It takes an effort these days to recall the thrill that surged through the world when Barack Obama was elected America’s president. It was not only that he was the first black person to assume the globe’s greatest office. He seemed to be preternaturally thoughtful, dignified and decent; a man who could heal America’s wounds at home and restore its reputation abroad. Though too many were swept away in a collective longing to see hope triumph over experience, none of it seemed wholly unreasonable at the time. Yes, many thought, he can.

Two years later, the magnitude of the let-down is palpable everywhere; and at home the president is caught in a vice. To many on the left, he is a cowardly compromiser, whose half-baked plans to get America back to work have done little to help those who voted for him, and whose health-care and financial reforms were gutted at the behest of special interests. To many on the right, he seems a doctrinaire spendthrift who has squandered trillions of dollars on wasteful bureaucracy, mortgaging the future while failing to grapple with the present. To centrists who backed him, including this newspaper, he has been a disappointment, his skills as a president falling far short of his genius as a campaigner.

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Two years after America voted overwhelmingly for change, polls, analysts and an angry election season suggest its voters are about to do so again.

Amid universal expectations of big Republican gains in Congress, Tuesday’s balloting is also likely to tip the scales of power in states across the country, and with them, partisan prospects for the elections of 2012 and the balance of the century’s second decade.

In Pennsylvania, the high-profile, high-spending races for governor and senator have been unavoidable to anyone with a television or radio. Both are at the top of the national parties’ priorities. But in an election in which the GOP needs 39 seats to wrest the speaker’s gavel from Nancy Pelosi, a spotlight has also cast Pennsylvania’s U.S. House contests in sharp relief. In a chamber in which 90 percent of incumbents typically win re-election, nearly half of Pennsylvania’s seats feature competitive contests.

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A number of you know I (a) like politics and (b) follow it quite closely. From time to time it crops up as an element of focus on the blog, and the midterm elections 2010 is one of those times. There is no flawless indicator, but my favorite as some of you may remember is Intrade, since it involves real people and real money (and it has a very fine track record). By far the most revealing graph I have found is this one:

What does this mean? Think anti-incumbency and a disgust with business as usual in Washington at a minimum–KSH.

Over the next two years, Obama will have to show that he is a traditionalist on social matters and a center-left pragmatist on political ones. Culturally, he will have to demonstrate that even though he comes from an unusual background, he is a fervent believer in the old-fashioned bourgeois virtues: order, self-discipline, punctuality and personal responsibility. Politically, he will have to demonstrate that he is data-driven ”” that even though he has more faith in government than most Americans, he will relentlessly oppose programs when the evidence shows they don’t work.

… Obama will need to respond to the nation’s fear of decline. The current sour mood is not just caused by high unemployment. It emerges from the fear that America’s best days are behind it. The public’s real anxiety is about values, not economics: the gnawing sense that Americans have become debt-addicted and self-indulgent; the sense that government undermines individual responsibility; the observation that people who work hard get shafted while people who play influence games get the gravy. Obama will have to propose policies that re-establish the link between effort and reward.

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Jay Leno on undecided voters: “Do we vote for the people who got us into this mess, or the people who can’t get us out of this mess?”

Having served in Congress for 16 years, I can attest from personal experience to the perverse influence that money has in our democratic process.

It isn’t just a question, as Mr. [David] Brooks advocates, as to whether money is the deciding factor in election outcomes. The effect of the money flow on influencing the way members of Congress vote on issues that motivate campaign donors to give is tremendously pernicious. Few members will bite the hand that feeds them.

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The bailout became law because the legislative branch was stampeded with the threats of certain doom. It vested unprecedented economic authority in a single unelected official, the secretary of the Treasury. And it used public funds to insulate well-connected private actors from the consequences of their recklessness. Its creation short-circuited republican self-government, and its execution created moral hazard on an epic scale. It may have been an economic necessity, but it felt like a travesty nonetheless.

This is why it should be possible to both sympathize with the politicians who voted for the bailout and welcome their rebuke at the ballot box. Faced with extraordinary circumstances ”” wars, natural disasters, economic crises ”” political leaders will always incline toward a blunt utilitarianism, in which the need for stability trumps more high-minded ideals. But after a crisis has passed, it’s immensely important that the ideals reassert themselves, so that the moral compromises made amid extraordinary times aren’t repeated in ordinary ones as well.

