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The Clinton “Celebration” of the win in an uncontested Florida Campaign that Mrs. Clinton had pledged not to campaign in, reminded me of the most important quote of the Bush Administration:

“When we act,we create our own reality.”

As The Fix reports,

Barack Obama’s campaign put out an e-mail the moment the polls closed in Florida, poking fun at the “beauty contest” nature of the primary. “Obama and Clinton tie for delegates in Florida,” read the missive. “0 for Obama, 0 for Clinton.”

Talk about the pot calling the kettle black? John Malone, who runs one of the least transparent and most muddled collection of media assets, Liberty Media–is accusing Barry Diller of mismanaging IAC, an opaque collection of muddled media assets. Neither company has any rationale behind their strategy other than the personality quirks of the CEO. Liberty is fully invested in digital cable networks like Discovery, which has gone from one network to 15 networks (yes, there is a Discovery Military Channel); putting 15 times the ad inventory on the market, while growing their market by 7%. Anyone who passed through Econ 101, should understand the laws of supply and demand. Pretty soon all these one way cable networks that don’t pass the “who cares test” are going to disappear as Comcast and the other MSO’s make room in their spectrum for lots more 2 Way-On Demand broadband traffic.

As for IAC, Diller is right to break up the firm. It never made any sense in the first place pretending that there was synergy between Lending Tree.com and Ticketmaster.

The essence of Paul Krugman’s latest installment in his endless rant again Obama’s “politics of hope”is that Bill Clinton tried to run as a candidate of hope in 1992 and it got him nothing but scorn.

Whatever hopes people might have had that Mr. Clinton would usher in a new era of national unity were quickly dashed. Within just a few months the country was wracked by the bitter partisanship Mr. Obama has decried.

Krugman’s argument for the last six weeks has been that only a fighting partisan can take on the “malefactors of megawealth”that are wrecking this country, and that Obama’s vision of a Post Partisan Politics is an impossible dream–A Fairy Tale. My problem with Krugman’s op-ed is he assumes we are still in 1992, when the power of the boogie men he cites (Jerry Falwell, Rush Limbaugh, Richard Mellon Scaife) was unchallenged. Today, Falwell is dead and there are more evangelicals following the progressive teachings of Rick Warrenand Jim Wallis then the reactionary preaching of Pat Robertson and Ralph Reed. Right wing financiers like Scaife have enough of their own troubles that they hardly have time to try another Arkansas Project, especially with someone like Barack, who has less of a “bimbo eruption” problem than Bill.

Finally the much vaunted power of Right Wing Talk Radio is beginning to fade in the age of the Internet (just starting in 1992). Rush Limbaugh has enough trouble trying to convince hard core Republicans to vote against McCain and Sean Hannity’s embrace of Rudy Guiliani has not exactly produced results. Republican’s who might have passively nodded in assent to Limbaugh and Hannity screeds, now see that the curtain has been torn back on their Oz like manipulations and they really don’t have all the power they pretended to have. The notion that these blowhards could move the whole country is laughable. I know Krugman has been bloodied by these same forces of the right wing media machine, but he is letting his paranoia impinge on his judgement.

As we suggested on Saturday, it has dawned on the genius’s in the Clinton campaign that maybe Bill should go back on his meds. After two weeks of red-faced outbursts against Obama, a new Bill will emerge this morning.

Senator Hillary Rodham Clinton’s campaign team, seeking to readjust after her lopsided defeat in South Carolina and amid a sense among many Democrats that Mr. Clinton had injected himself clumsily into the race, will try to shift the former president back into the sunnier, supportive-spouse role that he played before Mrs. Clinton’s loss in the Iowa caucuses, Clinton advisers said.

But Democrats said it was not clear whether the effects of Mr. Clinton’s high profile could be brushed away by having him modulate his campaign style. They said Mr. Clinton had upset some of the central themes of Mrs. Clinton’s campaign, including her appeal to women and her assertions that her time in the White House during the 1990s amounted to vital experience rather than a link to a presidency defined as much by scandal and partisan divisions as by its successes on fronts like the economy.

