Democrats Could Fare Even Worse Next Time If They Don't Fix Economy

To win, you need independent voters and they go with economic sentiment: the Democrats have two years to get that right

By now, it is clear to most analysts of the United States' midterm
election that the economy played a huge role in the Democrats' losses.
It is also pretty clear that the vote was a protest vote by people
reacting to economic troubles, rather than an attitudinal change in the
electorate towards a conservative political agenda.

This can be seen from both pre-election polling data and exit polling. For example, 58% of voters said
that they were "trying to send a message about how dissatisfied they
are with things in Washington". But voters were more likely to agree
with Democratic positions on social security, trade policy and other
issues. This despite the fact that an "enthusiasm gap" lowered Democratic turnout.
As comedian Jon Stewart prodded Obama in his recent interview on the
Daily Show: how did we go from "hope and change" to "please, baby, one
more chance?"

But with such a volatile electorate, it is worth examining the outcome in more depth. Political scientist Douglas Hibbs has looked at midterm congressional elections
in the US since 1950, and found that 92% of the variance can be
explained by just three factors. The first two are just measures of how
many seats and votes that the president's party had prior to the
current election. The third is a measure of how the economy has done
since the last election.

The president and his party have no
control over the first two variables: these are basically just
measuring the fact that, the better it did in the previous election, the
president's party will lose more seats in this one. This is partly
because, for example, if the Democrats win more seats, they inevitably
have some representatives who are more vulnerable because they hold
districts with more Republican voters.

Ignoring for a minute that
the president and the Democrats could have done a lot more to fix the
economy, Hibbs' model would project about a 41-seat loss for the
Democrats in this latest election. Since the Democrats lost about 63
seats, they still did significantly worse than would be predicted. But
most of their loss could be explained just by the votes they came in
with and the state of the economy. And that was enough to lose the House
(the Democrats had a 39-seat majority before the election).

Why does the economy play such a huge role in congressional elections?

of course, it is very important to most people, who have to worry about
their future employment prospects, retirement savings and other
features of their lives that are dependent on the overall state of the
economy - even if they currently have a job. But there is another
reason: since the two major parties each have a base that will mostly
vote for their candidates, most elections are being determined by "swing
voters" - about 35% in this latest election.

Most of these voters
are choosing a representative with very little information - most of
them know little or nothing about the candidates or how they stand on
the issues. The performance of the economy is one of the few politically
relevant realities they do know something about: they can see what is
happening in the labour market and other everyday indicators. For this
reason, they will tend to punish the incumbent party and the sitting
congressional representatives if they perceive the economy is doing

In reality, the Democrats could have done a lot more to fix
the economy - or at least, they could have tried. After subtracting the
state and local government budget tightening, the stimulus provided by
the American Recovery and Reinvestment Act
only made up for a small fraction - about one-eighth - of the private
spending that was lost from the bursting of the real estate bubble. This
was the Democrats' fatal mistake.

Will they make the same mistake going forward?

unforeseen circumstances, such as a steep decline in the dollar (which
would boost economic growth by reducing imports and
increasing exports), the next two years do not look good for the US
economy. Even the White House is projecting a figure of more than 8% for
unemployment in 2012. If President Obama and the Democrats decide to
find common ground with the Republicans on deficit reduction, it will
likely make the economy weaker still.

Of course, since the
Republicans now have the House, the Democrats have a chance to frame the
likely poor economic performance as the GOP's fault - depending partly
on what the Republicans do. And President Obama may get lucky and find
himself up against someone like Sarah Palin in 2012. But betting on your
opponents to defeat themselves is not a good strategy.

The latest
conventional wisdom is that another, more adequate stimulus package is
off the table now that the Republicans control the House. But the
president and his party had better find a way around that. At the very
least, they would have to fight very hard for what is needed - as they
did not do in the last two years - and make it extremely clear that
Republican obstruction is the obstacle to economic recovery. Otherwise,
the most likely result in 2012 will be a repeat of what we just saw -
only with more losses for the Democrats, including possibly the

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