It's the Economy, Stupid
Gross, Daniel, Newsweek
Byline: Daniel Gross
How growth could change the midterms.
Many republicans are looking forward to November as a repeat of 1994, when popular anger against an overreaching, reformist Democratic Party enabled the GOP to pick up 56 seats in the House of Representatives. But Republicans might be well advised to look at an earlier midterm election as a precedent: 1934.
When elected in 1932, Franklin D. Roosevelt swept into office along with a Democratic Congress just after the economy fell apart. They quickly stabilized the system, injected deficit-fueled stimulus into the economy, and passed far-reaching reforms. Then, as now, Republicans and talk-radio demagogues accused the president of being an un-American, currency-debasing socialist. They promised that all of Roosevelt's efforts--from the Civilian Conservation Corps to the Securities and Exchange Commission--would fail.
But the recession ended in March 1933, and the economy grew by 16.9 percent and 11 percent in 1933 and 1934, respectively. The unemployment rate started to come down from sickeningly high levels. In October 1934, the Dow Jones industrial average stood at 95--up nearly 90 percent from February 1933. And in November 1934, the Democrats increased their already-large majorities, picking up nine seats in both the House and Senate.
History doesn't repeat, but it sometimes rhymes. In 2009 and 2010, Democrats passed Keynes-inspired stimulus efforts and pushed through health-care reform over the uniform and frequently shrill opposition of Republicans. The economy stabilized and a recovery began to gain traction. Fast-forward to October 2010. Assuming recent trends continue, the U.S. economy will be in its sixth quarter of GDP growth, and the rancor of the health-care debate will be a distant memory. While not producing nearly enough jobs, the economy will be producing a sufficient number to bring the unemployment rate down. Should the stock market simply move sideways, it'll still be 70 percent higher than its March 2009 nadir. Is this a setup for an electoral wipeout?
"It's the economy, stupid" has become a political cliche. But both number crunchers and political scientists have shown that economic trends in the months leading up to elections can have great power in forecasting outcomes. …