Sunday must have been a depressing day for Team Billary. The morning started with Caroline Kennedy’s tribute to Barack and Frank Rich’s long piece on how Billary could be defeated by John McCain (The Times two most emailed articles of the last 24 hours). By the end of the Sunday talk shows they had learned that Teddy Kennedy was so pissed off about Bill’s low road attacks that he would abandon his traditional pre-convention neutrality and endorse and campaign for Obama. By sunset they knew that Toni Morrison, who had called Bill the “nation’s first Black President”, was going to endorse Barack. Charley Rangel, who is going to be as lonely as the Maytag repair man, in the Black Caucus told the Times Mr. Clinton was going to pull back. “He’s got to,” Mr. Rangel said. “The focus has got to get back on Hillary. For all that he cares about his wife, this has to be her election to win, and it’s become too much about his role.”

Personally, I’m not sure it will be easy for either Mark Penn or Hillary to control Bill. He has developed such a sense of entitlement that the big dog will pee anywhere he wants to. This morning on the Today Show, Clinton sock-puppet Paul Begala (having been banned from CNN) acted as if nothing was wrong comparing Bill to the Patriot’s Tom Brady as the best in the business. Surrounded by syncophants, Bill will never change.  What is interesting to watch is that the Democratic Establishment is slowly recoiling from the Clinton assault. The more the idea of the Billary Co-Presidency became established last week, the more the party elders rethought their support. My guess is that Hillary’s supposed lock on Super Delegates is going to look increasingly tenuous in the coming weeks.

Barack Obama’s campaign manager, David Axelrod, summarized last night’s South Carolina results in classic Chicago style,

“This was a good, old fashioned butt kicking — as we say in this business.”

He credited turnout, which he said approached half a million people and Obama’s broad support, including getting 24% of the white vote, according to exit polls. “He’s bring new people into the party,” Axelrod said, adding, “It’s just a harbinger of things to come.”

As we have maintained, the key to Obama’s Post Partisan appeal is to increase turnout and “grow the party”. Bill and Hillary think you have to fight like a pit bull over the existing voter pool. Barack says bring in the young, the dispossessed and the alienated. That’s what he did in Iowa and South Carolina. The Shaheen Machine in New Hampshire plus the fact that out of state New Hampshire college kids are very conservative (Dartmouth is a base of the college right wing) made that state an outlier. Barack’s remarks to George Stephanopolous on ABC this morning are key:

Savoring his landslide in the South Carolina primary, Sen. Barack Obama (D-Ill.) said Sunday that Bill Clinton is clinging to an outmoded “frame of reference” for racial politics that voters rejected this weekend.

“I don’t think [Bill and Hillary Clinton] were trying to demonize me,” Obama told George Stephanopoulos on ABC’s “This Week.”

“But I do think that there is a certain brand of politics that we’ve become accustomed to, and that the Republican Party had perfected and was often directed against the Clintons, but that all of us have become complicit in — where we basically think anything is fair game.”

Looking at the blue & purple states (Red represents Republican only Primary) on the Tsunami Tuesday map above, a couple of themes resonate from last night’s coalition. First, Barack can take the South (Tennessee, Georgia and Alabama), ceding only Arkansas to the Clinton Machine. In the urban northeast, Obama should be able to fight Clinton to a draw, maybe pulling Massachusetts to his column, especially if Ted Kennedy joins John Kerry and his niece Caroline Kennedy in endorsing Barack. He wins the biggest prize in the Midwest, Illinois and ekes out a victory in the Minnesota Caucus because he gets the Iowa type college student participation.

That leaves the Far West as the battleground. The key will be to build upon the coalition of boomers, their children, black voters and most importantly to make a strong message that the Clinton’s cannot set Hispanics against a Black candidate the way they tried (and maybe succeeded in Nevada). In his victory speech last night Barack set the right tone that he must continue, 

When I hear the cynical talk that blacks and whites and Latinos can’t join together and work together, I’m reminded of the Latino brothers and sisters I organized with, and stood with, and fought with side by side for jobs and justice on the streets of Chicago.  So don’t tell us change can’t happen.   

