Posted by Ralph Munyan on 11/15/09

• ASIA NEWS; NOVEMBER 13, 2009
• http://online.wsj.com/article/SB10001424052748703683804574533843334412818.html

A Superpower Stirs

600 years after bringing home its armada, will China once again stride the world's stage?

By ANDREW BROWNE

Beijing

The wooden treasure ships commanded by Admiral Cheng-ho, a Chinese Ming dynasty eunuch, were among the largest vessels ever built, nautical monsters that by some accounts carried nine masts.

Bigger by far than the ships of Christopher Columbus that set out decades later for the New World, they were the flagships of an armada that ventured as far as the east coast of Africa on seven naval expeditions. The first embarked in 1405 bearing some 30,000 men; the seventh in 1430.

Then the expeditions suddenly stopped. Cheng-ho's adventures had helped to ruin Ming finances. The emperors put a halt to sea trade and closed the shipbuilding industry; China looked inward for the next four centuries. The expeditions to the "Western Seas" were a glorious aberration.

Now, at the dawn of the 21st century, the world is looking to China to assume an unfamiliar role of global leadership. At a time when American prestige is fading, China's status is rising.

Jon Krause

President Barack Obama arrives in China next week seeking help on everything from climate change to North Korea's nuclear threat. At meetings of the Group of 20 nations, China's opinions are urgently sought on issues such as banking reform and executive pay. Persuading China to take a lead will be a challenge.

History has done little to prepare this country for the kind of leadership that an anxious international community seems so ready to thrust on it.

Unlike the U.S., China doesn't aspire to remake the world: Its longstanding mantra is "nonintervention" in the internal affairs of other countries. Even under Chairman Mao's reign, China never sought world domination, like the former Soviet Union-although it stirred up revolution in other parts of Asia and beyond. Now that China has largely discarded socialism, it's hard to find a definition for what remains of its ideology, values and world view.

Recently, at a dinner in a Beijing restaurant of a group of young Chinese professionals-several of them Communist Party members-somebody raised a question that should have been simple to answer. Can anybody list the "Three Represents"? The reference was to the political theory of former President Jiang Zemin, which has been written into the state constitution and is taught in schools. Not a single hand went up. Could anybody name two? Nobody. One? With difficulty.

A hard-nosed pragmatism is generally considered to be China's guiding principle at home and abroad: whatever produces growth in gross domestic product.

China's aloofness from the world was interrupted when the West came knocking. In 1793, Lord Macartney was dispatched to China by Britain's King George III to open the country to trade. He arrived with presents meant to dazzle the court of the Qianlong emperor-mechanical clocks, chronometers, telescopes and mathematical instruments. The 600 packages required 200 horses and 3,000 porters to transport.

"There is nothing we lack," the emperor famously told the royal emissary. "We have never set much store on strange and ingenious objects." The British forced open the doors to trade with gunboats; an enfeebled China was carved up by Western powers in what China calls its "century of humiliation."

It's easy to forget, driving by Beijing's Olympics-inspired landmarks-the Birds Nest Stadium, the Water Cube, the colossal CCTV Tower-that until quite recently China had closeted itself again.

For most of the first 30 years of Communist rule in China, which started in 1949, it was hard and often outright impossible to get a visa. Businessmen were granted access once a year for the Canton Trade Fair. In neighboring Hong Kong, tourist buses would deliver groups of camera-toting Americans and Japanese to the border to catch a glimpse of "Red China" on the other side. The rare Chinese official who ventured to the West was a curiosity, much like North Koreans today.

China was in turmoil. To divine what was going on inside the country, foreign intelligence decamped in Hong Kong to monitor local radio stations.

Deng Xiaoping put an end to Chairman Mao's era of murderous seclusion-its endless class struggles and man-made disasters, including the world's worst famine-with his "Open Door" reforms in 1978.

The decision to open the country to foreign trade and investment, initially through Special Economic Zones along the coast, set China on its path of supercharged economic growth. China is shortly expected to overtake Japan as the world's second largest economy.

China's achievements have provided a beacon for much of the developing world: its success in lifting 300 million people out of poverty; its fight against disease and illiteracy; its embrace of technology that has put Chinese astronauts in space. All this, while allowing an unprecedented flowering of personal freedoms.

Now, as the global economy emerges shakily from the worst recession since World War II, China is attracting admiration from new corners.