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The United Methodist Church’s public policy agency can advocate on causes beyond alcoholism and temperance without violating the terms of its endowment, a District of Columbia judge ruled on Wednesday (Oct. 6).

Superior Court Judge Rhonda Reid Winston’s decision is the latest twist in a long-running debate in the UMC about how its General Board of Church and Society is funded and the positions it takes on political issues.

“This matter has been an enormous, unnecessary distraction,” Jim Winkler, the board’s chief executive, said in a statement. The board has for decades fought “predatory enterprises” such as alcohol, tobacco and gambling, he said.

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Bad news isn’t always a surprise. But knowing it’s coming doesn’t always help, either. And now that, as expected, South Carolina now faces a huge new bill due to Obama-Care, our state faces a terrible dilemma.

The president and his allies in Congress promised that their massive health care overhaul would extend coverage to roughly 30 million previously uninsured Americans. The bill’s critics, including S.C. Gov. Mark Sanford, warned that the states would have to cover large new tabs due to the bill’s vastly increased number of people eligible for Medicaid.

The critics were right. Tuesday’s Post and Courier reported that the ObamaCare Medicaid mandate is projected to cost our state “nearly $1 billion over the next decade, even with the federal government covering at least 90 percent of the cost.”

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As Obama administration officials put into place the first major wave of changes under the health care legislation, they have tried to defuse stiffening resistance ”” from companies like McDonald’s and some insurers ”” by granting dozens of waivers to maintain even minimal coverage far below the new law’s standards.

The waivers have been issued in the last several weeks as part of a broader strategic effort to stave off threats by some health insurers to abandon markets, drop out of the business altogether or refuse to sell certain policies.

Among those that administration officials hoped to mollify with waivers were some big insurers, some smaller employers and McDonald’s, which went so far as to warn that the regulations could force it to strip workers of existing coverage.

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Eleven months out of the year, the parishioners of New York City can safely attend Sunday services with no reasonable fear of interlopers, television cameras or quizzical members of the press.

But this is the electoral playoff season of October, when aspiring statesmen show up on doorsteps more often than jack-o’-lanterns. That means politicians are descending on the pews.

By noon on Sunday, three churches along a single two-mile stretch of Bedford-Stuyvesant, Brooklyn, had played host to three of New York State’s more prominent elected officials: the state’s attorney general and comptroller, both of whom are running for statewide office, and the mayor of New York City.

Coincidence? In campaigns, there may be no such thing.

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“We basically have two bankrupt parties bankrupting the country,” said the Stanford University political scientist Larry Diamond. Indeed, our two-party system is ossified; it lacks integrity and creativity and any sense of courage or high-aspiration in confronting our problems. We simply will not be able to do the things we need to do as a country to move forward “with all the vested interests that have accrued around these two parties,” added Diamond. “They cannot think about the overall public good and the longer term anymore because both parties are trapped in short-term, zero-sum calculations,” where each one’s gains are seen as the other’s losses.

We have to rip open this two-party duopoly and have it challenged by a serious third party that will talk about education reform, without worrying about offending unions; financial reform, without worrying about losing donations from Wall Street; corporate tax reductions to stimulate jobs, without worrying about offending the far left; energy and climate reform, without worrying about offending the far right and coal-state Democrats; and proper health care reform, without worrying about offending insurers and drug companies.

“If competition is good for our economy,” asks Diamond, “why isn’t it good for our politics?”

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The U.S. healthcare reform law will worsen a shortage of physicians as millions of newly insured patients seek care, the Association of American Medical Colleges said on Thursday.

The group’s Center for Workforce Studies released new estimates that showed shortages would be 50 percent worse in 2015 than forecast.

“While previous projections showed a baseline shortage of 39,600 doctors in 2015, current estimates bring that number closer to 63,000, with a worsening of shortages through 2025,” the group said in a statement.

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The U.S. government will face pressure to bail out struggling states in the next 12 months, said Meredith Whitney, the banking analyst who correctly predicted Citigroup Inc.’s dividend cut in 2008.

While saying a bailout might not be politically viable, Whitney joined investor Warren Buffett in raising alarm bells about the potential for widespread defaults in the $2.8 trillion municipal bond market. She said state and local issuers have taken on too much debt and that the gap between public spending and revenue is unsustainable.

