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That got me thinking - the problem isn't the system so much as the people who maintain and vote in it. The problem, in part, is prosperity; when people are prosperous, for the most part they really don't give a shit what their elected representatives are up to.
No matter what they say, Democrats really don't consider these presidential elections all that important. If they did, we wouldn't still be holding our first primaries in Iowa and New Hampshire. When people get fat and happy enough, they really don't care about who runs the country beyond a 'Red Sox v. Yankees' infantile sort of yay-for-my-team mentality.
Hypothetical question: What if we tried something other than democracy, so long as we stay prosperous?
Let's say we wrote a certain level of Median Per Capita Income into the constitution, adjusted annually for inflation. We'll call this the "Things Are Going To Hell Level".
When median income dips below the Things Are Going To Hell Level (Alternate title: the Things Are Going To Detroit Level), we have presidential elections every four years. When median income is above this level, the Supreme Court picks every four years. The only requirement for their selection is that it must be 8-1 or unanimous.
Oh, and if voter turnout is below 70% during a presidential election, the Supreme Court picks next time no matter what.
Thoughts?

I also would have an issue with the SC, a body made up of Presidential appointees, appointing the President (look what happened last time they did that!).
They were picking among two people, and within a legal framework that all decisions had to be couched in. Under my rubric, they'd be free to pick whomever.
Also, my requirement for an 8-1 or unanimous decision invalidates the comparison to Bush v. Gore (5-4).
For the sake of argument, let's say the House and Senate remain elected by the usual means.
The first three words of the Preamble sum it up succinctly. "We the People" remain the fount of power only because we continue, for good or ill, to have the right to select our leadership, and because that leadership knows there will always be at least the potential for accountability moments. Were that fount to come from elsewhere, there could properly be no check on it. The current failures in our system come not from when there is too much democracy and it becomes ignored, but when there is not enough and it becomes powerless. A regular democratic process serves as a far, far better check on the excesses of the state than an ad hoc basis. If I had my ideal situation, we'd have a franchise guaranteed via a constitutional amendment.
In other words, I don't think Hamilton really understood the potential for oligarchy in the same way that we in the post-fascism era do.
It sounds to me like your idea would take republicanism and shoot it up with some human growth hormone. I dislike the elder council model of governance (and I'm not a fan of the group that controls the interpretation of the law being in charge of appointing its executor, either), because it both limits the responsiveness of the state and empowers the state beyond the means of the people to stop it from tyrrany.
Tying the national right to vote to the percentage that exercises the vote is likewise problematic. It amounts to punishment through collective responsibility. We'd be removing those that seek active participation from the process.
(Initial thoughts while watching "The Man with the Golden Gun"--Christopher Lee is as good a villain as Christopher Walken. In fact, here's a new law: only guys named Christopher are allowed to be Bond villains)
The people can still select their leadership if they really care to. Presidential elections would occur underneath the Everything Is Going To Hell line, and above that line one could still get an article of impeachment through the House and Senate (which are still democratically elected) if a president was to seriously step out of line.
You say oligarchy like it's so negative and unseemly!
Also, I think at this point it's fair to say what we all know to be true in our hearts - I'd probably give Hamilton a reacharound if I could.
My idea is essentially merging the best elements of our system (The people can intervene if things get really fucked up) with the best elements of China's system (There are people not subject to democratic pressures tackling really tough issues). Much as I'm unhappy with the current state of China, the more I learn about them the more I gain a grudging respect for today's Chinese leaders, even if they're immoral or amoral on some level. They didn't Start The Fire, and yet they're doing their best to manage an incredibly volatile situation.
Also, the fact that 8 of the 9 members of China's ruling politburo currently hold Ph.D's does not compare unfavorably with America's overall taste in leadership.
Have never seen! Must rectify that.
I think the biggest problem I'd have is that, in all too many scenarios, the people couldn't intervene if things got really fucked up. "Really fucked up" in your system is entirely economically determined, and makes it possible for someone that was barely supported by a small plurality of voters insulated.
The scenario that first popped into my mind was an election with about 60% turnout, where one candidate barely beat the other. The winner will not only be insulated for his or her entire term, but if they appoint enough SCOTUS justices they can easily be returned to power without reelection, regardless of the bass-ackwards social policies they may implement or the stupid-ass wars they might get us into.