While the Western world hurtled towards the financial abyss, China was moving ahead cautiously. It has emerged from the crisis with an economy growing powerfully. Its banks are unpolluted by toxic assets; hardly a ripple disturbs its vast pools of national savings. This year, property markets in Beijing and Shanghai are sizzling.

There are hopes, too, that China will use its new strategic heft-and its apparently deft touch-to help resolve the most pressing security issues of the times. Zbigniew Brzezinski, the U.S. national security adviser under Jimmy Carter, proposed a drastically slimmer G20-a G2, the U.S. and China-to deal with the nuclear threat posed by Iran and North Korea; the Israeli-Palestinian conflict; India-Pakistan tensions; climate change.

When he arrives in Beijing, Mr. Obama will be clutching a geopolitical "to-do" list that looks quite similar. America's broad goal has been to persuade China to assume the global responsibilities that go with its growing economic influence in a way that strengthens, rather than threatens, existing international arrangements. China, urged former U.S. Deputy Secretary of State Robert Zoellick, should become a "responsible stakeholder."

Yet China's official commitment to a "harmonious world" is often at odds with an assertive America fighting two wars in Iraq and Afghanistan. More often than not, it has meant that China has been a reluctant follower not a leader. Critics say that China's record in the world's trouble spots, from North Korea to Iraq and Darfur, suggests that it defines its responsibilities in ways that enhance its economic interests.

On North Korea, China has been heading diplomatic efforts to try to rein in Pyongyang's nuclear program. But it is hesitant to threaten the flow of Chinese oil and food that keeps the regime alive. Skeptics in the U.S. say that China holds back because it fears a collapse of North Korea that would not only unleash a flood of refugees across its border but also place U.S. forces face-to-face with its own.

Similar tensions between China's economic interests and international obligations play out in Africa, where Chinese companies are investing massively in energy and raw materials to fuel China's growth. The "no-strings" investments from Nigeria to Ethiopia fly in the face of Western efforts to link investment with improvements in human rights and the environment. In Sudan, China has sent peacekeepers to the war-torn region of Darfur, while bolstering the government by buying oil and selling arms.

Iran may provide the biggest test to date of China's willingness to lead. Washington and its European allies see China's role as critical in the effort to pressure Tehran over its nuclear program. So far, China has resisted tougher sanctions against a country that is its second-largest oil supplier after Saudi Arabia.

China's leaders wrap their great power aspirations in modesty. They point out that China is still a poor developing country, with one tenth of the per capita GDP of the U.S.

Yet China is rapidly modernizing its military forces. Every schoolchild in China knows the story of the Dowager Empress who used funds earmarked for the navy to build stone boats at the Summer Palace in Beijing. The story has become a metaphor for national weakness, and a call to arms.

A military parade last month to mark the 60th anniversary of the founding of the People's Republic of China sent a powerful message to China's 1.3 billion people. The intercontinental ballistic missiles that rumbled down Beijing's Avenue of Eternal Peace, and the tanker planes that lumbered overhead, signaled that China not only was at last a strong country, but also could project power beyond its shores.

These days, China's appetite for "ingenious objects" from the West knows no bounds. It has 650 million mobile phones; it has passed America as the world's largest auto market.

No emerging nation on earth has seized the opportunities of global trade more enthusiastically than China. Its decision to join the World Trade Organization in 2001 launched its economy into a new orbit. Surpluses from foreign trade-particularly with the U.S.-have helped China rack up more than $2 trillion in foreign-exchange reserves.

So what does China want to do with the enhanced status that it craves, and which the world seems equally anxious to concede to China?

Some two-and-a-half millennia ago, the Chinese philosopher Laozi wrote: "Governing a large country is like frying a small fish." The advice was aimed at the scholar-officials that ran China-a Mandarin class that became a model of governance for the ancient world. The light touch has never been a hallmark of Communist rule, or of its statecraft. That matters greatly in a world in which influence and legitimacy derive more than ever from the attractiveness of a country's governing ideals.

Last month, the Frankfurt Book Fair offered the world a glimpse into the internal workings of the Chinese state, and a case study on the limitations of China's "soft power" and its ability to lead.

China was invited to the fair as the guest of honor. The Chinese government had invested millions of dollars in the event, lining up some 2,000 Chinese writers, publishers and artists to attend. All went well until organizers invited two Chinese dissidents to a prefair symposium titled "China and the World-Perception and Reality." Furious Chinese officials threatened to boycott the event and backed down only when organizers withdrew the invitations.

