It doesn't take much political analysis to conclude that the state of the economy in the fall of 2010 will largely determine the outcome of the 2010 midterm elections. In areas of the country where economic conditions are improving for most people, Democrats will likely do extremely well. In areas of the country where economic conditions are either stagnating or continuing to deteriorate for most people, Republicans should see improvements from their 2006 and 2008 performances. No amount of spin, or strategic improvements, or even progressive infrastructure can do much to change this dynamic.
Also of note, there is very little in the way of new economic policy that will change this dynamic. This is because federal economic policy for the period between now and October-November of 2010 has largely already been passed and implemented. The policy battles in which we are currently engaged will mainly impact economic conditions in 2011, 2013, and even further down the road. Here is why:
Trains that have already left the station
Bailouts: Don't expect much, if anything, in the way of new, congressionally mandated bailouts to financial institutions or automakers between now and 2010. Such bailouts highly unpopular, and will not take place in another election year.
Stimulus: Don't expect a second, large-scale stimulus, either. Given low public support for a second stimulus plan (only 27% according to a recent CBS poll), the current stimulus is the only plan we should expect to get. Discussions about whether or not we should have another one are entirely academic. Personally, given that I think we needed a larger stimulus, I also think we need a second stimulus, but it just ain't going to happen.
Budget. The non-health care aspects of the federal budget are also a done deal. The votes to pass the budget are already in place, and the budget will cover federal spending until September 30th, 2010. That is only five weeks from the 2010 elections.
Health Care: Major provisions of health care legislation, including a public option and requiring insurance companies to accept all applicants, will not take effect until 2013. So, even if health care reform passes, it isn't going to have much impact on economic conditions for not only the 2010 elections, but even for the 2012 elections.
Collectively, this means that federal spending plans from now through the 2010 elections is already in place. Given that Democratic electoral fortunes are largely tied to the state of the economy come election time, in the short-term, the policy mold for the midterm elections has largely been cast.
While the mold has largely been cast, in the extended entry, I look at the areas where Democrats can still nibble around the edges to improve economic conditions for most people by 2010.
Compared to the size of the four bullet points listed above, the four listed below largely nibble around the edges. However, cumulatively, they can still have a not insignificant impact, especially if the economy really is already on the mend (I doubt that, but it is possible).
What can still make a difference
The American Clean Energy and Security Act (ACES): Some of the more optimistic forecasts for the ACES indicate that, largely due to the mandated efficiency standards in retrofitting buildings, it can create 1.7 million jobs that will last at least a decade. If the bill is passed before the end of 2009, with 2010 efficiency requirements (a 30% increase in the current bill) for buildings intact, that will have an impact on economic conditions by the end of 2010. Certainly, it will impact the economy by 2011 and 2012.
Whatever the problems of the ACES in reducing greenhouse emissions, weakening the Clean Air Act and giving away money to polluters, this is a real positive to the legislation that needs to be supported.
State and local budget battles: While the federal budget for fiscal year 2010 is largely already in place, many state and local governments (most notably California and Pennsylvania, which represent one-sixth of the national population combined) are facing major budget showdowns this summer (and fall). The outcomes of those battles will have a major impact on the amount of local services available to people. As such, they will also have an impact on the 2010 elections.
Cash for clunkers. While we can't expect a full-scale second stimulus, expanding the cash for clunkers program and unemployment benefits will have a not insignificant impact on the economy. If cash for clunkers eventually becomes a $3 billion, or even $5-10 billion, program, it should result in creating economic activity five times that amount.
Extending unemployment benefits. 1.5 million Americans are projected to lose their unemployment benefits by the end of the year. Extending those benefits through December 31st, 2010--as proposed by Rep. McDermott of Washington--would result in tens of billions of economic activity.
Will it be enough for Democrats to avoid losing seats in 2010? That is an extremely difficult prediction to make. However, it is important for the future of progressivism that the economy does turn around quickly. Even if the Democratic trifecta did not institute policies that many progressives thought went far enough, the public will still use the state of the economy in 2010 and 2011 as the benchmark for the efficacy of using the government as the spender of last resort. If the economy does not improve, this basic tenet of progressive economic will take a huge hit in public opinion for a long time to come.
It is also worth noting that if the economy does turn around, progressive economics will be vindicated and embraced by an entire generation of voters for a long time to come. High risk, high reward.
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