“People will think the federal government will bail these states out,” Whitney, 40, the founder of Meredith Whitney Advisory Group Inc., said in an interview on Bloomberg Television’s “In the Loop.” “It’s going to be an incredibly divisive issue.”

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The House of Representatives by a wide margin passed legislation to penalize China’s foreign-exchange practices, sending a powerful warning to Beijing but risking a response that could harm U.S. companies and consumers.

The measure would allow, but not require, the U.S. to levy tariffs on countries that undervalue their currencies, which makes their goods cheaper relative to American products. A majority of Republicans lined up with Democrats to pass the bill on a 348-79 vote, highlighting lawmakers’ long-simmering frustration with Chinese trade practices as well as their sensitivity to the faltering U.S. economic recovery with an election looming.

The vote marks the strongest trade measure aimed at China to make it through a chamber of Congress after more than a decade of threats by lawmakers. But despite the broad support Wednesday, dim Senate prospects make it unlikely the measure would become law this year.

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Bob Moon: What’s the rush? That’s what investment consultant Chris Whalen was asking today at Institutional Risk Analytics. He says the government seems to be in a hurry to get the word out that it’s aiming to start unloading its $49 billion in AIG shares within the coming year. Whalen warns the market isn’t ready and won’t support it.

Chris Whalen: We’re trying to do a public offering of shares in a company that can’t stand by itself, that has to have government support. That’s not going to work.

Flooding the market with shares, he cautions, is a money-losing proposition. He says it’s the same catch-22 the government faces with General Motors, and has already run up against trying to sell its Citigroup shares. Gauging by AIG’s total market capitalization — the value of all outstanding shares — he argues the idea of taxpayers making all their money back is pie-in-the-sky.

Whalen: The market cap of this company is single digits. They owe us $100 billion, right? So what the market’s telling you is that the company is worth, today, a tenth of what they owe us.

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If there is one area where the Obama administration and the American people seem in fundamental agreement, it is in their contempt for Washington.

Not, presumably, for the actual place of schools and neighborhoods and monuments but for the conceptual Washington, the symbolic city. Chief of Staff Rahm Emanuel, with typical delicacy, calls it “[expletive]-nutsville,” a judgment that earthier Tea Party activists might share. Senior adviser David Axelrod has announced his spring departure. “I think he’s not having fun,” says a White House colleague. A recent profile claims that Axelrod’s idealism was disappointed by “a ferociously stubborn, possibly irredeemable system.” And Barack Obama himself constantly complains about the “politicking” and obstructionism of the capital city, where they “talk about me like a dog.” Much of the White House senior staff seems to long for a purer, simpler, more wholesome kind of politics . . . in Chicago.

The tension here is obvious. Even while depicting Washington as a flawed, fractured, hopeless mess, the Obama administration has sought to increase the influence of Washington over America’s economy and health-care system. In the Obama era, Washington helps run auto companies, oversees some corporate salaries, imposes an individual mandate to purchase health insurance, and seeks to rationalize the health-care system with a profusion of new boards, offices, agencies and commissions — estimates vary from 47 to 159 new bureaucratic entities.

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On paper, I should be a progressive voter. I am an agnostic. I am a woman in my 20s with an Ivy League graduate degree and liberal arts background.

But I’m a conservative. I vote for Republicans because I believe they have the best strategies for where the country should be headed fiscally, militarily and culturally.

Secular conservatives like me are in a bind. We want to work with religious conservatives because we agree with them on most issues. We respect the ethical contributions from many faith traditions, which inspire millions to seek the public good. But we’re troubled by the religious right’s dominance over the conservative movement, a trend that repels rational, independent-minded folks who see religious zealotry as anathema to the Founding Fathers’ pluralistic vision.

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It is a very scary picture.

The problem with the business cycle under this analysis, you’ll notice, is not the bust ”” it’s the boom. That’s when the bad investment decisions are made, largely because political influence in the markets (housing policy, tax breaks, artificially cheap money and other interest-rate subsidies, risk subsidies, etc.) distorts economic calculation.