When I hear that we’ll never overcome the racial divide in our politics, I think about that Republican woman who used to work for Strom Thurmond, who’s now devoted to educating inner-city children and who went out onto the streets of South Carolina and knocked on doors for this campaign.  Don’t tell me we can’t change.  

Yes we can change. 

Obviously if Bill Richardson would get off the fence and support Barack, that would help. As I said last night, it is also time for John Edwards to stop his self serving game of playing Kingmaker in a brokered convention. He should remove himself this week from the race. One more thing, If Bill Clinton insists on keeping himself in the game, Michelle Obama should just get back on the campaign trail and “take him to school.”

UPDATE: As we hoped, Ted Kennedy will endorse Obama. On This Week George Will has made the point that Obama’s pitch is that he could attract enough Republicans and Independants to produce a “Landslide Election” like 1932 or 1964 after which transformative legislation (Social Security, Civil Rights, Medicare) gets passed. Will makes the point that Hillary Clinton has a ceiling of 51% of the vote.

The choice in this election is not between regions or religions or genders.  It’s not about rich versus poor; young versus old; and it is not about black versus white. 

It’s about the past versus the future. 

                                -Obama’s South Carolina Victory Speech 

I’ll have a lot more to say later, but three things are really clear from the exit polls in South Carolina. Bill Clinton as a legitimate attack dog is finished. He may not know this yet, but the fact that young white voters (as we had hoped) rejected his racial trope alongside the 80%+ rejection by black voters, says to me he should retire quietly to Ron Burkle’s mansion (above) in La Jolla, California and take up surfing for the rest of the election. Hillary is going to have to fight this campaign on her own and Bubba better go home. The problem of course is that Hillary’s campaign is run by Bill’s political team. Who is going to tell him to shut up? Who showed up first on camera after the defeat? Bill Clinton rambling on about his Presidential Library, his Presidency and his office in Harlem. They can’t control him.

Second, its time for John Edwards to get out of this campaign. I know he has nothing else to do with his life, since he can’t go back to the hedge fund business, but his and Elizabeth’s dream that they can play some sort of kingmaker role in a brokered convention is truly sick. All he does is split the anti-Hillary vote and we need a clear choice for the party between reform or restoration. Hillary slimed Edwards with Robocalls yesterday and he should know he is just a distraction. All of the ”No Surrender” crowd like Daily Kos, Paul Krugman and My DD that have sustained John Edwards fantasy that if William Jennings Bryant were alive today he would live in a 30,000 sqare foot mansion with indoor basketball court, should now ask him to retire from the stage. For him to pretend in his “concession speech” that he was the only voice for the dispossessed in this country was laughable. Why does he think Barack beat him 57-17, after Edwards outspent Obama? My guess is the Obama beat Edwards by a larger margin in households 2X the poverty line and below. The very people Edwards claims to speak for.

Third, Black voters are angrier than the Clintons think. My own view on that is informed by the great blog Jack and Jill Politics. Here is a sample from a recent post.

I’m glad the ugly has come out. I’m glad Bill Clinton’s face is glowing so brightly and so red; the better to see this campaign by. I’m glad Bill Clinton is getting down and dirty and using his considerable political capital to smear a great presidential candidate. I’m glad The Clintons are calling in favors from their black beholden elected officials and power brokers. Because every time they do, we get to dig up another little nugget which has us questioning the entire premise of “The Clinton Administration.”

And I’m glad Hillary keeps moving closer and closer to Bill, closer to that co-presidency. Keep running on “experience.” Just don’t get mad when we help remind people what that experience really was, and why many of us never want to see it return.

After a day when 80% of the black vote went to Barack, Charley Rangel and all the other “black beholden elected officials” are going to have to look again at Chris Rock’s Obama introduction at the Apollo Theater. As he cautioned the assembled Black Politicians,

You’ll be real embarrassed if Barack won big and you weren’t down with it. You be saying , “What was I thinkin’, I had the White Lady?”

