El Justo Reclamo

Recession Would Work in Democrats’ Favor

By TOM REDBURN
The New York Times

It’s almost unheard of for an economic slump to occur in a presidential election year.

In the last century, it has only happened three times —­ in 1932, 1960 and 1980 —­ and each time the incumbent president or his party were handed a defeat. That’s what everybody mostly remembers about Herbert Hoover and Jimmy Carter, if not Richard Nixon.
Washington is nothing if not a self-preservation society: politicians and policymakers do everything they can to avoid having the bottom of an economic cycle hit in the months just before voters go to the polls to choose a new president. But despite the best efforts of the Federal Reserve and Congress, which have both moved with uncommon swiftness to provide hefty monetary and fiscal stimulus, it now looks more likely than not that the nation is about to go through a recession this year in which economic activity could well be falling into the summer, perhaps longer. It may already be in one.
Nobody welcomes a recession, but for the Democrats that probability might be considered good news. And even if the economy skirts a formal recession and only undergoes a more modest slowdown before rebounding later this year, voters are likely to blame the weak economy mostly on the Republicans, who are all but certain to be led in November by Senator John McCain. It doesn’t make much difference that President Bush will not be on the ballot.
“Under that scenerio, a lot of very favorable non-economic things would have to happen for the Republicans to win,” said Ray C. Fair, a Yale economist who is the leading expert on how the economy’s performance affects election outcomes. “If we have a recession, even a mild and short one, the unemployment rate will be rising this fall. The Democratic candidate will be hammering on the economy and Republicans will be very much on the defensive.”
But then what? In 2009, a central quandary for the next president, particularly if it is a Democrat with healthy Democratic majorities in both houses of Congress, will be how aggressively to push an agenda that calls for greater government spending and higher taxes.
In advancing those goals, the sense that the economy is doing poorly cuts both ways. It adds to the crisis atmosphere that encourages an activist government. But it also tends to make middle-class voters want to protect themselves and wary of being asked to dip into their pockets to finance programs for those in need.
And the Republicans are likely to take aim at Democrats over rolling back the Bush tax cuts and suggesting some wholesale tax increases, like Senator Barack Obama’s plan to make more income subject to Social Security taxes.
“It puts Democrats in a bit of a political bind,” said Stephen Rose, a moderate Democratic economist who has challenged some of the conventional wisdom on the left about the reasons behind the increasing anxiety of the middle class.
“An economic downturn should be a natural environment for supporting a bigger safety net,” Mr. Rose explained, “but a lot of middle-class voters are also concerned about not wanting to pay more taxes. And people don’t feel as much solidarity with people below them when they are feeling bad about their own economic prospects as well.”
With the stimulus package that Congress just passed, it is clear that Democrats, while determined to spread the largesse as broadly as possible, are particularly focused on appealing to middle-class voters.
“We are making history,” House Speaker Nancy Pelosi said after the bill was approved by lawmakers on Thursday evening. “What has passed the Congress in record time is a gift to the middle class and those who aspire to it in our country.”
In his 2005 book, “The Moral Consequencs of Economic Growth,” Benjamin Friedman, an economics professor at Harvard, makes the case that strong economic growth fosters less fear of immigrants and more generous support for public education and the disadvantaged. Economic stagnation, by contrast, leads to insecurity that encourages a retreat from progressive social policies.
Mr. Friedman, in a telephone interview, notes that incomes for the majority of American households, adjusted for inflation, have slipped despite the overall growth of this decade. While a recession is a relatively short-term event, Mr. Friedman adds, it is likely “to focus people’s minds on a stagnation that has been under way throughout the decade.”
Democratic politicians and policy activists have made much of the erosion of middle class incomes and hope to use it to their advantage in this year’s election. But they have to be careful to avoid leaving the public with the impression that the economy is in such bad shape that the best that can be done is to hunker down for hard times.
“A lot will depend on how any recession plays out,” said Jason Furman, director of the moderately-liberal Hamilton Project at the Brookings Institution in Washington. “If it has blown over by 2009, most of this is irrelevant.”
But even if the recession ends relatively quickly, a just-released study by John Schmitt and Dean Baker of the liberal Center for Economic and Policy Research that looked at the three most recent downturns — in the early 1980s, the early 90s and in 2001 — suggests that the economic pain is likely to linger well beyond the formal end of any recession.
“Based on the historical pattern,” the study concluded, “the unemployment rate and the number of unemployed would continue to increase through 2010 (to 6.7 percent in the case of a mild-to-moderate recession) or 2011 (to 8.4 percent in the case of a more severe economic downturn.)”
Despite his worries about the economy, though, Mr. Baker remains hopeful that the next President will be up to the challenge.
“It’s going to take a skillful politician to navigate through these troubled economic waters,” Mr. Baker said. “But whoever wins this election is going to have proved himself or herself to be a very skillful politician, indeed.”