The only check remaining would be Senate confirmation for the Justices, and call me crazy but I just don't think that's as effective a process at protecting citizens' rights as the threat of booting someone from office. And if the Senate is still elected in the same way (I don't see why you wouldn't go even closer to the Chinese model and return Senate elections to the state legislatures), then you could be looking at a situation where Senate elections are referrenda on the Supreme Court ("elect me and I'll back impeaching that asshat Souter!"). I mean, it's not like judges are particularly popular among huge swaths of America as it is--would every Sunday be a 'Justice Sunday'?
I just think the potential for abuse would increase heavily over the present system.
My idea for reforming the system is to go the opposite way: rotate the states that have the initial primaries, protect the sanctity of the individual vote, and get rid of that goddamn Electoral College (why do we invest so much power in 538 people nobody's ever heard of?). You want to see a democratic resurgence? Make the popular vote what counts, establish instant runoff voting and watch regional populist candidates emerge. THAT would be entertainment.
While I'm all for rotating the initial primaries, I remember reading a pretty mathematically-sound study explaining how the electoral college, while indeed being a somewhat 'undemocratic' institution, forces the winning presidential candidate to be significantly more in tune with a wider variety of interests and constituents than he otherwise would be.
As for instant runoff voting, I've thought about it, and it'd be ideal if we wanted the rise of, as you accurately put it, "regional populist candidates".
Except that the more I thought about it, the more I realized I don't want those regional populist candidates anywhere near elected office. Our politician's most important duties are in the realm of foreign policy, not domestic; people like Representatives Kirk and Larsen are able to get real and important work done on foreign policy, even though it's something they could never run on in an election, by the nature of relatively safe districts.
I don't mind as much as I used to when politicians demagogue on domestic issues, because they've done that since time immemorial. But with the exception of the Middle East, we're in a relatively unique spot right now, where much of our nation's foreign policy is composed outside the public view, and the public remains largely indifferent - the end result being that in places like Asia, experts have been able to take the reins without worrying about electoral consequences and really make us a force for good. The more populist officeholders, the more that's threatened. While some might argue this leaves the domestic front neglected, so long as the rest of the world is a hell of a lot worse off than we are, I think that they can be first priority.
And those regional populists will control elected positions regardless--it's just a question of whether they can be the top official or not. Hell, they had to shoot Huey Long to get his fat ass out of the Senate.
But I think the elimination of the electoral college, much more than adopting IRV, would lead to regional populist candidates getting elected President. IRV would probably lead to a proliferation of national parties (or, more accurately, greater success for the myriad 'national' parties already available). We might see them having greater down-ticket successes, and subsequently rising to prominence nationally, but I think the moderating effect of having to govern through consensus will take care of the greatest risks and destabilizing elements.
But check Federalist 9 again, if memory serves and that's the one I'm thinking of, and ask if Hamilton's notion that the Union would prevent factionalized politics from being dominant actually panned out. We've got factional politics and a strong union--I'm not convinced that a greater regional focus in national politics is going to be any more detrimental than the current order. ("Progressive Hamiltonianism" sort of reminds me of White Russia, around the turn of the twentieth century, when peasants suffering under brutal local officials or from abject poverty would say "if only the Tsar knew, he'd fix it," without considering the likelihood that the Tsar knew and approved of what was happening. Or, for your Chinese sensibilities, think the Deng-era corruption that, if only Deng knew about, he'd stop. Without the need to be responsive to the people, the leadership sat on its ass.)
I also see a lot of value in Legalism. The geographic divisions in our country (north vs. south, west coast vs. heartland) are just like the fragmentary social and cultural pressures that plagued the efforts to unify ancient China, and Legalism provides the antidote:
1) coercing the best and brightest citizens to serve the government, and choosing them through a rigorous series of exams designed to test how well candidates have memorized massive amounts of classical texts
2) maintaining the authority of the single, central emperor through a uniform and strictly enforced code of laws
3) discouraging mercantile activities so that citizens will focus on agricultural production that will enrich the state
Legalism may have failed during the Qin dynasty, but if ever there were a time for it to work, it is clearly now.
As a student of Chinese history, I see vast differences in the historical context that would prevent legalism from working in the same sense today that it once did (And even then, it worked only briefly).
If you'd like, I can elaborate on this.
Also, it's worth keeping in mind that legalism was a lot less rigorous than later scholars maintained, according to the primary sources that have been recently unearthed from that time period.