Sunday, September 26, 2010

Obama v. Unemployment

Due to the cacophony of verbiage currently bombarding airwaves about Obama's election prospects, people are losing sight of a simple political axiom, one that was given its best articulation by James Carville in 1992 and - when it comes to the outcome of elections - has yet to be disproven:

It's the economy, stupid.

Let me back up a little bit...

The last three presidents who failed to win second terms - Gerald Ford in 1976, Jimmy Carter in 1980, and George H. W. Bush in 1992 - all lost when unemployment was between 7.1% and 7.5%.


Three of the last four presidents who succeeded in winning second terms - Richard Nixon in 1972, Bill Clinton in 1996, and George W. Bush in 2004 - won when unemployment was between 5.2% and 5.6%.


As of September 2010, President Barack Obama is confronted with an unemployment rate of 9.6%. In light of the aforementioned data, this is predictably causing liberals to mourn and conservatives to crow over what both perceive as his impending political demise.


Both of them are doing this prematurely, since they're forgetting the one recent president I haven't yet mentioned - Ronald Reagan, who was reelected in 1984 even though unemployment was at a "loser" rate of 7.4%.


The parallels between the economic circumstances of Reagan's first term and those currently facing Obama are strong enough that they deserve further exploration.

(1a) In 1980, the year in which Ronald Reagan defeated Jimmy Carter, unemployment rose from 6.3% in January to 7.5% by Election Day, a rise of 1.2%. This undoubtedly contributed to Reagan's election.
(1b) In 2008, the year in which Barack Obama defeated John McCain (serving, politically speaking, as a stand-in for George W. Bush), unemployment rose from 5.0% in January to 6.6% by Election Day, a rise of 1.6%. This undoubtedly contributed to Obama's election.
(2a) When Reagan was inaugurated in January 1981, unemployment was at 7.5%.
(2b) When Obama was inaugurated in January 2009, unemployment was at 7.7%.
(3a) Twenty months into Ronald Reagan's presidency (September 1982), unemployment had risen to 10.1%, an increase of 2.6%. Reagan's approval rating was at 42%.
(3b) Twenty months into Barack Obama's presidency (September 2010), unemployment has risen to 9.6%, an increase of 1.9%. Obama's approval rating is at 46%.

(4a) When Reagan was reelected in November 1984, unemployment was at 7.4% - roughly the same rate at which it had been both when he defeated Jimmy Carter in November 1980 and when he had been inaugurated in January 1981.


Starting in the summer of 1983, unemployment began to steadily decline during Reagan's presidency, starting with a sudden drop from 10.1% in June '83 to 9.4% in July '83 and continuing at a rate of 0.2% - 0.4% per month for ten of the next twelve months until, by July 1984, it had reached 7.2%. At that point it steadied out, neither rising nor falling at any meaningful rate for the rest of the year.
That said, the period of economic growth from July 1983 to July 1984 was such that the American public, rather than focusing on how things had not actually improved from what they had been before Reagan took office, instead simply gave Reagan credit for the sudden perceived progress. By the summer of 1984 his approval rating was in the 50s and, capitalizing on this in such a way as to give the impression that things had changed for the better since Carter's tenure, Reagan was reelected by a landslide.

What does this tell us about Barack Obama's situation?

(4b) It is by no means too late for him to salvage his political fortunes. When Ronald Reagan was at a comparable chronological point in his presidency, unemployment was higher than it is for Obama today, his approval ratings were lower than Obama's are at present, and defeat in his campaign for reelection seemed all but certain. Yet even though no one knew it at the time, events would begin ten months later that, within a year after that, had transformed Reagan from an unpopular leader into a surefire winner.
That said...

There are still thrice as many examples from recent history of presidents in Obama's situation who didn't win a second term (Ford, Carter, and Bush I) then there are those who managed to pull it off (Reagan). The key difference between Ford/Carter/Bush and Reagan was that, while Reagan's economy was just as lousy as those of the other three, a discernible progress had been seen in the period directly before Reagan's reelection effort, something that did not benefit his counterparts. As such, common sense suggests that if some manner of meaningful recovery (by "meaningful" I mean "significantly reducing unemployment") occurs within the next twenty-two months, Obama will likely find himself in Reagan's shoes, whereas if nothing of that sort happens, he will indeed become another Ford/Carter/Bush.
So how can Obama make sure that he winds up in Reagan's category?

