Obama has claimed before (and will soon claim again) that earmarks are a miniscule portion of the budget and therefore not that big an issue. But he's missing the point, probably intentionally.
The reason the earmark process is so bad is that it is a form of bribery. If congressman Blue Dog Democrat in Alabama doesn't want to go along with a 12% increase in the State Department budget or a 10% increase in Amtrak subsidies, well, maybe his vote can be bought by funding an $819K catfish genetics research project in his district. We're seeing this with the new 2009 Omnibus Budget bill. A lot of congressmen have qualms about the vastly increased spending in this bill, but the 8,500 different earmark projects (worth about $7.7B) embedded in it make its likelihood of passage very high.
Everybody knows an earmark is bad in and of itself because it is far more likely to be an inefficient allocation of money. It wouldn't be an earmark if it could survive scrutiny from the full congress, so it had to be tucked away in a bill where nobody could see it or remove it.
But the really bad thing about earmarks is never discussed. The earmark process corrupts the law-making function of congress. In essence, it is a legal form of bribery. It leads to a far less representative democracy and a far more inefficient government than we would otherwise have.