-radio networks in America (with their stable of talk-radio stars) is opposed by other broadcasters. However, the Justice Department reckoned the deal would not create a monopoly because of competition from the internet.
Starbucks said it would appeal against a ruling ordering it to repay $105m in tips, including interest, to its baristas in California. An employee had complained about the company's policy of sharing the tip jar with shift managers, which, a judge decided, was contrary to state law. The coffee chain maintains that supervisors “deserve their fair share” of the gratuities; the baristas claim their tips are subsidising managers' wages.
The coming week
The week ahead
Climate talks and other news
• BANGKOK hosts the next round of UN-sponsored global climate-change negotiations beginning on Monday March 31st. Over 1,000 participants, including politicians, scientists, NGOs and businessmen from more than 190 countries will attend the event in Thailand’s capital. The aim of the meeting is to thrash out concrete measures that will fulfil an agreement on international action over climate change reached in Bali, Indonesia, in December.
For background see article
• NATO leaders gather in Bucharest, Romania’s capital, for a three-day summit starting on Wednesday April 2nd. Despite Russia’s rage about NATO enlargement and American missile defences in Europe, President Vladimir Putin has been invited and he may sign an agreement opening up air and land routes through Russia to supply NATO’s embattled forces in Afghanistan. Albania and Croatia seem certain to be invited to join NATO—Macedonia too if Greek objections are overcome. America wants to promise future membership to Ukraine and Georgia. But Russia regards NATO’s expansion as an affront so Mr Putin will be an awkward guest to keep happy.
• PRESIDENT George Bush is set to make a rapidly arranged visit to Russia after the NATO summit. Mr Bush is hoping that, by making the trip, he will get the chance to reassure his Russian counterpart, Vladimir Putin, over NATO expansion, American support for Kosovo’s independence and even thrash out an accord over American plans for a missile-defence shield based in Eastern Europe. It could be the final meeting between the two as Mr Putin steps down in favour of his protégé, Dmitry Medvedev, on May 7th.
For background see article
• FIGURES released on Monday March 31st will probably show that inflation in the euro area picked up further in March. February's rate, at 3.3%, was the highest since the euro's launch in 1999. Economy-watchers are braced for fresh bad news from America's jobs market on Friday April 4th. Employers cut 63,000 workers from their payrolls in February and further job cuts are likely to be reported for March.
Zapatero Depletes Surplus as Housing Shakeout Reduces EU Growth
March 28 (Bloomberg) -- Miguel Angel Lopez and Virginia Pardo watched the steady rise of interest rates last year as they expected their first child and wondered whether they would be able to keep up with the mortgage on their two-bedroom Madrid apartment.
Then the government introduced a 2,500 euro ($3,947) payment for each newborn, the first in a series of benefits and tax breaks aimed at cushioning the impact as Europe's biggest housing boom shudders to a halt. Permits to build new homes, which peaked in 2006 at 734,978, two-thirds more than Germany and the U.K. together, will drop to 500,000 this year from 675,000 in 2007, according to Banco Bilbao Vizcaya Argentaria SA, Spain's No. 2 lender.
``Lots of people may have to stop paying their mortgages if rates keep increasing,'' says Pardo, a 29-year-old homemaker whose husband makes about 1,000 euros a month as a warehouse manager. ``This will give us room to breathe,'' she says, cradling their 2-day-old daughter, Ainhoa.
Prime Minister Jose Luis Rodriguez Zapatero, whose Socialist Party retained control of parliament in March 9 elections, is increasing government spending to avoid a real estate fire sale. In a country with an 86 percent home ownership rate, highest in the 15-nation euro region, the collapsing housing market is already slowing the economy.
Growth will dwindle to 2.5 percent this year from 3.8 percent in 2007, according to forecasts by the Paris-based Organization for Economic Cooperation and Development.
Wealth Tax Pledge
Zapatero, 47, and his People's Party opponent, Mariano Rajoy, 53, made the economy the centerpiece of their campaigns. Both pledged to end the wealth tax on assets, which has ensnared more and more Spaniards because of rising home values.
The Socialists also promised to give workers an annual income tax rebate of 400 euros and boost the lowest state pensions by 26 percent. That's on top of the surge in infrastructure investment already budgeted for this year.