"We did not come to be instructed about democracy," Mei Zhaorong, China's former ambassador to Germany, icily declared.

"Two principles also apply to the Frankfurt Book Fair," said a German foreign ministry spokeswoman. "Guests are treated like guests, and art without freedom is inconceivable."

Write to Andrew Browne at andrew.browne@wsj.com

Posted by Ralph Munyan on 11/11/09

• REVIEW & OUTLOOK; NOVEMBER 11, 2009; Wall Street Journal
• http://online.wsj.com/article/SB10001424052748704402404574527513453636326.html

Pfizer and Kelo's Ghost Town

Pfizer bugs out, long after the land grab.

The Supreme Court's 2005 decision in Kelo v. City of New London stands as one of the worst in recent years, handing local governments carte blanche to seize private property in the name of economic development. Now, four years after that decision gave Susette Kelo's land to private developers for a project including a hotel and offices intended to enhance Pfizer Inc.'s nearby corporate facility, the pharmaceutical giant has announced it will close its research and development headquarters in New London, Connecticut.

The aftermath of Kelo is the latest example of the futility of using eminent domain as corporate welfare. While Ms. Kelo and her neighbors lost their homes, the city and the state spent some $78 million to bulldoze private property for high-end condos and other "desirable" elements. Instead, the wrecked and condemned neighborhood still stands vacant, without any of the touted tax benefits or job creation.

That's especially galling because the five Supreme Court Justices cited the development plan as a major factor in rationalizing their Kelo decision. Justice Anthony Kennedy called the plan "comprehensive," while Justice John Paul Stevens insisted that "The city has carefully formulated a development plan that it believes will provide appreciable benefits to the community, including, but not limited to, new jobs and increased tax revenue." So much for that.

Kelo's silver lining has been that it transformed eminent domain from an arcane government power into a major concern of voters who suddenly wonder if their own homes are at risk. According to the Institute for Justice, which represented Susette Kelo, 43 states have since passed laws that place limits and safeguards on eminent domain, giving property owners greater security in their homes. State courts have also held local development projects to a higher standard than what prevailed against the condemned neighborhood in New London.

If there is a lesson from Connecticut's misfortune, it is that economic development that relies on the strong arm of government will never be the kind to create sustainable growth.

Posted by Ralph Munyan on 11/10/09

• REVIEW & OUTLOOK; NOVEMBER 10, 2009
• http://online.wsj.com/article/SB10001424052748704795604574522680235765894.html

Confessions of an ObamaCare Backer - A liberal explains the political calculus.

The typical argument for ObamaCare is that it will offer better medical care for everyone and cost less to do it, but occasionally a supporter lets the mask slip and reveals the real political motivation. So let's give credit to John Cassidy, part of the left-wing stable at the New Yorker, who wrote last week on its Web site that "it's important to be clear about what the reform amounts to."

Mr. Cassidy is more honest than the politicians whose dishonesty he supports. "The U.S. government is making a costly and open-ended commitment," he writes. "Let's not pretend that it isn't a big deal, or that it will be self-financing, or that it will work out exactly as planned. It won't. What is really unfolding, I suspect, is the scenario that many conservatives feared. The Obama Administration . . . is creating a new entitlement program, which, once established, will be virtually impossible to rescind."

Why are they doing it? Because, according to Mr. Cassidy, ObamaCare serves the twin goals of "making the United States a more equitable country" and furthering the Democrats' "political calculus." In other words, the purpose is to further redistribute income by putting health care further under government control, and in the process making the middle class more dependent on government. As the party of government, Democrats will benefit over the long run.

This explains why Nancy Pelosi is willing to risk the seats of so many Blue Dog Democrats by forcing such an unpopular bill through Congress on a narrow, partisan vote: You have to break a few eggs to make a permanent welfare state. As Mr. Cassidy concludes, "Putting on my amateur historian's cap, I might even claim that some subterfuge is his

Posted by Ralph Munyan on 11/07/09

• OPINION; NOVEMBER 6, 2009
• http://online.wsj.com/article/SB20001424052748703363704574503404180541392.html

Three Decades of Subsidized Risk

By CHARLES GASPARINO

I recently sat down with legendary investor Ted Forstmann to discuss why, on the one-year anniversary of the financial meltdown, the press has largely ignored the role of government in creating the meltdown-and possibly setting the stage for another one-by allowing Wall Street to borrow cheaply and easily during the past three decades.