A reporter called me yesterday asking why movies with apocalyptic messages like I Am Legend and Cloverfield are doing so well. My guess is that dystopian science fiction always does well when there is a lot of popular anxiety. Currently 72% of the public feels the country is “on the wrong track”(see below). In this mindset, imagining that New York will be a wasteland in the future is not as big a stretch. The last time this sort of movie worked for the Zeitgeist is when Blade Runnerwas released in 1982. As Floyd Norris noted  about that year,

(Consume confidence fell) in February 1982, when the Dow had fallen 15.4 percent over the previous year and housing starts were more than a third below their level of the two prior years. Consumer confidence stayed low for a year, not climbing over 62.5 until the next February.

 

So what is the next trend coming down the movie pipeline? Well if Variety’s Todd McCarthy  (reporting from Sundance) is right, we better bring out the old Bob Dylan song, “Everybody Must Get Stoned.”

It seemed that nearly every film I saw featured characters very partial to getting high, or made drugs a significant part of their plots.

Maybe this is the secret only young, independent filmmakers knew, I thought. Instead of trudging off to make films about how awful the Iraq War is, as numerous older Hollywood directors (including Redford) did last year, the kids realized no one wanted see pictures like that. Instead, perhaps they suspected that young audiences might well line up for films featuring characters reacting to the world’s horrors in the same manner they were, by medicating themselves.

Part of me has seen this movie before, but my brain refuses to accept that 2008 will be a repeat of 1968. After the assassinations of Martin Luther King and Bobby Kennedy in the spring of 1968, a lot of my generation that had been incredibly politically involved retreated to the comforts of music, art, film and to a certain the palliative comfort of smoking pot. I have written recently of the potential alienation of a whole new generation of political activists turned off by the bareknuckle politics of the Clinton’s and the Romney’s of this world. In a few weeks time we will begin to know if the movie makers of Sundance are on to something, or whether the kids will prove them wrong. Although I would never attempt to equate low youth voter turnout with high youth drug use, the question is more symbolic. In Iowa the young people came out and voted and to some extent it appears in New Hampshire they did not. My guess is that Obama’s success or failure on Super Tuesday will depend on whether he can repeat his Iowa success with the college voter.

Let me see if I understand this. The U.S. Treasury is going to borrow $150 Billion from the Chinese and other T-Bill buyers and mail checks for that total amount to anyone earning less than $75,000 a year. But because the IRS is too busy dealing with tax returns, the earliest the money could arrive in your mailbox is June. At that point consumers are going to do one of two things with the $600 check. Either use it to pay down their maxed out credit card or go out and spend it on some cheap Chinese manufactured goods at WalMart.

Assuming that Roubini and other smart economists are right, by June unemployment will be one of the biggest problems facing the nation. But in this plan, not a single American job will have been created, though some Chinese jobs will probably have been saved. You will say: What about those WalMart clerks jobs? I will say: WalMart did not get to be the low price leader by expanding employment in a downturn.

Imagine on the other hand if the government said it was creating immediately an Alternative Energy Investment Fund that would be sent to the states in the form of per capita Block Grants (i.e. California got more money than Rhode Island) that would need to be matched by local public/private partnerships to create businesses around alternative energy creation. Then we would have created $300 billion in job creating businesses that would have had a real effect long after the $600 checks have been sent to China.

In the space of four minutes I heard Ron Paul say the greatest problem we have, is that we are spending $1 Trillion per year on our foreign military operations, and we are borrowing that money from the Chinese. Then John McCain says in his administration he’s going to cut spending so we don’t have to borrow from the Chinese in a McCain Administration. Good luck finding another customer with $800 billion in dollars that need to be parked in treasuries, especially when you also say we could be in Iraq for “one hundred years”.