``We've saved, we've managed our finances well and we've got a bigger surplus than expected, so we can stimulate the economy and help families,'' Zapatero said in a Jan. 29 interview on Spanish public television. ``This is a prudent measure.''
Residential construction, which accounts for about 6 percent of Spain's economy, peaked in 2006 after a decade-long surge fueled by a drop in interest rates, growing incomes and vacation home purchases by Britons, Germans and other northern Europeans. Housing prices gained 11 percent a year on average, as even ordinary Spaniards speculated in real estate.
Consumer Spending Power
Spain's economic growth, which outpaced the euro-region average, provided a quarter of the single-currency area's new consumer spending during the past four years, according to the European Union's Luxembourg-based statistics agency, Eurostat. That's more than five times the contribution of Germany, where the economy is three times the size.
Now, a glut of properties weighs on the market, and interest rate increases and tighter bank lending standards make it more difficult for buyers to finance. The supply of new homes in 2006 outstripped demand by about 50 percent, according to government estimates.
Mortgage interest rates more than doubled since 2005 as rising credit costs sparked by the U.S. subprime crisis compounded eight increases by the European Central Bank. The 12- month euro interbank offered rate, or Euribor, calculated monthly by the Bank of Spain and used to set mortgage rates, was 4.79 percent in December, the highest since 2000.
It eased to 4.35 percent in February, 26 basis points above a year earlier. (A basis point is 0.01 percentage point.)
`For Sale' Signs
The slowdown can be seen on the streets of Madrid, where buildings are plastered with ``For Sale'' signs and it's getting easier to find a seat in the normally packed cafes.
``People just don't have any money,'' Antonio Romero, a taxi driver, says. ``With so many people on low wages, the price rises are really being felt and people are cutting back on unnecessary expenses.''
Romero, 53, says his earnings have fallen by a quarter since last year. Customers who might have taken a 25 euro cab to the airport when they went on vacation are now asking to be dropped off at the metro station, which is usually a fare of less than 10 euros, he says.
Residential construction may decline by as much as half before it reaches a sustainable pace, Zapatero said on Feb. 22. Industrial production contracted the most in more than five years in December, while a survey of executives suggested service activity collapsed in January.
Milk Prices, Unemployment
Accelerating price gains, caused by global pressure on the supply of food commodities and oil, are eating into wages, and new jobs are becoming scarce.
The price of milk rose 28 percent in the past year, bread rose 12 percent and gasoline was up 17 percent. Unemployment claims rose for a fifth month in February. G14, a trade group representing the country's largest developers that is lobbying for subsidized loans, estimates 1.1 million residential and commercial construction jobs will be lost.
Real estate has a special place in the Spanish psyche. The constitution, which sealed Spain's transition to democracy from dictatorship after General Francisco Franco's death in 1975, grants every Spaniard the right to ``a decent and fitting home.''
While it also charges the government with preventing speculation, most new developments are dotted with banners showing mobile phone numbers of people who signed up for apartments with plans to flip them to new buyers for quick profits. Immigrants from North Africa, eastern Europe and Latin America flocked to Spain to find work building homes.
Home Prices, Inventory
Home prices rose 4.8 percent in the fourth quarter, the smallest increase in more than a decade. They may fall this year by as much as 8 percent, according to Frankfurt-based Deutsche Bank AG. Unsold inventory may be as much as 1 million, about 5 percent of all homes, according to Ignacio Carvajal, an analyst at Zurich-based UBS AG, Europe's largest bank.
Investors are increasingly reluctant to lend to Spanish banks on concern that falling property prices may hurt their credit ratings. Banks have responded by making it harder and more expensive to borrow.
Half of Spanish banks toughened mortgage-lending standards in the fourth quarter, requiring large down payments by reducing the amount they're prepared to lend against a given property, according to a January report by the Bank of Spain. That compared with a similar tightening by about 10 percent of banks across the single-currency area.
Late Mortgage Payments
Mortgage-lending growth at Madrid-based Banco Espanol de Credito SA, the retail bank majority owned by Banco Santander SA, the country's largest bank, fell by almost half in the fourth quarter, while the number of borrowers missing payments for the first time doubled. Mortgage-lending growth may slow to 6 percent this year from 15 percent in 2007, the Spanish Mortgage Association said in February.
