2012 Election: The Outlook A Year in Advance

Perhaps never before in my lifetime has an election been this tough to handicap a year in advance, with so many conflicting factors in play. Things tend to change a lot in a year, as was certainly the case in 1991 when George H.W. Bush looked like a lock for re-election, in 1995 when Bill Clinton looked vulnerable, and in 2003 when George W. Bush seemed poised for a comfortable victory. In November 2011, we're looking at a scenario where the economic environment for the incumbent is very unlikely to get measurably better and could in fact get much worse, while the political environment for the incumbent isn't as bad as it should be and could in fact get much better.

Starting with the economy, incredibly slow recoveries are the new normal in postglobalization America. Interestingly, the demographic most aware of this structural transformation is the white working class, the very group who rewards those vowing to slow down economic recoveries even further with ill-advised austerity measures and the withdrawal of trillions of dollars of demand from would-be consumers to be redistributed to nonexistent "job creators" already flush with cash. Aside from the white working class, everybody else seems surprised that the economy hasn't returned to a 1999 level of growth with unemployment rates of 3% even in the wake of a financial crisis with effects still percolating through the system in the form of escalating foreclosure rates resulting from bad loans made in the years before the crisis.

With all these forces working against economic growth, I'm surprised it's doing as well as it is, but it won't take much to derail us again and there's a flurry of rocky waves that could do just that in the next 12 months. At the top of that list is the crisis in Europe, which has already hit crisis mode in Greece and could very easily hit Italy soon. Europe seems to be now where America was in the spring of 2008, realizing they have a major problem on their hands and knowing that it won't be going away, yet maintaining a stiff upper lip about the magnitude of the problem until it reaches its inevitable boiling point with their equivalent to the Lehman Brothers collapse. Honestly, the tipping point could come about at any time, and I'd be surprised if Europe limped along for another full year without the law of gravity catching up to them. And when that point comes, America instantly plunges into another recession. There's not a damn thing Obama can do about this, but if it happens, he will almost certainly lose the election next year.

Yet with an economic situation with no tangible upsides and seemingly endless downsides for Obama, I would rate his chances of being re-elected at no worse than 50-50 because the political environment is not terminally toxic. That is the case because the opposition party is peddling a political tonic that is about as popular as diarrhea, with a cohort of unimaginably awful candidates as their chief emissaries. Voters got their opportunity to express their outrage at Obama in 2010, and the result has been the elevation of a fringe group of extremists to what could charitably be called 50% control of the American government, and the result has been complete political paralysis in a time of economic crisis. American voters convinced themselves that divided control of government was a good thing, and a strong case can be made that in the past public policy worked better with conflicting forces meeting in the middle. But with the current political polarization and the Republican Party gone off an ideological cliff, the public is seeing that past precedent no longer applies and divided government now has the potential to destroy the country based purely on GOP obstinence.

And most of the Republican Presidential candidates not only personify everything the public doesn't like about Congress, they also happen to seem woefully incompetent. The public certainly believes the country is moving in the wrong direction, but the Republicans want to double down on the things the public is most sour about. And with the national conversation moving towards income inequality courtesy of Occupy Wall Street, the Republicans have found themselves fiercely on the wrong side of public opinion with their tin-eared calls for still more tax cuts for upper-income Americans, and are creating an opportunity for a damaged Obama to resurrect himself.

Anecdotal evidence shows the only reason that Republicans are still in the game for 2012 is Obama and the liabilities he has from being an incumbent in a period of domestic decline. A Suffolk University poll showed a hypothetical contest between Hillary Clinton and Mitt Romney producing a crushing 55-38 victory for Hillary, and Hillary mopping the floor up with Perry by an even larger 58-32 margin. Since Hillary isn't running, this doesn't tell us much, but below the surface the poll numbers speak volumes. Against a non-Obama Democrat, the two leading lights for the Republican Party are scoring less than 40% of the vote. Insofar as one can glean this is a "generic" Democrat versus the current Republican frontrunners, that speaks very badly for the long-term prospects of these Republicans and the radioactive political message they're peddling.

And Obama has proven himself successful in the past at winning over skeptical voters, as he did in the final weeks of the 2008 campaign, meaning that against such wimpy opposition, one should not sell short his ability to do the same next year peddling a message far more in line with what the public wants to hear. To be sure, Obama will have to thread a needle in more ways than one, but I can easily envision a scenario where he not only wins, but wins with a comfortable majority and more than 300 electoral votes. And if the next year produces an economic environment vaguely similar to the current one, with a nominally lower unemployment rate and growth rates in the 2.5% range, that's the outcome that seems most plausible.

One caveat I will add that goes undiscussed by political analysts is that the primary metric by which Obama's re-election will be determined is not the unemployment rate, but gas prices. With that in mind, modest economic growth is a best-case scenario for Obama given that a sudden and unforeseen surge in economic activity will send oil prices soaring, and since Joe Sixpack still won't be getting a raise he will judge Obama more harshly with 5% growth and $5.50 gas prices than he would with 2% growth and $3.00 gas prices.

As hard as it is to handicap the Presidential race, it's even harder to handicap Congressional races next year with so much up in the air regarding redistricting court challenges and historic incumbent dissatisfaction. I don't believe there will be a general "throw the bums out" sentiment that will hurt both parties equally as such a climate almost always hurts one party far more than the other. It's hard to imagine any scenario where the arithmetic works out for the Democrats to win the Senate. It's possible, but does anybody really see a scenario where Ben Nelson, Claire McCaskill, and Jon Tester survive? With the House, a favorable situation at the top of the ticket that is yet to be determined will determine whether the Republicans gain seats or lose seats, but given how they consolidated power in the now unreachable McCain districts in 2010, it's very hard to see how the Democrats have a prayer of winning the House back since those seats will mostly stick with their Republican freshmen. What is a safe bet is that whichever party wins the White House in 2012 will have a bloody midterm in 2014.

Another prediction I will make is that the 2012 election will have a lower voter turnout since any Presidential election since 2000 and possibly since 1996. Few of Obama's first-time voters will be sufficiently motivated to reward him for his bleak first term next year, while the independents that will determine the election outcome don't seem like they'll be chomping at the bit to replace him with a shmuck like Romney or Perry. Even for myself, the excitement surrounding elections is now more than ever based exclusively on the horse race aspect. Holding any expectation for good governance is a relic of my youth that was discarded after 2006 when the new Democratic Congress governed from a pathetically weak posture. Whoever wins the 2012 election, America will not be better off in four years, and politics becomes far less interesting when it becomes a contest in who will destroy the country less rapidly.