A few Democratic bloggers have magnanimously pointed out that despite people's current conviction (which may well hold up on reflection, or it may not) that McCain ran an especially slimy campaign, he in fact did engage the public on a lot more substantive issues than Republican presidential candidates generally have in the modern era.
One substantive issue McCain brought up a lot was earmark spending. He often brought it up in the context of the federal budget and the deficit, and in this context Obama rightly pooh-poohed the idea that earmark spending is a significant part of the federal budget picture.
Even so, there is a significant issue there. The earmark system DOES invite corruption, and it almost guarantees that the dollars are not being spent entirely on things that are truly in the national interest. That's not really a controversial point. The problem is, what do we do about it? Answering THAT question is the thorny part, and McCain never made a serious effort during the campaign to provide that answer.
In my view, the main root of the earmark spending system is the difference in financing structure between the federal budget and state budgets - namely that the federal budget can meet its general budget obligations by borrowing money from the private sector, while state governments are usually prohibited from doing so. The inability to borrow money creates a slightly perverse incentive structure in state governments with regard to certain types of expenditures.
Put a bit more simply, imagine you're running the government of, say, Montana, and you learn that there's some rare goat that's going to die out if you don't build a retaining wall along the edge of some canal somewhere. Not being a goat-hater, you'll probably want to do something about it. But if you have a budget shortfall and there is a decision about whether to cut the goat wall or lay off some police officers, well, bye bye Mr. Goat.
So in theory that's why we have earmark spending. In such an instance, the Governor of Montana goes to the senior senator from Montana and he says "dude, you gotta get me a half million dollars for this goat wall." The senator goes through the process needed to insert the goat wall money into a budget bill and eventually the goat wall gets built and the goats are saved.
Of course in this instance I've chosen to spend the imaginary money on something that could reasonably be construed as being in the national interest - saving a rare subspecies of goat. In reality, a lot of earmark spending cannot reasonably be construed that way. The "Bridge to Nowhere" in Alaska is a famous example - it was purely a giveaway to Alaskan construction companies.
The problem is, no matter how much people may hate the idea that their tax money is going to some sweetheart construction deal in the middle of the wilderness, there's not a lot they can do about it. The only people who really have control over the process are getting much more benefit out of it (in terms of financial benefit to their state economy) than they are giving away (in terms of the impact on the federal tax rates of their constituents: essentially none), which means that all the decision-makers are essentially in a room together going
Governor: I propose free wine!
Senator: I second!
Governor: All in favor?
One big solution that's often proposed for this is the so-called Line Item Veto. This would allow the president to veto individual spending projects that he or she deemed to be not in the national interest. The problem with that solution is that it just paints another layer of politics over the process. The president is no more likely, in actual practice, to use his power responsibly than a senator or congressperson, especially given our Electoral College system that establishes a handful of states as "battlegrounds" where presidents must curry favor if they hope to be reelected.
Another solution would be some sort of nonpartisan review board to review earmark spending to determine if it serves a legitimate purpose, and ensure that the process of disbursing the money is fair. That sounds reasonable enough to me in the abstract, but one would imagine it would be a nonstarter with the vast majority of congresspeople, since it would reduce their power to please their constituents.
I'd be interested to hear from anybody who has ideas on this topic. I imagine there must be some innovative stuff out there regarding how to see that earmark spending becomes fairer and more effective dollar-for-dollar. I just don't know what it is, or where to find it.