Some banks have had to turn to the ECB to fund their business as demand for their mortgage-backed bonds evaporated. Spanish banks tripled the amount of their ECB borrowings to a record 52.3 billion euros in December compared with July, according to Bank of Spain data. Spanish banks haven't raised money in the public mortgage-covered bond market since November, according to data compiled by Bloomberg. That compares with more than 35 billion euros of such notes sold to investors in the European bond market in the year through November, the most among the 15 countries sharing the euro, according to Paris- based Societe Generale.
Growing Yield Gap
The price of debt outstanding slumped on investor concern that declining house prices may undermine the quality of Spanish bonds. The difference in yields between AAA-rated notes backed by Spanish home loans and benchmark rates rose more than sixfold since July to a record 1.2 percentage points, according to Milan-based UniCredit SpA, Italy's largest bank by assets.
Bankers say they are confident they can manage the risks. Spanish banks have more than five times the bad-loan provisions of their U.K. counterparts. The ratio of reserves to bad loans in Spain was 2.69 to 1 in 2006 compared with 0.56 to 1 in the U.K., according to the Spanish Banking Association.
Aiding risk control, banks originate and manage all Spanish mortgages; in the U.S., banks have such total responsibility for less than half of home loans.
``Our economy and our financial system are very solvent,'' Banco Espanol Chairman Ana Patricia Botin said at a Jan. 11 press conference in Madrid. ``The structure of our mortgage market is very different from the U.S.''
`At the Limit'
The impact on struggling borrowers is much the same on both sides of the Atlantic. Pavel Santa, a Romanian construction foreman, brought his wife and son to live in Spain last year after he joined the management committee of the property company where he's worked for five years. Then his mortgage interest rate reset, causing the monthly payment to take up almost all of his 1,800 euros monthly salary.
``I'm at the limit,'' says Santa, 38, who earns 600 more in overtime. ``I live worse than I did in Romania.''
On the advice of his boss, he's taking government-funded courses to earn qualifications as a foreman and crane operator so he can go to work on the railways should the residential slump continue.
The government's effort to soften the blow for people like Santa is helped by a record budget surplus of 23.4 billion euros, equivalent to 2.2 percent of gross domestic product.
`Room to Maneuver'
``What could prevent a more dramatic downturn in 2008 is that the Spanish government has ample room to maneuver to accommodate the shock,'' says Gilles Moec, an economist in London at Charlotte, North Carolina-based Bank of America Corp.
The surplus will be cut by almost half this year, according to official forecasts. Deutsche Bank, Germany's largest bank by assets, sees it dwindling to 0.2 percent by 2009 as the government dips into the public coffers to bolster the economy.
Spain has already increased spending on public infrastructure projects, accelerating a 250 billion euro transport plan that aims to upgrade highways and build a 10,000- kilometer (6,214-mile) high-speed rail network by 2020. Infrastructure investment will increase 16 percent this year to 20.3 billion euros compared with average spending of 15.5 billion euros envisaged in Zapatero's 2005 plan.
``That's only the start,'' Jose Luis Martinez, a strategist in Madrid at New York-based Citigroup Inc., says. ``The numbers are on the table, and they have to be faced. Infrastructure spending will increase further, and there will be additional tax cuts.''
High-Speed Link
In February, workers completed the high-speed link between Madrid and Barcelona, which cut the time for the 659-kilometer journey between the country's two biggest cities to 2 hours 38 minutes from around 7 hours. Valencia and Granada are among the next cities that will join the steel-and-concrete network of railroads slicing through the Spanish mountains.
Business and consumer confidence may be harder to restore. Luis Mochon, an engineering lecturer at Madrid's Comillas Pontifical University, says his family of four barely makes it to the end of each month before the money runs out.
``There's a crisis coming, and in Spain we're all going to feel it,'' he says. ``Real estate is obviously one source of the trouble, but there may be others. We just don't know.''
Zapatero has his work cut out for him, judging by the estimates of economists surveyed by Bloomberg News. Based on the median of 11 forecasts for 2009 and 15 for 2008, growth will decline to 1.9 percent next year from 2.4 percent in 2008. That would be the slowest expansion in 16 years.