There are three possible ways, of which the first two are:

i. The economic equivalent of a deus ex machina takes place, causing a recovery to occur independent of Obama's efforts and helping him get reelected.
Obama pursues policies that bring about a recovery on their own.
For obvious reasons, the second option is clearly preferable to the first one. But how can Obama make that happen? Once again, history provides us with a guide.
What ended the recession in 1983 was the ability of a Democratic Congress to push through spending programs that stimulated the economy while the Federal Reserve (led at that time by Paul Volcker) kept interest rates at an artificial low. Although the Democratic stimulus measures did cause an explosion in the budget deficit (due mostly to Ronald Reagan's insistence on cutting taxes for the wealthy and increasing spending on the military-industrial complex in conjunction with them), that deficit failed to cause rapid inflation due to the Federal Reserve's actions, while the stimulus succeeded in triggering a period of massive job creation sufficient to constitute what many perceived as a "recovery." In short, even though Ronald Reagan's specific policies (tax cuts for the wealthy and increased military spending) were at best unsuccessful and at worse exacerbated the problem, he lucked out by having other people in power - namely Paul Volcker of the Federal Reserve and Democrats in Congress - pursue policies that would cause a recovery just in time for him to be reelected.
The good news for Barack Obama here is that the Federal Reserve (led now by Ben Bernanke) is currently keeping interest rates at the lowest possible level; in that respect luck is on his side, just as it was with Ronald Reagan. The bad news, though, is that the stimulus package Obama passed was inadequately small compared to the needs of the recession he is facing, a problem that did not face the Democratic Congress of Reagan's era, which was lucky enough to have a production gap that could be successfully covered with much smaller stimulus measures. Even worse, Obama has decided to appease conservatives by focusing on reducing the deficit and cutting spending instead of priming the economy through stimulus spending regardless of the misplaced fears of the deficit hawks; this is an approach born of a bipartisan idealism that, apparently, he has failed to realize is as undesirable as it is unrealistic (see:
That said, if Obama wants to have the same good fortune as Ronald Reagan, the most reliable way of going about that would be to pivot to the left economically and reverse his current course of action. As John B. Judis of "The New Republic" wrote last November:
. is pure folly for the Obama administration to encourage talk about curbing the deficit. What’s needed is exactly the opposite: greater stimulus, greater deficits, and stimulus programs and budgetary expenditures directed not just toward creating jobs, but toward encouraging new areas of private industrial growth, without which the United States is never going to extricate itself from this slump.
Won’t greater deficits lead to greater debt, which will burden our grandchildren with intolerable obligations? They will in the short term, but they are also the only way to avoid even higher debt in the longer term. The current deficits are much more the result of lost revenues than of increased spending--and they will begin to diminish only when revenues (wages and profits) begin to rise again. That won’t happen without deficit spending now.
Won’t greater deficits lead to higher interest rates, which will choke off investment? This might happen in the future, but not currently, as interest rates remain near or below zero and are not expected to rise until the private economy begins to grow. The Chinese and other foreign holders of dollars could, of course, force interest rates upward by dumping their dollars, but they would lose in the process, as the value of their existing holdings would plummet. So while greater deficits might imperil investment in the future, the United States still has a window of opportunity to use deficits to revive its economy.

In short, if Obama wants to preside over an economic recovery of the sort that benefited Ronald Reagan in 1984, he will need to replicate the variables that led to that year's economic expansion - deficit spending that pumps money into the market, creates jobs, and leads to a self-sustaining cycle of growth. Should he do this, the chances are that the recovery will cause him to win in 2012 regardless of who is nominated to oppose him, just as Reagan's victory in 1984 was guaranteed irrespective of whether the Democrats selected Gary Hart or Walter Mondale.

If, on the other hand, Obama continues on his current course, history suggests that the increase in unemployment experienced during his presidency will override other variables and lead to his defeat. That said, while the likelihood will be greater than not that he will lose, there would still be a third possible way he could pull off a victory:

iii. He can run against the Republicans instead of on his own record.