"I guess reporters think writing about greedy investment bankers is more interesting," Mr. Forstmann laughed.

Mr. Forstmann knows a thing or two about greedy investment bankers: He's been calling them on the carpet for years, most famously during the 1980s when he fulminated against the excesses of the junk-bond era. He also knows that blaming banking greed alone can't by itself explain the financial tsunami that tore the markets apart last year and left the banking system and the economy in tatters.

The greed merchants needed a co-conspirator, Mr. Forstmann argues, and that co-conspirator is and was the United States government.

"They're always there waiting to hand out free money," he said. "They just throw money at the problem every time Wall Street gets in trouble. It starts out when they have a cold and it builds until the risk-taking leads to cancer."

Mr. Forstmann's point shouldn't be taken lightly. Not by the press, nor by policy makers in Washington. But so far it has been, and the easy money is flowing like never before. Interest rates are close to zero; in effect the Federal Reserve is subsidizing the risk-taking and bond trading that has allowed Goldman Sachs to produce billions in profits and that infamous $16 billion bonus pool (analysts say it could grow to as high as $20 billion). The Treasury has lent banks money, guaranteed Wall Street's debt and declared every firm to be a commercial bank, from Citigroup with close to $1 trillion in U.S. deposits, to Morgan Stanley with close to zero. They are all "too big to fail" and so free to trade as they please-on the taxpayer dime.

The conventional wisdom as perpetuated in the media is that these bailout mechanisms are unique, designed to ameliorate a once-in-a-lifetime financial "perfect storm." They are unique, but only in size. A quick look back at the past three decades will demonstrate what Mr. Forstmann meant when he said the government has been ready to hand out free money nearly every time risk-taking led to losses.

The first mortgage market meltdown of the mid-1980s, spurred by the Fed's supply of easy money, was among the most painful market upheavals in the history of the bond market. The pioneers of the mortgage bond market, Lew Ranieri of Salomon Brothers and Larry Fink of First Boston (the same Larry Fink now considered a sage CEO at money management powerhouse BlackRock), lost what were then unheard-of sums of money. (Mr. Fink concedes to losses of over $100 million.)

"What happened then was a dry run of what was to come," Mr. Fink recently told me, as he looked back on the market he created, which would eventually lie at the heart of the most recent financial crisis. Wall Street took excessive risk in mortgage bonds amid the easy money supplied by the Fed-and lost. When the crisis began, the Fed under then Chairman Alan Greenspan slashed interest rates-as it would do after Orange County, Calif., declared bankruptcy in 1994 because of bad bets on complex bonds; and again in 1998 when the hedge fund Long-Term Capital Management (LTCM) blew up; and of course in the bond-market crisis of 2007 and 2008. The lower rates each time lessened the pain of the risk-taking gone awry, and opened the door for increased risk down the line.

Easy money wasn't the only way government induced the bubble. The mortgage-bond market was the mechanism by which policy makers transformed home ownership into something that must be earned into something close to a civil right. The Community Reinvestment Act and projects by the Department of Housing and Urban Development, beginning in the Clinton years, couldn't have been accomplished without the mortgage bond-which allowed banks to offload the increasingly risky mortgages to Wall Street, which in turn securitized them into triple-A rated bonds thanks to compliant ratings agencies.

The perversity of these efforts wasn't merely that bonds packed with subprime loans received such high ratings. It was also that by inducing homeownership, the government was itself making homeownership less affordable. Because families without the real economic means to repay traditional 30-year mortgages were getting them, housing prices grew to artificially high levels.

This is where the real sin of Fannie Mae and Freddie Mac comes into play. Both were created by Congress to make housing affordable to the middle class. But when they began guaranteeing subprime loans, they actually began pricing out the working class from the market until the banking business responded with ways to make repayment of mortgages allegedly easier through adjustable rates loans that start off with low payments. But these loans, fully sanctioned by the government, were a ticking time bomb, as we're all now so painfully aware.

A similar bomb exploded in 1998, when LTCM blew up. The policy response to the LTCM debacle is instructive; more than anything else it solidified Wall Street's belief that there were little if any real risks to risk-taking. With $5 billion under management, LTCM was deemed too big to fail because, with nearly every major firm copying its money losing trades, much of Wall Street might have failed with it.

