2010: What Happened?

A lot of people are asking, How could the voters have swung so much in two years? And, why didn’t Obama give Americans a better sense of his long-term economic plan in 2009, back when he still had a political mandate? As an academic statistician and political scientist, I have no insight into the administration’s internal deliberations, but I have some thoughts based on my interpretation of political science research.

The baseline

As Doug Hibbs and others have pointed out, given the Democrats’ existing large majority in both houses of Congress and the continuing economic depression, we’d expect a big Republican swing in the vote. And this has been echoed for a long time in the polls–as early as September, 2009–over a year before the election–political scientists were forecasting that the Democrats were going to lose big in the midterms. (The polls have made it clear that most voters do not believe the Republican Party has the answer either. But, as I’ve emphasized before, given that the Democrats control the presidency and are still (at the time of this writing) likely to keep the Senate, it’s perfectly reasonable for swing voters to swing Republican in congressional voting.)

The Tea Party

What about those new Republican candidates? Radical or merely conservative? How much did they stir up the base and how much did they turn off moderate voters? Based on some of my research with Caltech political scientist Jonathan Katz, I estimate moderation to be worth about 2 percentage points in congressional elections. There’s a lot of variation here, but overall people are voting primarily the party and secondarily the candidate. Ideology is a distant third. Sure, it’s a good plan to run moderate candidates if you can, but the choice of ideology is really much more of a battle within the party than a concern in the general election. 2010 was not a good year to be a Democrat in any case.

But where did that bad economy come from?

The unemployment rate increased from 6.6% in October 2008 to 8.6% in March 2009: a huge jump before the new administration had a chance to do much at all. So the Democrats were starting in a deep hole.

Thus, one story of the election, as expressed, for example, by journalist Jonathan Chait, is that Obama and congressional Democrats shouldn’t be blamed for their 2010 election failure: after all, they did about as well as forecasted. To be fair, Chait is not a pure determinist; he’s just using the forecast as a baseline. Still, he’s missing a key piece of the picture, which is that economic performance is not fixed. According to Paul Krugman, for example, the economy would’ve been doing much worse right now had there been no stimulus plan and would be doing much better had a larger stimulus been enacted in 2009. Economists on the right have a different view, but even those who think the government can’t do much to repair the economy tend to feel that the government has the ability to make things worse.

To put it another way, nobody’s claiming that the correct economic policies (whatever they may have been) would cause the economy to be booming right now, but perhaps the difference between a mild depression, a severe depression, or complete free fall would have some impact on whether the Republicans achieved small gains, large gains, or a landslide in 2010.

Why didn’t the Democrats do more?

The next natural question is: Why, in early 2009, seeing the economy sink, did Obama and congressional Democrats not do more? Why didn’t they follow the advice of Krugman and others and (a) vigorously blame the outgoing administration for their problems and (b) act more decisively to get Americans spending again?

I offer a few thoughts, but bear in mind that I know nothing about the people involved in these deliberations, so these are all just speculations or, at best, rational reconstructions:

One answer is that Obama wanted to do more but was limited by the preferences of the 60th-most-liberal senator. I buy this argument a bit but not completely. For one thing, all the Democratic senators, even the conservative ones, have an interest in their party remaining in the majority. OK, maybe Joe Lieberman is ready to switch at any time, but most of them are locked in. So they don’t gain from a Republican landslide, More to the point, the 55 or so Democratic senators who certainly wanted their party to remain in power could’ve done more, if they’d really felt it was a good idea.

Now we’re getting closer. Several Democratic senators did not favor the big stimulus. Part of this can be attributed to ideology (or, to put it in a more positive way, conservative or free-market economic convictions) or maybe even to lobbyists etc. Beyond this, there was the feeling, somewhere around mid-2009, that government intervention wasn’t so popular–that, between TARP, the stimulus, and the auto bailout, voters were getting a bit wary of big government taking over the economy.

Now, from the standpoint of November, 2010, if you’re a Democratic senator and can go back in time to mid-2009, you might want to forget about looking like a moderate and go for a stronger, Krugman-approved plan to juice up the economy. Being a compromiser might have seemed like a good idea at the time, but in retrospect it appears that voters care about results, not about what happens to be popular at the time of the vote.