For that to happen, two very specific events would need to occur:

1) The Republicans would need to make significant inroads in the 2010 midterm elections.

Since most reliable projections indicate that they will win the House of Representatives and, while not regaining control of the Senate, at the very least grab a foothold in that body, this will probably come to pass. What's more, once it happens, the growing influence of extremist elements within that party makes it probable that they will (a) hound Obama mercilessly, (b) make statements and pursue policies that will cause them to be branded as radical, and (c) attempt to thwart every aspect of Obama's own agenda. Even though Republicans may interpret such actions as being well-timed (given their recent string of electoral triumphs), polls and basic political knowledge suggests that this would in fact be destructive to their own ends - Americans supporting Republicans in 2010 are generally motivated not by any real support for their ideology, but from disgust with Democratic ineptitude. Consequently, their actions will enable Obama to characterize Congressional Republicans - and by extension all Republicans - as vitriolic, ideologically dangerous, and obstructionist, a maneuver that would both shift blame for America's difficulties to them and cause the public to sympathize with their chief executive by default.

Such a tactical move, though seemingly far-fetched, would actually not be without precedent. Two other Democrats - Harry Truman in 1948 and Bill Clinton in 1996 - did the same thing and were ultimately successful. Having this first piece fall into place would thus probably not be a problem for Obama.

A second thing, though, would also have to occur...

2) The Republicans would need to nominate a candidate who possesses serious flaws that inherently hinder his electability.

Given the length of the election cycle and the crucial role both fundraising and name recognition play in political viability, it is all but assured that the Republican presidential nominee will be one of the four candidates currently listed at the top of the polls; after all, the last president from either party who was not among the top four in the polls two years before the actual election was Jimmy Carter in 1976. When it comes to the Republicans in 2012, that gives us Mitt Romney, Mike Huckabee, Sarah Palin, and Newt Gingrich.
From there Palin and Gingrich can be ruled out, since both - despite the wide affection with which they are held by the rank-and-file in their party organizations - are too widely regarded as being unelectable to serve as serious prospects. That leaves Romney and Huckabee.

Romney has the advantage of (a) automatically receiving the support of moderates in GOP primary voters who will prefer him to the radical alternatives, (b) being a centrist who will not scare off independent voters as Huckabee, Palin, and Gingrich may very well do, and (c) having a resume that, from his successes in the business world to his fiscal record as Governor of Massachusetts, naturally recommends him as a uniquely electable candidate in an election that revolves around economic issues. At the same time, Romney is not a candidate who excites enthusiasm among the right-wing grassroots ideologues who compose the majority of the Republican primary electorate. His wishy-washy record on social issues like abortion and gay rights, his support as governor of a health care reform plan similar to the unpopular one passed by President Obama, bigotry directed against him for being a Mormon, and his general lack of charisma are all serious weaknesses that could be exploited so as to cost him the nomination.

Romney is, in short, the "pragmatic candidate" - one whose virtues are "safeness" and "electability" and whose weaknesses are "softness" (on the issues that mobilize his party base) and the lack of any intrinsically appealing qualities. This status is by no means crippling, as purely pragmatic candidates have been successful both in getting nominated (John Kerry in 2004) and in both being nominated and elected (Richard Nixon in 1968). At the same time, pragmatic candidates also have a track record of suffering as a result of precisely those factors which were believed to be their greatest assets, thus either ultimately losing the nomination (Edmund Muskie in 1972) or being nominated only to lose the general election (Thomas Dewey in 1948).

The other possible nominee is Mike Huckabee. Like Palin and Gingrich, Huckabee's extreme views have earned him the passionate support among the party's grassroots base, especially the Christian Right, the Tea Party, and other far right-wing blocs on social, cultural, and economic issues. Of the three, however, Huckabee is widely seen as the most electable, in part due to his own impressive assets (a charming and affable persona, a record as Governor of Arkansas that pleases conservatives, an oratorical flair that helps him stir right-wing hearts, his deft skill in keeping his name prominent with a FoxNews TV show while avoiding public embarrassments) and in part to the serious baggage harming both Palin (her image as an intellectual lightweight) and Gingrich (skeletons from his personal past, particularly divorcing his cancer-ridden wife shortly after surgery and tricking her into poverty). Should the party decide to go with ideological puritanism instead of pure pragmatism, the fact that they will still care about winning would make Huckabee the logical choice.