Payrolls May Have Slumped for Third Month: U.S. Economy Preview
March 30 (Bloomberg) -- The U.S. lost jobs for a third month in March and manufacturing contracted at the fastest pace in five years, signs the economy continues to turn down, economists said before reports this week.
Payrolls probably shrank by 50,000, according to the median estimate of economists surveyed by Bloomberg News before the Labor Department's April 4 report. The last time the economy lost jobs for at least three consecutive months coincided with the start of the Iraq War in 2003.
``The economy has slipped into a recession,'' said Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc. in New York. ``We expect the labor market to weaken, with payrolls falling steadily through the middle of next year.''
Job losses, slumping confidence and the biggest plunge in housing in a generation all point to a slowdown in consumer spending that will weaken growth. Federal Reserve Chairman Ben S. Bernanke will testify before Congress this week after lowering interest rates and extending credit to non-banks in an attempt to calm financial markets.
The projected decrease in payrolls would follow a decline of 63,000 in February and a smaller drop in January. The jobless rate likely rose to 5 percent from 4.8 percent, the survey said.
Factory payrolls in March probably shrank by 40,000 workers, reflecting automakers' efforts to trim costs and a strike at a suppler for General Motors Corp., economists project the jobs report may show.
Strike's Influence
A walkout by workers at American Axle & Manufacturing over pay and benefits that started on Feb. 26 has idled almost half of GM's North American workforce. The payroll figures may be reduced by as much as 20,000 workers because of the effects of the strike, according to Morgan Stanley economist David Greenlaw.
Ford Motor Co., which lost $15.3 billion in the past two years, may cut more jobs in North America, Chief Executive Officer Alan Mulally said earlier this month.
``The old ways of doing business are gone,'' Joe Hinrichs, Ford's manufacturing chief, and Marty Mulloy, vice president of labor affairs, said in a March 19 commentary sent to newspapers in communities where Ford has plants. ``We must continue to downsize and simply will not have enough jobs for all of our current hourly workers.''
Job losses in financial markets are also mounting following the collapse in subprime lending.
Wall Street banks hit by mortgage losses and writedowns have cut more than 34,000 jobs in the past nine months, the most since the dot-com boom fizzled in 2001, according to the Securities Industry and Financial Markets Association.
Job Losses
This year, banks including Lehman, Citigroup Inc. and Morgan Stanley have been reducing staff in fixed income trading, securitization and investment banking. So far, Lehman has eliminated 18 percent of its workforce, Morgan Stanley has cut 6.2 percent, and Merrill Lynch & Co. has trimmed 4.5 percent.
``Rising unemployment should continue to slow wage growth, adding to the strain on consumers,'' said Lehman's Harris.
Manufacturers are retrenching as demand weakens. The Tempe, Arizona-based Institute for Supply Management may report April 1 that its factory index fell to 47.5 this month, the lowest level since April 2003, from 48.3 in February, according to the survey median. A reading of 50 is the dividing line between expansion and contraction.
The following day, the Commerce Department may report that factory orders in February dropped 0.8 percent following a 2.5 percent decline the prior month.
Services Contract
In another sign that the housing recession is dragging down other areas, service industries contracted for a third month in March, the ISM is projected to report on April 3.
The group's non-manufacturing index, which covers 90 percent of the economy, fell to 48.5 this month, from 49.3 in February, according to the median forecast. Services haven't contracted for three consecutive months since 2001-2002, when the economy was emerging from the last recession.
``The tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters,'' the Fed said March 18 following its last policy meeting. ``Growth in consumer spending has slowed and labor markets have softened.''
Bernanke will elaborate on the outlook before the Joint Economic Committee of Congress on April 2.
Seeking to ease credit, restore confidence to financial markets and cushion the slowdown, the Fed on March 18 lowered its key rate by three-quarters of a point and vowed to act ``as needed'' to cushion the economy. The Fed has cut the benchmark rate by 3 percentage points since September.