On the other hand, most of the Senate’s moderate-to-conservative Democrats were not up for reelection in 2010. Thus they had little personal reason to support policies with immediate effects on the economy and had more motivation to favor a go-slow approach.

On not wanting to repeat the mistakes of the past

OK, so why didn’t Obama do a better job of leveling with the American people? In his first months in office, why didn’t he anticipate the example of the incoming British government and warn people of economic blood, sweat, and tears? Why did his economic team release overly-optimistic graphs such as shown here? Wouldn’t it have been better to have set low expectations and then exceed them, rather than the reverse?

I don’t know, but here’s my theory. When Obama came into office, I imagine one of his major goals was to avoid repeating the experiences of Bill Clinton and Jimmy Carter in their first two years.

Clinton, you may recall, was elected with less then 50% of the vote, was never given the respect of a “mandate” by congressional Republicans, wasted political capital on peripheral issues such as gays in the military, spent much of his first two years on centrist, “responsible” politics (budgetary reform and NAFTA) which didn’t thrill his base, and then got rewarded with a smackdown on heath care and a Republican takeover of Congress. Clinton may have personally weathered the storm but he never had a chance to implement the liberal program.

Carter, of course, was the original Gloomy Gus, and his term saw the resurgence of the conservative movement in this country, with big tax revolts in 1978 and the Reagan landslide two years after that. It wasn’t all economics, of course: there were also the Russians, Iran, and Jerry Falwell pitching in.

Following Plan Reagan

From a political (but not a policy) perspective, my impression was that Obama’s model was not Bill Clinton or Jimmy Carter but Ronald Reagan. Like Obama in 2008, Reagan came into office in 1980 in a bad economy and inheriting a discredited foreign policy. The economy got steadily worse in the next two years, the opposition party gained seats in the midterm election, but Reagan weathered the storm and came out better than ever.

If the goal was to imitate Reagan, what might Obama have done?

– Stick with the optimism and leave the gloom-and-doom to the other party. Check.
– Stand fast in the face of a recession. Take the hit in the midterms with the goal of bouncing back in year 4. Check.
– Keep ideological purity. Maintain a contrast with the opposition party and pass whatever you can in Congress. Check.

The Democrats got hit harder in 2010 than the Republicans in 1982, but the Democrats had further to fall. Obama and his party in Congress can still hope to bounce back in two years.

Avoiding the curse of Bartels

Political scientist Larry Bartels wrote an influential paper, later incorporated into his book, Unequal Democracy, presenting evidence that for the past several decades, the economy generally has done better under Democratic than Republican presidents. Why then, Bartels asked, have Republicans done so well in presidential elections? Bartels gives several answers, including different patterns at the low and high end of the income spectrum, but a key part of his story is timing: Democratic presidents tend to boost the economy when the enter office and then are stuck watching it rebound against them in year 4 (think Jimmy Carter), whereas Republicans come into office with contract-the-economy policies which hurt at first but tend to yield positive trends in time for reelection (again, think Ronald Reagan).

Overall, according to Bartels, the economy does better under Democratic administrations, but at election time, Republicans are better situated. And there’s general agreement among political scientists that voters respond to recent economic conditions, not to the entire previous four years. Bartels and others argue that the systematic differences between the two parties connect naturally to their key constituencies, with new Democratic administrations being under pressure to heat up the economy and improve conditions for wage-earners and incoming Republicans wanting to keep inflation down.

Some people agree with Bartels’s analysis, some don’t. But, from the point of Obama’s strategy, all that matters is that he and his advisers were familiar with the argument that previous Democrats had failed by being too aggressive with economic expansion. Again, it’s the Carter/Reagan example. Under this story, Obama didn’t want to peak too early. So, sure, he wanted a stimulus–he didn’t want the economy to collapse, but he didn’t want to turn the stove on too high and spark an unsustainable bubble of a recovery. In saying this, I’m not attributing any malign motives (any more than I’m casting aspersions of conservatives’ skepticism of unsustainable government-financed recovery). Rather, I’m putting the economic arguments in a political context to give a possible answer to the question of why Obama and congressional Democrats didn’t do things differently in 2009.

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