Further helping Huckabee in this respect are the patterns of recent history. Republican primaries in the 2010 congressional and gubernatorial races have yielded a surprising number of cases in which candidates whose reasonable conservatism and widely acknowledged electabilty wound up being defeated by less electable but more philosophically stalwart alternatives, in part due to the latter group's ideological zealotry and in part because the former group was perceived as being soft in their conservatism. Should those patterns hold during the 2012 Republican primaries, Huckabee's nomination would become virtually inevitable.

Insofar as Obama is concerned, a Huckabee victory would be far better than a Romney triumph. To explain why, I will need to delve into
another central political axiom, one I like to call "The Rule of Thirty-Seven":

In every presidential election, 37% of the electorate is guaranteed to vote Republican no matter what, 37% is guaranteed to vote Democratic no matter what, and the contest is thus decided by the remaining 25% (with 1% going to third-party candidates).

This principle, which has held true in every election since 1924, holds with it the logical corollary that the 25% of voters who do decide elections are generally unconcerned about ideological particulars. This isn't to say that they don't possess ideological convictions (all voters do), but rather that, whatever the substance of their convictions, those aren't going to be a deciding factor in how they cast their ballot; after all, if ideology was going to decide how they voted, they'd be a Thirty-Seven (or, less likely, a One). Indeed, the only way ideology ever does influence their decisions is as a negative - while a liberal Twenty-Five is willing to vote for a reasonably conservative Republican under the right circumstances, and likewise a conservative Twenty-Five is willing to vote for a reasonably liberal Democrat under the right circumstances, both liberal Twenty-Fives and conservative Twenty-Fives get scared off when a Republican is too conservative or a Democrat is too liberal.

Instead the Twenty-Fives usually are more concerned (a) the incumbent party's success or failure in successfully dealing with the major issues of the time, including the economy, domestic tranquility, addressing major injustices at home, and maintaining security and strength abroad and
(b) the strength of the leadership qualities that they see in the two major candidates, including intangible gravitas, honesty, basic human decency, boldness, competence, and being principled (without being extreme). Since both parties are generally smart enough to choose candidates who don't flagrantly violate any of the minimum of criteria of (b) but, at the same time, aren't exemplary enough to win the election on (b) alone, elections usually wind up getting decided by (a).

This is what helps Romney. Despite his weaknesses, he is lucky that virtually all of them would only hurt him in the Republican primaries. Should he actually receive the nomination, many of those former disadvantages would either become strengths (his image as a moderate, his distance from the party's extreme wings) or be rendered unimportant (his Mormonism and lackluster support among conservative radicals is unlikely to hurt him, since they will be compelled to turn out in full force behind him anyway so as to beat Obama). Left behind would be his presence as an unoffensive alternative to Barack Obama, a candidate whose moderate image would make him immune to being blamed for the errors of a radical Republican Congress, and a man with a strong image on economic issues during a time of terrible recession. Thus, barring any serious gaffes on Romney's part, the odds are that these variables alone would make him capable of easily defeating Obama in the general election.

Huckabee, on the other hand, would have trouble written all over him.
That is because, on those occasions when an election is decided by (b), it is usually not because a candidate is so exemplary that (b) alone gets him elected, but rather because he falls so short in meeting basic standards that (b) alone sinks him. For example, of the four candidates for whom (b) alone was a deciding factor within the last sixty years, only one of them - Dwight Eisenhower - found that (b) alone could get him elected. The other three candidates - Barry Goldwater, George McGovern, and Michael Dukakis - found that (b) worked to their detriment because they were found to fall beneath minimum standards, in Goldwater's case because he was too ideologically extreme, in Dukakis's case because he was viewed as incompetent, and in McGovern's case because of both. Hence Huckabee would lose because the extreme nature of his Christian Right ideology would be too radical for Twenty-Fives, his failures in the Wayne DuMond and Maurice Clemmons case would be viewed as too incompetent for Twenty-Fives, and his bigoted remarks about homosexuals, women, and Mormons would be perceived by Twenty-Fives as reflecting poorly on his basic human decency.
What is the final conclusion of all this analysis?
Obama may be screwed right now, but he isn't fatally screwed. That said, if he wants to get out of this mess, he needs to start aggressively unscrewing himself.