That's what the policy makers told us anyway. On Wall Street there's general agreement that the implosion of LTCM would have tanked one of the biggest risk takers in the market, Lehman Brothers, a full decade before its historic bankruptcy filing. Officials at Merrill, including its then-CFO (and future CEO) Stan O'Neal, believed Merrill's risk-taking in esoteric bonds could have led to a similar implosion 10 years before its calamitous merger with Bank of America.

We'll never know if LTCM's demise would have tanked the financial system or simply tanked a couple of firms that bet wrong. But one thing is certain: A valuable lesson in risk-taking was lost. By 2007, the years of excessive risk-taking, aided and abetted by the belief that the government was ready to paper over mistakes, had taken their toll.

With so much easy money, with the government always ready to ease their pain, Wall Street developed new and even more innovative ways to make money through risk-taking. The old mortgage bonds created by Messrs. Fink and Ranieri as simple securitized pools had morphed into the so-called collateralized debt obligations (CDOs), complex structures that allowed Wall Street banks as well as quasi-governmental agencies Fannie Mae and Freddie Mac to securitize ever riskier mortgages.

Mr. O'Neal, the man considered most responsible for Merrill's disastrous foray into risk-taking, told me in an interview last year that in the fall of 2007, when he saw that the firm's problems were insurmountable, he had a deal to sell Merrill to Bank of America for around $90 a share. But Merrill's board rejected it, believing he would be selling out cheaply. The CDOs would eventually recover, they argued, as the Fed pumped life into the markets.

Likewise, nearly to the minute he was forced to file for bankruptcy, former Lehman CEO Dick Fuld believed the government wouldn't let Lehman die. After all, government largess had always been there in the past.

All of which brings me back to Mr. Fortsmann's comment about policy makers helping turn a cold into cancer. What if the Fed hadn't eased Wall Street's pain in the late 1980s, and again after the 1994 bond-market collapse? What if policy makers in 1998 had allowed the markets to feel the consequences of risk-allowing LTCM to fail, and letting Lehman Brothers and possibly Merrill Lynch die as well?

There would have been pain-lots of it-for Wall Street and even for Main Street, but a lot less than what we're experiencing today. Wall Street would have learned a valuable lesson: There are consequences to risk.

-Mr. Gasparino is a CNBC on-air editor and the author, most recently, of "The Sellout: How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System," just published by HarperBusiness.

Posted by Ralph Munyan on 11/04/09

• OPINION; NOVEMBER 4, 2009
• http://online.wsj.com/article/SB10001424052748703932904574511250528884932.html

Obama and the Liberal Paradigm

The sheep are quite capable of looking out for themselves. Someone tell the Democrats.

Valerie Jarrett, senior adviser to President Barack Obama, recently explained the White House war on Fox News as an example of "speaking truth to power." Much of the American political world collapsed in laughter, pointing out that her boss was president of the United States, the most powerful man on earth. His every word is news around the world. Fox News is a cable channel rarely watched by more than a few million people at a time. How could she have so blithely said something completely out-of-sync with reality?

Simple: She's a liberal.

As a liberal she carries around in her head the liberal paradigm of how the world works and what needs to be done to make it work better. There's nothing wrong with that. We all use paradigms to make sense of what we see around us and couldn't get along without them. Unfortunately, the basic liberal paradigm hasn't shifted in a hundred years, while the world we live in has changed utterly since the late 19th century, when modern liberalism was born.

What is that paradigm? The basic premise is that the population is divided into three groups. By far the largest group consists of ordinary people. They are good, God fearing and hard working. But they are also often ignorant of their true self-interest ("What's the matter with Kansas?") and thus easily misled. They are also politically weak and thus need to be protected from the second group, which is politically strong.

The second group, far smaller, are the affluent, successful businessmen, corporate executives and financiers. Capitalists in other words. They are the establishment and it is the establishment that, by definition, runs the country. They are, in the liberal paradigm, smart, ruthless and totally self-interested. They care only about personal gain.

And then there is the third group, those few, those happy few, that band of brothers, the educated and enlightened liberals, who understand what is really going on and want to help the members of the first group to live a better and more satisfying life. Unlike the establishment, which supposedly cares only for itself, liberals supposedly care for society as a whole and have no personal self-interest.

Thus the liberal paradigm divides the American body politic into sheep, wolves, and would-be shepherds. The shepherds must defeat the efforts of the wolves.

