The war of the regions?

From Politico.com
By: Joel Kotkin and Mark Schill
November 18, 2008 04:12 PM EST

It’s time to throw away red, blue and purple, left and right, and get to the real, traditional crux of American politics: the battle for resources among the country’s many diverse regions. How President-elect Barack Obama balances these divergent geographic interests may have more to do with his long-term success than his ideological stance or media image will. Personal charm is transitory; the struggle for money and jobs has a more permanent character.

To succeed as president, Obama must find a way to transcend his own very specific geography — university-dominated, liberal, de-industrialized Chicago — and address the needs of regions whose economies still depend on agriculture, energy and industry. In the primaries, most of these regions voted for Hillary Rodham Clinton.

The geographic concentration of manufacturing prepared by Praxis Strategy Group presents a particularly complex road map for the new president. Although Indiana and Wisconsin top our list of states most dependent on manufacturing employment, the next four are either in the Great Plains — Iowa — or in the South: Arkansas, Alabama and Mississippi. In fact, eight of the top 13 industrial states, on a per capita basis, are located in the South; only one of these manufacturing hotbeds, North Carolina, supported the new president.

In terms of industry, the auto industry represents the most difficult challenge. Great Lakes political leaders, such as Michigan’s clueless Gov. Jennifer Granholm, now a top Obama adviser, will twist the new president’s arm to bail out the crippled U.S.-based auto manufacturers, essentially socializing the industry. Yet in bailing out Detroit, Obama could undermine a growing, thriving auto complex developing in the old Confederacy and along the southern rim of the Midwest.

Although also hit by the recession, companies like Toyota, Honda, Hyundai, Mercedes and BMW have brought unprecedented prosperity to these areas, which include some of the historically poorest regions of the country. This is also where many of the most fuel-efficient “green” vehicles in America are being produced. The workers they employ may not belong to the unions so influential among liberals, but their interests matter mightily to the Democrats as well as the Republicans who represent them.

Energy issues may be even more challenging from a regional perspective. The nation’s fossil fuel resources are heavily concentrated in the West and the South, led by Wyoming, Alaska, West Virginia, Oklahoma, Louisiana, New Mexico, Texas, Montana, North Dakota and Kentucky. Obama took only one of these states: New Mexico. The new president’s statements against coal and other fossil fuels were not popular in areas where they provide not only reliable, low-cost energy but also well-paying jobs.

Not just oil riggers, heartland miners and coal companies have an interest in an expansive approach to energy policy. If enacted, Obama’s cap-and-trade proposals could raise the cost of Midwestern energy, largely coal-based, by between 20 percent and 40 percent, according to a recent study by Bernstein Research. This would create yet another disadvantage for U.S. manufacturers, particularly against largely unregulated competitors in developing countries.

In contrast, reliable and affordable domestic energy supplies from all sources — including nuclear facilities — would be a major boon for manufacturers across the country. Obama must recognize that many states with coal and oil reserves also possess strong wind and bioenergy potential. He should favor expansion of both kinds of energy. The resulting lower-cost electrical power could boost an incipient electric car industry that may be the last, best hope for hard-pressed General Motors.

Here’s another case where regional politics could prove sticky for Obama: Any attempt to boost nonrenewable energy supplies would run into opposition from the largely coastal-based green lobby. These groups generally oppose virtually any fossil fuel development, and most remain hostile to nuclear power. While they may be well-intentioned, increasingly restrictive environmental regulations on manufacturing could push production to parts of the world with dirtier industries and overreliance on shipping long distances. The resulting net reduction in carbon emissions would seem somewhat ephemeral.

The current recession and falling energy prices could provide political cover for Obama to shift his energy policies. Hard times have already eroded support for strict curbs on greenhouse gases in Europe, and strong advocacy for carbon taxes clearly hurt the Liberal Party in the recent Canadian elections. A similar reaction could also emerge in this country, except in the deepest blue coastal enclaves.

Finally, there remains one other regional constituency that must be addressed: the financial community. Our analysis shows securities and commodity trading industries to be regionally concentrated, with the largest clusters in greater New York and Vice President-elect Joe Biden’s home state of Delaware, followed by New Hampshire and Illinois. They are all now bedrock “blue states” and generally backed Obama by large margins.

Yet this presents yet another regional dilemma. Simply put, the rest of the country detests Wall Street. They see the bailout benefiting big players in cities such as New York or Chicago but doing little for smaller banks that do much of their lending outside the big money centers. This sentiment cuts across party lines, particularly in the West and South, as the initial anti-bailout votes in the House showed.

All presidents face such regional challenges in governing this vast and diverse country. Weak politicians, such as President George W. Bush, tend to fall back on an ever-narrower band of regional alliances that, once threatened, easily break apart.

Transformative leaders, such as Presidents Franklin D. Roosevelt and Ronald Reagan, learn to extend their appeal to as many industries and regions as possible. In the next four years, we will get to see what kind of leader Obama intends to be.

Joel Kotkin is a presidential fellow at Chapman University and executive editor of www.newgeography.com. Mark Schill, a principal at the Praxis Strategy Group, is the site’s managing editor.