Then Mike Huckabee noted that 4 months ago they had a debate on CNBC in which they were all asked about the state of the economy. Romney, McCain, Thompson, Guiliani all said the economy was in great shape. Only Huckabee said that from the point of view of the lower middle class, things were not going well–and that only he said so. Now he is saying I’m the only one who told the truth on the economy.

What a wierd race the Republicans are looking at? Their savior of the moment is John McCain– stuck in some mid 70′s notion that embraces globalization but has not clued into the effect of banning the Chinese Government from bidding on U.S. Treasuries (see above). Yikes! Gomer Pyle.

Huckabee’s populism is becoming more eloquent. He could increase his base beyond the church folk to the pissed off Reagan Democrats who stuck with the Republican Brand, and now are deserting it (The Generic Party preference is more than +14 for the democrats).

Ron Paul is like the jester in a Shakespearean Play. He gets to “say truth to power”, but only if they can consider him no real threat to their power. Paul has enough money, thanks to the libertarian nature of the Internet community, that he can stay in until the convention just to have a platform for his ideas.

The basic economic problem we will face in the next few years is that the Federal system no longer works correctly. In the same way that giant corporations like G.E., News Corp and Berkshire Hathaway have flattened their organizations and shrunk their corporate staff, we need to redesign the way we govern, tax and spend. The States are without sufficient taxing power to provide basic services for their people, as every single state government is in a fiscal crisis, exacerbated by the inability to keep capturing falling property tax revenues from county governments. Because the strength of the progressives resides in the State Houses of the largest states that have the greatest budget crisis, the Democratic Party needs to return to its roots and reexamine the philosophy of its founder Thomas Jefferson. Jefferson said, “The true theory of our Constitution is that the states are independent as to everything within themselves, and united as to everything respecting foreign nations.” 

Since most of the concerns of citizens are local matters: Schools, Police, Housing, Power & Water, Public Transportation, and Health Care, these should be funded at the local level. Even though the Federal Government provides block grants to the States for these concerns, much of the tax revenue gets wasted in the Federal Bureaucracy. The New Federalist solution is to change the tax structure. Federal taxes should be radically cut, so that State taxes could rise to pay for the real needs of citizens. This would have two effects. The States would have sufficient taxing authority to pay for decent services, health care and infrastructure. Therefore local property taxes would not be hijacked by state governments and could remain at the county level to fund improved schools and local infrastructure. California currently sends $220 Billion a year in individual and corporate taxes to Washington and only $43 Billion to the state and the cities. California has a history of leading tax revolts, but I don’t profess to know how this shift could be accomplished short of a constitutional convention.

 The Federal Government would have to drastically shrink the departments of Education, Agriculture, Health and Human Services, Housing and Urban Development, Commerce, Transportation and Labor which are 100% duplicative of state bureaucracies. However, the Federal taxes could more than adequately fund the needs of the Departments of Defense, State, Treasury, Veterans Affairs and Homeland Security as well as its Social Security and Medicare benefits. The addition of Tom Friedman’s Patriot Energy Tax, could also make up the shortfall in federal revenues and provide funds for common energy research.

            Although the negative progressive reaction to the words “States Rights” was formed during the Civil Rights era, citizen uninterested in living in Dick Cheney World, should look to the heartening developments where Democratic state legislators and regulators are taking on corporate power in ways the Bush administration is unwilling to do. Let us assume that the United States Treasury will not be able to continue to borrow unlimited amounts of money from the rest of the world and repay those debts in falling dollars. If aggregate demand continues to fall as Roubini suggests, then state spending on infrastructure may be the best investment we as a society can make in our future. We cannot continue to be laggards in the digital future (see chart below) and expect to be competitive and so there are innovative public-private initiatives that could restore our competitive edge. Personally if I could ride a 250 MPH train like the TGV (top photo) from LA to San Francisco in 2 hours and avoid the airport nightmare and all the pollution, I would. But big projects like high speed rail that would put thousands of Californians to work are not possible without public and private sector cooperation. Next we will look at the role of the digital infrastructure in building a sustainable new model for growth in a deleveraging world.