Which brings us back to the entitlements. It’s easy to say: Well, we’ll just raise the retirement age, or cut benefits, or means-test them, or raise taxes on the wealthy who receive them (which amounts to means-testing, but Democrats like that version better). And, yes, that probably is what we will do, eventually. But that does not get us out of the economic pickle: People have been making decisions for years and years ”” decisions about saving, investing, consuming, working, and retiring ”” based at least in some part on what are almost certainly faulty assumptions about what sort of Social Security, Medicare, and other benefits they will receive when they retire. When those disappear, a lot of consumption is going to have to be forgone ”” and a lot of capital dedicated to producing those goods and services for consumption will be massively devalued. Businesses will have to retrench, probably in a way that is more disruptive and more expensive than the housing-bubble recession necessitated.

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Efforts to tame America’s ballooning budget deficit could soon confront a daunting reality: Nearly half of all Americans live in a household in which someone receives government benefits, more than at any time in history.

At the same time, the fraction of American households not paying federal income taxes has also grown””to an estimated 45% in 2010, from 39% five years ago, according to the Tax Policy Center, a nonpartisan research organization.

A little more than half don’t earn enough to be taxed; the rest take so many credits and deductions they don’t owe anything. Most still get hit with Medicare and Social Security payroll taxes, but 13% of all U.S. households pay neither federal income nor payroll taxes.

“We have a very large share of the American population that is getting checks from the government,” says Keith Hennessey, an economic adviser to President George W. Bush and now a fellow at the conservative Hoover Institution, “and an increasingly smaller portion of the population that’s paying for it.”

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Ask yourself: What made our Greatest Generation great? First, the problems they faced were huge, merciless and inescapable: the Depression, Nazism and Soviet Communism. Second, the Greatest Generation’s leaders were never afraid to ask Americans to sacrifice. Third, that generation was ready to sacrifice, and pull together, for the good of the country. And fourth, because they were ready to do hard things, they earned global leadership the only way you can, by saying: “Follow me.”

Contrast that with the Baby Boomer Generation. Our big problems are unfolding incrementally ”” the decline in U.S. education, competitiveness and infrastructure, as well as oil addiction and climate change. Our generation’s leaders never dare utter the word “sacrifice.” All solutions must be painless. Which drug would you like? A stimulus from Democrats or a tax cut from Republicans? A national energy policy? Too hard. For a decade we sent our best minds not to make computer chips in Silicon Valley but to make poker chips on Wall Street, while telling ourselves we could have the American dream ”” a home ”” without saving and investing, for nothing down and nothing to pay for two years. Our leadership message to the world (except for our brave soldiers): “After you.”

So much of today’s debate between the two parties, notes David Rothkopf, a Carnegie Endowment visiting scholar, “is about assigning blame rather than assuming responsibility. It’s a contest to see who can give away more at precisely the time they should be asking more of the American people.”

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During the recession, political and business leaders have held out the promise that American advances, particularly in green technology, might stem the decades-long decline in U.S. manufacturing jobs. But as the lighting industry shows, even when the government pushes companies toward environmental innovations and Americans come up with them, the manufacture of the next generation technology can still end up overseas.

What made the plant here vulnerable is, in part, a 2007 energy conservation measure passed by Congress that set standards essentially banning ordinary incandescents by 2014. The law will force millions of American households to switch to more efficient bulbs.

The resulting savings in energy and greenhouse-gas emissions are expected to be immense. But the move also had unintended consequences.

Rather than setting off a boom in the U.S. manufacture of replacement lights, the leading replacement lights are compact fluorescents, or CFLs, which are made almost entirely overseas, mostly in China.

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Health insurers say they plan to raise premiums for some Americans as a direct result of the health overhaul in coming weeks, complicating Democrats’ efforts to trumpet their signature achievement before the midterm elections.

Aetna Inc., some BlueCross BlueShield plans and other smaller carriers have asked for premium increases of between 1% and 9% to pay for extra benefits required under the law, according to filings with state regulators.

These and other insurers say Congress’s landmark refashioning of U.S. health coverage, which passed in March after a brutal fight, is causing them to pass on more costs to consumers than Democrats predicted.

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The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid.

Over the last 18 months, the administration has rolled out just about every program it could think of to prop up the ailing housing market, using tax credits, mortgage modification programs, low interest rates, government-backed loans and other assistance intended to keep values up and delinquent borrowers out of foreclosure. The goal was to stabilize the market until a resurgent economy created new households that demanded places to live.

