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The Economy and the 2010 Elections: Bleak Assumptions May Be Premature

5 years ago
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In a reflection of both the news-of-the-moment obsession of TV anchors and the sad-eyed reality that 9.7 percent unemployment has become the new normal, Barack Obama skated through Sunday's talk-show pentathlon without being challenged about the moribund economy on four of the five networks that interviewed him. Only CNN's John King – in a shocking deviation from the journalistic herd instinct – bothered to ask, "Is the recession over?"

Federal Reserve Chairman Ben Bernanke said last week that the recession is "very likely over," but Obama refrained from any "mission accomplished" credit-claiming. The president's caution is easy to understand – the Republicans already plan to exploit in the 2010 congressional elections an over-the-moon economic forecast by Obama's advisers back in January inaccurately predicting that unemployment would peak at 8 percent if Congress passed the stimulus program.

So Obama adopted the same sober tone about the economy that he reserves for discussions of Afghanistan as he told CNN, "Usually jobs figures [are] the last to catch up, they're the lagging indicator. But the other problem is: We lost so many jobs that making up for those that have already been lost is going to require really high growth rates."

Obama's bleak economic assessment is pretty close to Washington orthodoxy. At a time when the news is littered with references to a "jobless recovery" and pessimistic economists warn of a "double-dip recession," the political community widely assumes that the 2010 congressional elections will be fought on a parched economic landscape.

The National Republican Campaign Committee (NRCC), the electoral arm of the House GOP, has been churning out mocking press releases with headlines like, "Where are the jobs?" Leading political seer Charlie Cook, who handicaps congressional races, reflected the conventional wisdom when he began a recent column: "The political environment for Democrats has turned ugly." The latest economic forecast from the Congressional Budget Office (CBO), released last month, sees the average monthly unemployment rate in 2010 as a punishing-to-the-country and devastating-to-the-Democrats 10.2 percent. Small wonder some House Democrats are so skittish over the economy that they worry that the party's 38-seat majority could be in jeopardy next year in a replay of the 1994 Republican upheaval that vaulted Newt Gingrich to power.

But what if the consensus predictions of a long, hard slog of a recovery are wrong? What if the same economists who did not see the 2008 Wall Street collapse coming are now erring the other way by anticipating years of stagnation? What if almost everyone in Washington has mistakenly bought into the crystal-ball fallacy of believing that the near future will look almost exactly like the present?

These contrarian questions are not based on an economic discussion moderated by Voltaire's Dr. Pangloss, nor are they drawn from Democratic Party talking points. Rather, they are prompted by hearing an upbeat economic assessment last week by a former member of Ronald Reagan's Council of Economic Advisers. Michael Mussa, also the former chief economist of the International Monetary Fund (IMF), buoyantly announced, "The occasion today is the funeral of the Great Recession of 2009." Now a senior fellow at the Peterson Institute for International Economics, Mussa predicted "a moderately vigorous recovery" primarily fueled by business investment that would bring the unemployment rate down to 8.8 percent in the fourth quarter of 2010. As a card-carrying Reaganite, Mussa gleefully recalled that the experts embarrassingly failed to foresee the fast-paced recovery coming out of the deep 1982-83 recession. Although Mussa did not mention it in his presentation, the result was Reagan running for reelection in 1984, successfully taking credit for "morning in America" and carrying 49 states.

Maybe Mussa is an economic genius for breaking with the safety-in-numbers consensus forecasts. Or maybe he is looking for rosy scenarios in all the wrong places. But this against-the-grain prediction is a reminder that so many assumptions that govern discussions about politics in Washington are based on shaky and impossible-to-prove premises. It is one thing to say confidently that Obama will own the economy; it is another thing to predict with any certainty what the terms of that economic ownership agreement will be when voters go to the polls in 2010. As veteran James Grant, the editor of Grant's "Interest Rate Monitor," argued in a recent essay in the Wall Street Journal, "Leading economists predict that recovery from our Great Recession will be plodding, gray and jobless. But they don't know and can't. The future is unfathomable."

The same lessons in humility should be applied to political gurus and press-pack pundits. Electoral soothsayers – when they are not purporting to divine the future from polls and forecasts – spend their time strip-mining the past. Emory University political scientist Alan Abramowitz pointed out in a recent article that in the 16 midterm congressional elections since World War II, "The president's party has lost House seats in 14 of these 16 elections and Senate seats in 12 of 16, with an average loss of just over 24 seats in the House and between 3 and 4 seats in the Senate."

You might as well print out these statistics and paste them to your television screen, since it is an ironclad prediction that anyone who follows politics will hear variants of these numbers repeated endlessly between now and the 2010 elections. For the rule in both newspaper columns and on TV roundtables is: When in doubt, cite historical data as if you have stumbled on unalterable rules of human behavior. For as Abramowitz put it in an interview, "A year in advance, 14 months in advance of the congressional elections, you can't tell very much other than the party in power in the White House tends to lose seats."

But this historical rule of thumb may be slipping off the scale. In 1998 and 2002, the president's party actually gained House seats. The 1994 and 2006 elections were extreme cases going the other way – with the out-of-power-in-the-White-House party winning 54 seats in 1994 and 30 seats in 2006 to take control of the House. Challenging former House Speaker Tip O'Neill's dictum that "all politics is local," each of these four midterm elections were shaped by large national themes: Bill Clinton's health-care failure and voter antipathy toward congressional Democrats (1994); Republican over-reach in the drive to impeach Clinton (1998); rally-round-the-flag patriotism and fear-mongering in the aftermath of 9/11 (2002); and ire at George W. Bush over Iraq and Hurricane Katrina (2006).

"Big themes will emerge for this off-year election just as they did for 1994-1998-2002-2006 races," said Republican pollster David Winston, who advises the congressional Republican leadership. "That's why to assume that the 2010 elections will automatically follow a historical pattern -- when there have been so many major changes in political communication in recent years -- is to miss the big picture." Presidential politics permanently changed with the 1960 election and the over-arching importance of television. The same kind of transformation may have begun occurring in the mid-1990s with the proliferation of cable television channels and the emergence of the Internet.

Pollster Dave Petts has written a memo, widely circulating on Capitol Hill, designed to reassure anxious House Democrats about the applicable lessons from the party's 1994 debacle. As Petts wrote, "In the modern era, large losses of more than 20 seats for the incumbent party have only occurred when the president's approval rating has fallen significantly below 50 percent." In 1982, when the Democrats gained 26 seats, Reagan's popularity had temporarily slid to 42 percent because of the recession; in 1994, only 43 percent of the voters gave Clinton a thumbs-up job rating; and in 2006 Bush's approval had plunged to 39 percent. In an interview, Petts summarized his midterm congressional election findings with a three-word epigram: "Angry people vote."

Both Petts and Winston freely admit that guessing the political terrain with any precision a year in advance of the 2010 elections is nearly impossible. When asked what would be his favorite early indicator to help accurately forecast those elections, Petts picked Obama's approval rating in August and September of next year. Winston opted for the unemployment rate in July 2010 as a predictive device, but added that "the jobless number will be, I think, central to what Obama's approval rate is." In short, the underlying message is that the president and the congressional Democrats are in the same sailboat, hoping that the waves recede and the winds change direction in time for the elections.

Nancy Pelosi has spent recent weeks telling wavering House Democrats worrying about 2010 that their votes on health-care reform will be their historical legacy -- the most important votes they will ever cast in Congress. But, in the end, coming out of the worst economic collapse since the Depression, the real question for next year may not be about the outcome of the health-care debate in Congress at all. Rather, it may all depend on whether Obama and the Democrats can make a convincing economic case that it is again morning in America.

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