Resistance grows to Obama's bigger government

By Tabassum Zakaria -Analysis

WASHINGTON (Reuters) - A public furor over big bonuses paid by firms bailed out with U.S. taxpayer money is fueling resistance to President Barack Obama's ambitious plans to extend government intervention in the U.S. private sector.

Republican opponents say his commitment of huge sums to try to revive the ailing economy is driven by a philosophical belief in greater government intrusion in many areas, from healthcare to education, dubbing it socialism.

Obama is pursuing these policies just 13 years after President Bill Clinton, a fellow Democrat, disarmed Republican opponents by declaring: "The era of big government is over."

As the enormous cost of the Obama's effort to stimulate the economy grows, many are weighing just how far government should be extending its powers.

"We're in the midst of a huge political battle, which is being obscured behind a financial crisis," said Bruce Kogut, professor of ethics and corporate governance at Columbia University. "If the financial crisis wasn't here we'd be having this battle anyway."

"The question I think we need to figure out as a country is what is the proper role of government?" said David Moss, professor of economic history at Harvard Business School.

Regulation of the financial system to contain risk has not been adequate or effective, he said. "So on the financial front we want to try to find a Goldilocks scenario of not too much and not too little."

Obama administration officials have had to fend off accusations they were too easy on the financial industry, after the insurance giant AIG paid out millions of dollars in bonuses after accepting billions of dollars in taxpayer funds.

CHARGES OF SOCIALISM

Airing charges of socialism, opponents have sought to turn public opinion against Obama's big spending policies, including a record $3.55 trillion budget proposed for next year and a $787 billion economic stimulus package.

In the United States calling someone a socialist is often an insult, striking at the heart of American individualism and raising the fear of government fingers in everyone's business.

The word's powerful negative connotation prompted Obama to call The New York Times back after an interview to belatedly respond to a question on whether he was a socialist.

"It was hard for me to believe that you were entirely serious about that socialist question," Obama said, defending his policies as consistent with free-market principles.

"The fact that we've had to take these extraordinary measures and intervene is not an indication of my ideological preference, but an indication of the degree to which lax regulation and extravagant risk-taking has precipitated a crisis," he said.

Kogut said the socialist tag was misleading. "I think it's a weapon, I don't think it's honest," he said.