As the economy again sputters and potential buyers flee ”” July housing sales sank 26 percent from July 2009 ”” there is a growing sense of exhaustion with government intervention. Some economists and analysts are now urging a dose of shock therapy that would greatly shift the benefits to future homeowners: Let the housing market crash.

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The U.S. economy will eventually rebound from the Great Recession. Millions of American workers will not.

What some economists now project ”” and policymakers are loath to admit ”” is that the U.S. unemployment rate, which stood at 9.6% in August, could remain elevated for years to come.

The nation’s job deficit is so deep that even a powerful recovery would leave large numbers of Americans out of work for years, experts say. And with growth now weakening, analysts are doubtful that companies will boost payrolls significantly any time soon. Unemployment, long considered a temporary, transitional condition in the United States, appears to be settling in for a lengthy run.

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This coming Monday marks the second Labor Day of the Obama administration, and the American work force has little to show for it other than higher unemployment, stagnant wages, last year’s $1.4 trillion federal deficit, this year’s $1.3 trillion deficit, and next year’s anticipated $1 trillion-plus deficit. Oh, and a slew of new federal regulations and programs””like ObamaCare””that will make it even more expensive for businesses to retain current workers, much less create new jobs.

No wonder American confidence in the future is evaporating. And when confidence crumbles, consumers won’t spend, lenders won’t lend, investors won’t invest, and businesses won’t hire.

Today we see businesses husbanding cash rather than hiring. Nonfinancial S&P 500 companies are sitting on a record $837 billion. Personal savings are increasing dramatically, to over 6% of income today compared to barely 1% in 2005. Those small businesses still willing to take on more debt to expand are having tremendous difficulty finding credit.

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…the most effective tax cut for putting people back to work quickly is one that businesses and households get only if they spend money. Last year’s cash-for-clunkers program was an example. So was a recent bipartisan tax credit for businesses that hired workers who had been unemployed for months. Perhaps the broadest example is a temporary cut in the payroll tax for businesses, which reduces the cost of employing people.

Any of these steps would increase the budget deficit, obviously. But relative to the multitrillion-dollar, Medicare-driven, long-term deficit, a temporary tax cut costing a couple of hundred billion dollars isn’t significant. The more pressing problem today, by far, is the weak economy.

The great historical lesson of financial crises is that governments are usually not aggressive enough in responding. That was Japan’s mistake in 1990s, Herbert Hoover’s in the early 1930s and even Franklin Roosevelt’s in the mid-1930s.

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It increasingly seems as if the policy makers attending like physicians to the American economy are peering into their medical kits and coming up empty, their arsenal of pharmaceuticals largely exhausted and the few that remain deemed too experimental or laden with risky side effects. The patient ”” who started in critical care ”” was showing signs of improvement in the convalescent ward earlier this year, but has since deteriorated. The doctors cannot agree on a diagnosis, let alone administer an antidote with confidence.

This is where the Great Recession has taken the world’s largest economy, to a Great Ambiguity over what lies ahead, and what can be done now. Economists debate the benefits of previous policy prescriptions, but in the political realm a rare consensus has emerged: The future is now so colored in red ink that running up the debt seems politically risky in the months before the Congressional elections, even in the name of creating jobs and generating economic growth. The result is that Democrats and Republicans have foresworn virtually any course that involves spending serious money.

The growing impression of a weakening economy combined with a dearth of policy options has reinvigorated concerns that the United States risks sinking into the sort of economic stagnation that captured Japan during its so-called Lost Decade in the 1990s.

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“The economy is going to limp along for the next few months,” said Gus Faucher, an economist at Moody’s Analytics. There’s even a one in three chance it could slip back into recession, he said.

Many temporary factors that boosted the economy earlier this year are fading. Companies built up their inventories after cutting them sharply in the recession to match slower sales. The increase provided a boost to manufacturers, but now many companies’ stockpiles are in line with sales and don’t need to grow as much. In addition, the impact of the government’s $862 billion fiscal stimulus program is lessening. That leaves the private sector to pick up the slack. But businesses are cutting back on their spending on machines, computers and software, according to a government report earlier this week. And the housing sector is slumping again after a popular home buyer’s tax credit expired in April.

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