This paradigm, while never wholly accurate and, of course, always self-serving (as political philosophies tend to be), had a basis in reality in the late 19th century. Then, industrial capitalism was being born and the rules needed to ensure that it worked for all, not just the capitalists, were only beginning to evolve.

A few lived at an incredible level of affluence, such as can be seen in the summer "cottages" in Newport, R.I., and had disproportionate influence with government. In 1900 one-third of the Senate were millionaires at a time when a million dollars made you very, very rich. But millions of Americans lived in abject poverty, toiling long, dangerous hours as industrial workers or as sharecroppers in the impoverished South. These millions were indeed ignorant and weak.

Even as late as 1937, Franklin Delano Roosevelt, in his great second inaugural address, could quite accurately note the fact that he could "see one-third of a nation ill-housed, ill-clad, ill-nourished."

But by that time, liberals had stormed-and taken-the citadel of power. Between 1896 and 1932, the Republicans had been the majority party in this country and the conservatism of that day the ruling doctrine. Then, in 1932, Democrats swept into control of both Congress and the White House. They were now the establishment, as liberalism became the dominant American political philosophy, a status it kept for more than 40 years.

A liberal revolution from the top began as the New Deal created a safety net for American families and reformed the banking and financial systems by greatly enlarging the government and what it regulated. At the end of World War II, college education became far more affordable, thanks to the GI Bill and other measures. The GI Bill also fostered home ownership, which for the first time became the norm among nonfarm families, giving them significant wealth. The sheep were becoming capitalists too.

Between 1947 and the mid-1960s, the civil-rights movement overturned centuries of racial discrimination and greatly narrowed the gap between American claims of liberty and equality and American reality.

By the 1970s, the percentage of Americans living in poverty had been greatly reduced and those still below the poverty line were receiving assistance such as food stamps, housing assistance, and refundable tax credits that lifted most of them above the line. Race was no longer a barrier to accomplishment. The majority of American families now lived at a level of affluence and financial security known only to a few in the early 20th century.

The liberal revolution of the middle third of that century was, in short, one of the greatest-and most peaceful-political triumphs in history. And because of it, most of the sheep are now more than able to look out for themselves, having the means and education to do so. The wolves have been fitted for electric collars that largely keep them from straying into the wrong fold.

Now if only someone would tell the shepherds about their own success.

Ms. Jarrett still sees herself and her political allies as being on the outside, speaking truth to power, even when speaking from the Oval Office. The Congressional Black Caucus still routinely sees a pervasive racism, even though both the president of the United States and the chairman of the Republican National Committee are black. The rich are still looked upon by liberals as enemies of the poor and disadvantaged, even though Mr. Obama not only carried a majority of voters earning less than $50,000 but also a majority of those earning over $200,000. He did, in other words, as well among the wolves as he did among the sheep.

Not only does the liberal paradigm not even come close to agreeing with the social and economic reality on the ground today, worse, it has largely congealed into a political religion, especially in the nearly 30 years since Ronald Reagan shifted the nation's political center of gravity, just as FDR had done 48 years earlier. Since liberals care about the sheep, all who disagree with liberalism must not, making them morally inferior if not downright immoral. Thus the nastiness in American politics is largely on the left. Whatever you think of Sarah Palin, her treatment in the liberal press was ugliness personified.

The conservatives of today bear little resemblance to those of the 1930s that cartoonist Peter Arno immortalized heading down to Manhattan's Trans-Lux theater to hiss newsreels of FDR. They are instead abubble with ideas to reform aspects of American politics and economics that badly need reform, such as the tax and legal systems, and the impending entitlements crisis. They want to utilize the great power of markets to force efficiency, drive down costs, and drive up yields. But liberals refuse to engage those ideas, simply because they are not liberal ideas and must, therefore, be wrong if not the latest plot by the wolves to exploit the sheep.

But in a world where a majority of Americans work at white-collar jobs, have high-school and college degrees, own their own homes, and hold financial securities in their own right, the so-called wolves are now a majority. If liberals don't begin to take that fact into account in formulating policy, the Obama administration will not only be an unsuccessful liberal administration, it may well be the last liberal administration.

Mr. Gordon is the author of "Hamilton's Blessing: The Extraordinary Life and Times of Our National Debt," out in a revised edition by Walker & Co. early next year.