'It's the Economy, Stupid!' The Real Lesson of the 2010 Midterms

ANALYSIS

(Nov. 4) -- "It's the economy, stupid."

The phrase, popularized by James Carville, helped propel Bill Clinton to the White House, defeating George H.W. Bush in 1992. Above all else -- and Bush presided over the end of the Cold War and a painless Persian Gulf War -- the economy is the barometer for the country's political tides. That was evident again Tuesday with the Republican landslide, which saw the GOP retake the House, pick up seats in the Senate and perform even more impressively in various state government contests.

All the other factors -- the rise of the tea party, health care reform, ongoing wars in Iraq and Afghanistan -- were secondary. The bottom line was that official unemployment stood at 9.6 percent -- and actually is considerably higher -- and the Democrats' implicit argument that things would have been much worse were it not for their actions didn't resonate with voters.

"Had unemployment been below 6 percent, does anybody think the anxiety over the health care bill and auto bailouts would have mattered as much?" writes former New York Gov. Eliot Spitzer in a perceptive post-election survey of the "Democratic disaster."

Never mind that the proposed Republican solutions for the country's economic woes are difficult to reconcile. They ran on a mutually exclusive promise of slashing taxes and the deficit without making the necessary cuts in defense, Social Security, Medicaid and Medicare that could possibly achieve this result. Conflicted thinking, to be sure, but it didn't take away from the fact that President Barack Obama's economic policies have yet to turn the economy around.

Spitzer, who targeted Wall Street abuses during his tenure as New York's attorney general, may be exaggerating when he identifies the Wall Street bailout as "the emotional Rubicon for this administration." But it certainly did no favors for Obama with Main Street voters or the liberal wing of the Democratic Party, both of which would have liked to see much more regulation of the industry. That his top economic advisers were so closely tied to Wall Street didn't help.

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In retrospect, it appears the Democrats would have been better off to push a much larger stimulus (more jobs) while holding Wall Street's feet to the fire -- policies recommended by Nobel Prize-winning economists Paul Krugman and Joseph Stiglitz, both liberal stalwarts kept at arm's length by the president.

Sure, the deficit would have gone up. But that's often the price of getting out of a recession. And wasn't it Dick Cheney, no less, who said, "Deficits don't matter"? Indeed, in a blog post, Krugman explains that the general public doesn't understand much about deficits, anyway.

And Krugman seconds Spitzer's thinking on the midterms:

What actually happened, of course, was that Obama failed to do enough to boost the economy, plus totally failing to tap into populist outrage at Wall Street. And now we're in the trap I worried about from the beginning: by failing to do enough when he had political capital, he lost that capital, and now we're stuck.

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