Democrats fattened their majority control of the Senate on Tuesday, ousting Republican Sens. Elizabeth Dole of North Carolina and John Sununu of New Hampshire and capturing seats held by retiring GOP senators in Virginia, New Mexico and Colorado. Piggybacking on the excitement level raised by presidential victor Barack Obama and his voter-registration and get-out-the-vote drives, Democrats increased their effective majority to at least 56 seats in the 100-member Senate. They did not turn over a single seat to Republicans. All Democratic incumbents on the ballot prevailed. But Republicans stopped a complete rout, holding the Kentucky seat of Senate Minority Leader Mitch McConnell and a Mississippi seat once held by Trent Lott – two top Democratic targets. – AP
Dominant Social Theme: A repudiation of free markets and capitalism.
Free-Market Analysis: The victory of Barack Obama is being presented in the mainstream media as a resounding affirmation for Obama's slogan of "change." While no one is absolutely sure of what "change" entails, one might offer with some certainty the idea that the vote that propelled the Democrats to further power, as well as the White House, was in large part a protest vote.
Of course, it is not being presented this way. Yet it is likely true. Americans are furious with outgoing president George W. Bush who is perceived not only at muddying the Republican message of fiscal conservatism, but doing so in a way that damaged the fortunes of the country and the pocketbooks of individual Americans.
Thus, American voters turned to the election to express their outrage – and the result is a victory for Obama and his party as well. It is unfortunate that this will not be written about very much for a simple reason: To point it out in the mainstream media is to ask for a racist label. This will be the trouble going forward as well. With a resounding victory for himself and for his party, it will be very difficult for most mainstream pundits, especially American ones, to make the case that Obama does not have a "mandate" to implement aggressive socialist policies. And even if these policies backfire as they certainly will, the conversation as it is currently being conducted in the United States will likely not tolerate criticism.
As the nation's first black president, and one with a majority in both the House and Senate, Obama is uniquely positioned to push through an agenda that will move America farther to the left. Already there is talk of reintroducing the fairness doctrine that demands that those on the public airways provide both a "left" and "right" perspective. This would effectively remove from the airways, the right wing pundits such as Rush Limbaugh who have made a career of promoting Libertarian and conservative causes.
Right wing talk radio has done much better in America than left wing talk radio because of the Libertarian, free-market content it offered up. Many, if not most Americans, have free-market sympathies, even if they are not outright free-market thinkers. (Such individuals want the government neither in their wallets nor their bedroom, and they number in the tens of millions.) Ironically, right wing talk radio has drifted down in popularity because of the refusal of right wing talk show hosts to criticize President George W. Bush's military and domestic policies, almost all of which expanded the federal government and added fairly Draconian powers.
Additionally, having called on the federal government to do so much in terms of a behavioral agenda – pursuing the war against drugs, for instance – those on the right who are involved in radio have little moral authority left. They cannot argue for federal government activism on the one hand and then reject it on the other. Instead of pursuing a free-market agenda, the biggest players in talk radio turned out to be supporters of the Republican party regardless of that party's actions and policies.
But the reversal of the fairness doctrine, if it happens, is only the beginning. Obama has attacked the American coal industry, has indicated aggressive support for measures against global warming, has indicated that he accepts the general thrust of the "war against terror" – which means that he will be cautious about winding down America's wars. In his acceptance speech, he mentioned Wall Street and seemed to indicate that fairly aggressive regulation of the financial sector was on the way because of the impact that Wall Street was having on Main Street.
Exactly what Obama means to do remains unclear, but he has given plenty of hints about a fairly sharp move toward more federal government interference within the private sector. He also may mean to make common cause with the European Union – and its increasingly anti-free-market policies. Ultimately, what Obama may mean to America is federal activism that encompasses both domestic and international spheres. President Bush radically expanded the federal government's power and involvement in various policing matters related to the war on terror. Obama will likely build on those intrusions plus he will be far more active in terms of monetary and fiscal policy. Activism for the first term of Obama's rule, will be a full time job.
From an investment perspective, Obama promises to provide much debate. Already the idea of converting 401(k) investments to savings bonds has been floated. But if this seems radical, it is probably possible to speculate, without sounding overly alarmist, that Obama could go much further. If the economy continues to go down, while precious metals rise, then it is conceivable an Obama regime could consider the radical solution of stiff currency controls, or even the confiscation of gold and silver. While another president might not be able to get away with such thing in the 21st century, it is likely that Obama could do so simply because for a good period of time, at least in his first term, he will be beyond criticism for the reasons mentioned above – he is black and he is arriving with what the media terms a "mandate."
Lost in all the mandate analysis is the reality of congressional approval, which is down in the low double digits, and perhaps the single digits from time to time among the American public. Yes, it is true that the only political institution that receives lower ratings than the US presidency these days is the US Congress. This reinforces the reasonable perception that Obama's mandate is more a protest against the previous administration than a vote of confidence in the further radical socialization of the American economy.
As an endnote, wouldn't it be great if when Obama stood up to preach that he wants to "share the wealth", what he really meant was that he wished to disolve the Federal Reserve and free the American public from the shackles of eternal debt? We won't hold our breath.