Bloomberg Survey
================================================================
Release Period Prior Median
Indicator Date Value Forecast
================================================================
Chicago PM Index 3/31 March 44.5 46.0
ISM Manu Index 4/1 March 48.3 47.5
ISM Prices Index 4/1 March 75.5 75.0
Construct Spending MOM% 4/1 Feb. -1.7% -1.0%
Factory Orders MOM% 4/2 Jan. -2.5% -0.8%
Initial Claims ,000's 4/3 30-Mar 366 366
Cont. Claims ,000's 4/3 23-Mar 2845 2848
ISM NonManu Index 4/3 March 49.3 48.5
Nonfarm Payrolls ,000's 4/4 March -63 -50
Unemploy Rate % 4/4 March 4.8% 5.0%
Manu Payrolls ,000's 4/4 March -52 -40
Hourly Earnings MOM% 4/4 March 0.3% 0.3%
Hourly Earnings YOY% 4/4 March 3.7% 3.6%
Avg Weekly Hours 4/4 March 33.7 33.7
================================================================
Saturday, March 29, 2008
Missing a Generation
By Michael BaroneMost people's views of the world are shaped by the times in which they came of age. That's why we speak of a baby boom generation or a Generation X. But some people miss out on the formative experiences of most of their peers. That's the case, I think, with the Republicans' certain nominee and the front-runner for the Democratic nomination. John McCain missed the 1960s. Barack Obama missed the 1980s.
That's obvious in McCain's case. He was a prisoner of war in North Vietnam between 1967 and 1973 -- the years of the march on the Pentagon, urban riots, campus rebellions and Woodstock.
He made the point himself last October when he attacked Hillary Clinton's proposal to earmark $1 million for a Woodstock museum. "I wasn't there. I'm sure it was a cultural and pharmaceutical event. I was tied up at the time."
And it's part of a larger point. Much of our politics over the past two decades has seemed to be a cultural civil war between the two halves of the baby boom generation, between the cultural liberalism of Bill Clinton and the cultural conservatism of George W. Bush. The resulting polarization has embittered our politics, as the odd couple of Cal Thomas and Bob Beckel argue in their new book, "Common Ground: How to Stop the Partisan War That Is Destroying America."
To most voters, McCain seems to stand above or at least aside from that culture war. His lack of fervor about issues like abortion may bother some cultural conservatives, but it is comforting to those with more ambivalent views. If elected, McCain would be the only president from the "silent generation," born between the World War II veterans who served as president from 1961 to 1993 and the two boomers who have served since then. His age and generational identity may turn out to be a political asset.
Obama, born at the tail end of the baby boom generation in 1961, didn't miss the '80s in the same sense that McCain missed the '60s. But in a decade in which Americans decided that government didn't work very well and that markets did, Obama chose to make his way outside the suddenly booming private sector.
As a community organizer in Chicago and a student at Harvard Law School, he inhabited a part of the nation where it did not seem like, in the words of the 1984 Reagan ad, "Morning in America." From then until now, he has continued to believe in big government programs -- "investing in the health, welfare, and education of black and brown and white children," as he put it in his speech on race last month. And to insist on addressing the grievances he says are behind his pastor Jeremiah Wright's controversial statements.
To many voters, it may seem that Obama is proposing the kind of overgenerous welfare programs that were finally rejected in the backwash of the '80s, and in that same speech he concedes that such programs may have had bad effects. But that may be counterbalanced by Obama's appeal to black voters and to the millennial generation (born after 1980) who, like him, missed the '80s.
Clinton, still in contention though behind in delegates, experienced both the '60s and the '80s in full measure. Like her husband and his successor, she polarizes the electorate along cultural lines, and the cultural civil war of the baby boom generation seems likely to continue in a second Clinton administration. The moderate stands Bill Clinton took in the 1990s -- supporting NAFTA, for example, or signing the 1996 welfare bill -- are liabilities rather than assets for her, at least in the primaries.
No one candidate can embody the experiences of the whole electorate, of course, and many presidents have lived highly atypical lives. Dwight D. Eisenhower was a career military man, John F. Kennedy the son of a multimillionaire, Ronald Reagan a movie actor. But it's unusual to have two front-runners who have missed out on the formative experiences of so many Americans -- though perhaps not surprising in a political year that has already given us more surprises than most.
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