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President Barack Obama holds up a pen as he speaks about the economy and the deficit, Friday, Nov. 9, 2012, in the East Room of the White House in Washington. (Carolyn Kaster/AP)
President Barack Obama holds up a pen as he speaks about the economy and the deficit, Friday, Nov. 9, 2012, in the East Room of the White House in Washington. (Carolyn Kaster/AP)

U.S. ELECTION

Obama win marks sharp break from Reagan legacy Add to ...

When Barack Obama was declared the victor in the U.S. presidential race, the immediate reaction of some was, so what has changed?

After a long, nasty campaign whose cost was roughly similar to the gross domestic product of sub-Saharan Africa, Mr. Obama is still president. The Republicans still control the House of Representatives and the Democrats kept the Senate. Legislative gridlock will persist. It all seemed much ado about nothing.

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But when the voter breakdown trickled out, we realized that the Democratic incumbent’s rather thorough trouncing of Republican rival Mitt Romney was anything but trivial. Instead, it looks like a pivotal moment in U.S. electioneering. The Great Republican con game, which had persuaded millions of Americans to vote against their economic interests since the start of the Reagan era, in 1980, is finally breaking down.

It looks like Mr. Obama’s efforts to label Mr. Romney a bloodless plutocrat scored some points. This is bad news for the country’s richest 1 per cent, who had benefited enormously from the great warping of the U.S. economy, in which financial capitalism – speculation, to use another term – took precedence over efficient markets dominated by manufacturing. It saw the rigging of tax codes to benefit the rich more than the poor. It saw sweeping deregulation that gave birth to creative financial products, such as collateralized debt obligations, that mere mortals (Warren Buffett among them) could not understand and ultimately turned toxic and biblically destructive.

To be sure, former Democratic president Bill Clinton was no slouch when it came to deregulation and making the country safe for Wall Street. But the momentum started before him and went into overdrive during the bubble years of George W. Bush.

The election was Mr. Obama’s to lose, which makes the Republicans’ defeat all the more compelling. While the United States was well removed from recession in the election year, the recovery has been weak and uneven, to the point that it was news to many Americans that the downturn was officially over. The jobless rate of 7.9 per cent had been coming down – it was 8.3 per cent at the start of the year – but remained high enough to allow Mr. Romney to claim that the Obama administration had botched the economic management file (never mind that Mr. Obama won Ohio, in part because the bailouts of General Motors and Chrysler were “interventionist” policies that voters in that state adored).

Yet, Mr. Romney still lost.

The white vote traditionally goes to the Republicans, but today some 28 per cent of American voters are non-white, a threefold increase since the early 1970s. Mr. Obama was a solid hit among black, Latino and gay voters. He also won over the under-30 crowd, 55 per cent of female voters and the majority of unmarried women.

As the number of non-white voters surges – Hispanics are the fastest growing ethnic vote in the United States – the numbers will increasingly shift in the Democrats’ favour, unless the Republicans reinvent themselves as a darker-shade-of-white party. “The angry old white guys [who vote Republican] are dying off faster than anyone realizes,” said Marshall Auerback of New York’s Institute for New Economic Thinking.

Mr. Romney would have won the election a generation or two ago. Demographically speaking, a lot has changed since then, which makes you wonder whether Republican campaign genius Karl Rove has been asleep for the last four years.

It now appears that the Democrats can rely on a broad, and broadening, coalition of voters who are not enthralled with the social and economic agenda of the Republicans. Mr. Romney wanted to drop taxes for “job creators.” Mr. Obama campaigned for higher taxes on the wealthy and vowed to veto any fiscal proposal that did not allow the top tax rate for those earning more than $250,000 (U.S.) to rise to 39.6 per cent from 35 per cent.

Republicans have spent decades telling Americans that the country can un-tax its way to endless prosperity. It didn’t quite work that way. The rich got very rich and the income gap between the wealthy and everyone else widened to obscene proportions. Infrastructure and schools fell apart. Budget deficits exploded in the Bush years and kept rising in the first Obama term, when spending to rescue the economy, financial institutions and the car makers became the necessary economic strategy.

Mr. Obama was smart enough to know he had to appeal to non-plutocrats and to those who think that Obamacare is a good thing. He won over voters who think that higher taxes for the rich can translate into lower taxes for the threatened middle class. He won over voters who worry that the power grab by the super-rich has served Wall Street too well for the country’s own good.

It wasn’t as if the super-rich and the Wall Street bankers suffered in Mr. Obama’s first term, thanks in part to the rescues financed by the Troubled Asset Relief Program launched in the dying days of the Bush presidency. But they could suffer in Mr. Obama’s second term as his administration tries to re-balance the economy away from the Wall Street speculation-and-bubble machine.

If Mr. Obama had won a razor-thin victory, you could draw different conclusions, that Mr. Romney’s loss was the result of a few slip-ups or bad luck as opposed to something fundamental. But Mr. Obama won a convincing victory. The 1-per-centers and the social conservatives and the angry white guys who are still kicking have every reason to worry.

Follow on Twitter: @ereguly

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