Via Matthew Yglesias, we have this report from the IMF with a very simple story: This recession is slowing, but recovery will be sluggish -- especially in the world's advanced economies, where the hurt has been deepest. Yglesias concludes: "If I were an incumbent U.S. Senator running for re-election in 2010 I would be terrified by these projections." Is that right?
Here's the illuminating graph the IMF provides. Advanced economies' GDP
growth dipped into steep negative territory in 2008 and looks to
recover, albeit slowly, toward the end of 2009.
On
the one hand, I think Yglesias is right that this isn't gravy for
incumbent senators in difficult reelection campaigns next year. Ideally
you would want a 2010 GDP growth rate of something closer to five or
six percent, ie one that recovers at least twice as quickly to bring
unemployment down from a peak north of 10 percent that we'll probably
see late this year or in early 2010. And since employment is a lagging
indicator -- and the last two recessions have seen what the industry
calls "jobless recoveries," where unemployment peaks linger for months
-- we can't expect jobs to recover in harmony with a slow economic
rebound.
On the other hand, my pet theory about the recession and the 2010 elections is that it's the Republicans
who should be most concerned. Most of the economists I read seem to
agree that we'll begin to see positive economic growth toward the end
of 2009. The GOP is stuck in an unfortunate track of economic timing,
because the mechanics of this
recession are such that by next
summer, the Democratic party will be able to say confidently: "Is this
economy better off than you were two years ago, when we were mired in
the suckhole of the worst financial crisis in 60 years?" And the
answer, even by dour estimates like the IMF, will almost certainly be Yes.
Side
note: It's for this reason that I've always defended, at least
strategically if not virtuously, the tactics of Republicans in Obama's
first few months in office, which has to build a unified fortress of
opposition to the Obama White House. If we spring out of this recession
with five-percent GDP growth in the first few quarters of 2010,
Republicans are flat-out hosed, because Democrats will get all the
credit. If we don't -- ie if growth is flattish and if unemployment
lingers around 9 percent toward the end of 2009-- than Republicans
stand to gain, but only if they can say: "We never stood with this
White House, or this failed economic policy, and look where we are
now." Inasmuch as 2010 will be an ultimatum on the economy, the GOP has
little reason to be seen as secondary enablers of an unconservative
economic policy.
Most economists expect positive economic growth, but not strong economic growth. The expectations are such that by next summer, the Democrats will be responsible for an economy that, at least in terms of GDP, will be smaller than the 2008 economy, with an unemployment rate 4 points higher. I guess I'm not sure why those facts would let Democrats claim--in your view correctly--that the economy is better off than it was in 2008. Maybe you have an idiosyncratic view of "better off"?
I'm nodding to everything you said except the last bit. September 2008 to March 2009 was an absurd roller coaster, wasn't it? Lehman failed, the economy plunged, the stock market was expected to hit the low 5000s in March...those were dark times, and although we are in no way out of the woods yet, it seems clear to me that comparing a non-recession September 2010 to a nearly cataclysmic September 2008 is something Democrats won't be embarrassed to do (that is, of course, unless the economy double dips...)
Responding to Derek's Reply...
First, we obviously can't rule out a double-dip recession.
Second, there's a very real chance that by 2010, the economy may be recovering technically, but not politically. There's a lot of ways that could happen- jobs don't come back, wages don't increase, family costs stay high- or the opposite of that happens, just way. Too. Slowly. for the amount of money spent.
In such a case, things will be very difficult for the Democrats (though I think they've got enough numbers and structural advantages to maintain control, especially in the Senate).
I agree totally with your pet theory although not the last para on the wisdom of Republican strategy. Who with a straight face can claim the economy in the summer of 2010 isn't going to look very much better than October 2008 when we were in the 11th month of the worst recession since the war and campaigns were being "suspended" to deal with the probable collapse of the banking system. The public clearly understands this is a "Bush/Republican recession" and even if the forget occasionally the Democrat campaign machine will be on hand to jog their memories. There's also the distinct possibility the economy is humming along quite nicely, even if not at 6% growth which has happened only at the peak of booms, but certainly noticeably so. And this is where we get to the wisdom or otherwise of just saying NO. The campaign commercials write themselves. With anything like a recovering economy taking place and the large number of Republican senatorial retirees the GOP is very exposed next year. And this leaves out the antics of people like Ensign, Palin and Sanford. In the house the Democrats are pretty well maxed out but in the senate gains of 3-6 are not beyond the realms of possibility.