Matthew Laszlo said...

PS: This addendum is not important to the understanding of the basic point of my earlier article, so those of you who aren't interested in minutiae can skip it. That said, it addresses a detail missing from the main piece, those of you concerned about comprehensiveness should read on.

You may have noticed that, of the ten elections that I cover in this article (from 1972 to 2008), there are two that go unmentioned - the Bush-Dukakis election in 1988 and the Bush-Gore election in 2000.

This is a deliberate omission, not an oversight. Those two elections fit very easily into the framework of the analysis I provided above; however, because they aren't particularly relevant to the question of Obama's reelection prospects (for reasons that will be clear in a moment), I decided not to include them so as to avoid having the article meander.

American voting patterns, at first, follow a simple and predictable rhythm:

1) If the economy is strong and the incumbent president is up for reelection, he will win.

2) Inversely, if the economy is weak and the incumbent president is up for reelection, he will lose.

That said, it is with the third and fourth possibilities that things become more complicated:

3) If the economy is weak and the sitting president is not up for reelection, the candidate from the president's party will become the de facto incumbent in the minds of voters and wind up suffering defeat as a result of negative association.

4) That said - and this is where things get tricky - the inverse to Point 3 is NOT true; that is, if the economy is strong but the sitting president isn't running for reelection, the candidate from the president's party does NOT automatically benefit from de facto incumbency and win by positive association.

Instead, elections in the fourth category wind up becoming the political equivalent of beauty contests. While trivialities always play a significant role in presidential campaigns, elections from the fourth category usually wind up being solely decided by them. In those contests, voters make their decisions based solely on superficial perceptions about both the candidates and the issues for which they stand.

Ironically, this tendency among American voters makes these elections the only kind in American political life that are genuinely unpredictable; although one can safely depend on a sitting president with a strong economy to be reelected, and can likewise assume that an incumbent party with a poor economy (regardless of whether it's candidate is the sitting president or a de facto heir) will be defeated, elections in which the economy is strong but the sitting president is not up for reelection can - and have - gone either way.

Matthew Laszlo said...

Thus in 1988, even though the economy was strong and voters were generally pleased with the performance of Ronald Reagan and the GOP, Republican presidential candidate George H. W. Bush was initially doing terribly in the polls compared to Democrat Michael Dukakis; for much of the election, Dukakis had a double-digit lead that Bush was unable to shake. This was due in part to Dukakis's image as a moderate and competent executive with a sound record as Governor of Massachusetts and in part to the fact that Bush's image - as a result of eight years of kowtowing to Reagan - was that of someone without his own identity or individual purpose.

What changed the '88 election was when Bush launched one of the most negative campaigns in recent political history against Dukakis (the highlights being Dukakis's support for prison furlough for violent offenders, the consequent Willie Horton incident, and the vetoing of a bill mandating the pledge of allegiance); by the time it was over, even though polls consistently showed that Bush's image had not improved one bit in the minds of voters, Dukakis's had sunk so badly that Bush wound up winning by default.

Similarly, the 2000 election was one in which - despite the strong economy presided over by Democrat Bill Clinton - the Democratic candidate, Al Gore, did not receive any discernible advantage over his Republican opponent, George W. Bush. Unlike 1988, neither candidate suffered the kind of serious damage to his personal image as did Michael Dukakis; as such, neither one ever gained a meaningful advantage over the other at any time, causing the popular vote to essentially end in a tie, albeit with Gore carrying a slight popular majority (I'll leave debates over the integrity of the Electoral College result for another discussion).

So that's how 1988 and 2000 fit into the rubric set up in the article. Like I said before, they don't really have any bearing on the 2012 election. If we're lucky, though, Obama will be reelected and the economy will have improved so that, by 2016, we'll face another election like 1988 and 2000 (yes, I know, hoping for a superficial election in which nothing serious is at stake seems counterintuitive, but after the drama and suffering of the past decade, I'm kind of hungry for it).

Matthew Laszlo said...

* its, not it's

I'm so embarrassed about that mistake.