The final numbers are almost beside the point. Whether Democrats lose one or both houses of Congress, the 2010 congressional midterms will almost surely be an epic rebuke to the party and President Barack Obama. Two years ago, Democrats actually thought they would probably gain seats during these elections, just like Republicans did in 2002. What happened? This, politically and economically:
1. Americans still think the country is headed in the wrong direction. According to a new Washington Post poll, 71 percent of registered voters think the United States is on the wrong track. That's the same as it was in February 2009 when the economy was shrinking and hemorrhaging jobs.
2. Sustained high unemployment. Ouch. 17 straight months of an unemployment rate of 9 percent of higher, 20 straight months of underemployment of 15 percent of higher. Both numbers are twice as high as what Americans are accustomed to during the past generation.
3. A moribund housing market. According to the S&P/Case-Shiller index of property values covering 20 cities, housing prices are 28 percent below their July 2006 peak.
4. A devastating loss of wealth. Households are 19 percent — or $18 trillion — poorer than they were right before the recession in 2007 thanks to the housing collapse and falling investment portfolios. Household wealth in the U.S. fell another 2.8 percent in the second quarter of this year.
5. The infamous Bernstein-Romer chart. Back in January 2009, White House economists Jared Bernstein and Christina Romer released a report that included a chart predicting the American Recovery and Reinvestment Act would keep the unemployment rate below 8 percent. That forecast created a metric that has come to define whether the stimulus plan is considered a success of failure. The current White House forecast, by the way, assumes the rate will not fall below 8 percent until 2013.
6. Americans think the stimulus has pretty much failed. Some 68% of likely voters think the money the federal government has spent on the economic stimulus has been mostly "mostly wasted."� (ABC News/Washington Post Poll. Sept. 30-Oct. 3.)
7. Obama's unpopular and off-point agenda. Democrats love to say how productive Congress has been. But apparently it has been passing stuff Americans don't really want. They don't like healthcare reform (56 percent to 39 percent), bank bailouts (61 percent to 37 percent), or the auto bailouts (56 percent to 43 percent), according to Gallup.
8. The astounding budget deficit. Politicians are usually dubious about whether Americans really care about the deficit. The Tea Party movement showed otherwise. Numbers in the trillions are so mindboggling ginormous that they undercut confidence in the economic progress that has been made. Americans know such debt levels are unsustainable.
9. A collapse in the belief in government efficacy. Obama was from the government and he said he was here to help. He represented a swing back in the pendulum toward faith in what Uncle Sam can do. But a Gallup poll finds that 59 percent of Americans think government has too much power, up from 50 percent when Obama took office. And 78 percent trust government only "some of the time or never."� That's the same as in 1994 and 20 points higher than when Ronald Reagan was elected in 1980. (New York Times-CBS Oct. 21-26.)
10. A rise in the belief that government is too meddlesome. The new WaPo poll also asked "what do you think is the bigger risk — that the Democrats will put in place too many government regulations, or that the Republicans will not put enough government regulations in place?"� 52 percent said Democrats, 35 percent Republicans.
11. Lots of vulnerable House Democrats. There are 48 Democrats in seats won by both John McCain in 2008 and George W. Bush in 2004. After big Democrat wins in 2006 and 2008, it was time for some mean reversion.
12. The Greek debt crisis. Debt problems in Greece and other European countries have provided a vivid warning that high government debt levels can lead to financial crisis. Budget hawks no longer have to make theoretical arguments. They just have to point to the business pages.
13. The stimulus was poorly designed. The infrastructure spending took too long, and the tax credits were saved at an even higher level than the Keynesian rebates in the 2008 Bush stimulus plan, 13 percent to 25 percent. And sweeping cuts to marginal income and investment tax rates were never considered.
14. Americans are ready for Washington to be downsized. By 55 percent to 36 percent, respondents say they would rather have smaller government providing fewer services than the opposite. (New York Times-CBS Oct. 21-26.)
15. The Gulf oil leak was no Hurricane Katrina, but it was pretty bad. Not only did the environmental disaster cut against Obama's image of technocratic competence, but distracted from the administration's "Recovery Summer"� tour.
16. White House overconfidence. As recently as last spring, the White House was confident that the economy was turning its way and would help Democrats keep control of Congress. So no final effort was made for fiscal action to boost growth. This same unfounded optimism led them to create a stimulus in 2009 that was as much about rewarding interest groups (public employee unions, greenies) as boosting growth.
17. The creation of toxic levels of business uncertainty. American companies are sitting on $2 trillion in cash. They don't know what's going to happen with the deficit, Bush tax cuts or how the new healthcare and financial regulations are going to play out. They also think the president doesn't quite understand their role in the U.S. economy. Said Intel CEO Paul Otellini recently, "The decisions so far have not resulted in either job growth or increased confidence. When what you’re doing isn’t working you rethink it and I think we need to rethink some plan."�
18. Obama misunderstood his mandate. Americans voted for Democrats to get the economy fixed, not to use the crisis to redistribute wealth and implement the Mondale-Dukakis-Kerry agenda of nationalized healthcare and industrial policy.
19. The Internet. It allowed thousands of average Americans to organize and network into what became the Tea Party movement.
20. America is a center-right, aspirational nation. Democrats thought the financial crisis and near-landslide 2008 election meant it somehow wasn’t anymore. So they attempted to graft an essentially artificial, elitist (especially cap-and-trade) agenda onto the body politic. It didn’t take and is in the process of being rejected.
What a superb article.
As a very interested Canadian watching this election closely, I can only hope the repudiation of Mr. Obama and the Democrats will be of an epic nature, one for the history books.
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