Talking us into a recession

Yoni Appelbaum, writing in the Atlantic, argues that William Jennings Bryan single-handedly created a double-dip recession for the United States when he delivered his Cross of Gold speech in 1896:

Bryan's speech is well remembered. Its consequences are not. Wall Street panicked. For ten days after Bryan's nomination, capital fled across the Atlantic, halted only by the formation of an extraordinary consortium. Even in the months leading up to the convention, the likely ascendancy of silverite forces had spooked businessmen and investors. After Bryan's improbable triumph, the bottom fell out of the economy. The uncertain climate of the spring of 1896 gave way to a prolonged slump. Interest rates rose, investments fell, stock and bond issues dried up, building permits slumped, and new orders for capital goods failed to materialize. Industrial and commercial activity declined across the board.

I can't claim to be any sort of an expert on the Gilded Age economy. I'm sure Appelbaum pursues this line of research in greater detail elsewhere, and I really don't have data to counter him here. But given how little power presidential speeches actually have, I'm skeptical of his argument. Were investors really so skittish and naive as to believe that the claims of a presidential nominee were soon to become law? Even if Bryan were to somehow win (McKinley beat him 51-47), would he be able to get this agenda through Congress? (Republicans held a 246-104 majority in the House at the time Bryan delivered his speech.)

I suppose this is possible. I mean, if Rick Perry were nominated next year and gave a speech at his convention promising to move the U.S. to a monetary system based solely on tungsten, yeah, some folks might panic a bit. But my guess would be that the relationship between Bryan's 1896 address and American economic problems was one of correlation rather than causation.

Update: Matt Glassman notes that Bryan's nomination itself (more so than the speech), was something of a surprise, as few observers expected the silver advocates to secure two-thirds of the convention vote. So perhaps Wall Street did panic when they saw one of America's two major parties being taken over by a faction they perceived as manifestly irresponsible. Still, I'd love to see some hard evidence. I guess I need to read Appelbaum's book.

The economy and the vote: It ain't just America

Ezra cites a new Larry Bartels paper on economic growth and support for the incumbent majority party in 31 recent parliamentary elections in developed democracies. Key graph:

Seen in this light, the Democrats here in the U.S. only underperformed very slightly. 

What's at stake in 2012

Saying that an upcoming presidential election is the most important election in a generation is a classic hack trope. That said, the upcoming presidential election is the most important election in a generation.

Why do I say this? Because we are in the middle of (and hopefully on the tail end of) a truly catastrophic recession. The economy will recover, although that may not happen for several years. It seems fair to say that the economy will not be roaring again any time soon, meaning that Obama will at best win by a squeaker. If it dips back into recession, he's toast. Most likely, it will end up just being a really competitive and interesting race on par with 2004.

The party occupying the White House when the economy does finally start booming will get the credit among the public for saving the country. It doesn't matter so much who was in power when the recession hit or whose policies helped or hurt the recovery. To a large extent, it's simply a matter of being in the Oval Office at the right time.

I've quoted Larry Bartels on this point before, but here it is again:

Considering America’s Depression-era politics in comparative perspective reinforces the impression that there may have been a good deal less real policy content to “throwing the bums out” than meets the eye. In the U.S.,voters replaced Republicans with Democrats and the economy improved. In Britain and Australia, voters replaced Labor governments with conservatives and the economy improved. In Sweden, voters replaced Conservatives with Liberals, then with Social Democrats, and the economy improved. In the Canadian agricultural province of Saskatchewan, voters replaced Conservatives with Socialists and the economy improved. In the adjacent agricultural province of Alberta, voters replaced a socialist party with a right-leaning funny-money party created from scratch by a charismatic radio preacher, and the economy improved. In Weimar Germany, where economic distress was deeper and longer-lasting, voters rejected all of the mainstream parties, the Nazis seized power, and the economy improved. In every case, the party that happened to be in power when the Depression eased dominated politics for a decade or more thereafter. It seems farfetched to imagine that all these contradictory shifts represented well-considered ideological conversions. A more parsimonious interpretation is that voters simply—and simple-mindedly—rewarded whoever happened to be in power when things got better.

All this is to say that a handful of states in 2012 will likely determine Democratic or Republican dominance for the next decade or longer. And given the huge ideological gulf between the parties today, that means vastly different policies depending on the outcome.

Thought for the day

If Kaddafi's ouster leads to plummeting oil prices, and that leads to an improved American economy, Obama will owe his election to a group of Muslim militants, which is what the right has been alleging for years anyway.

Give a Man a Job

David Karol alerted me to this fantastic 1933 video of Jimmy Durante plugging FDR's National Recovery Administration, urging wealthy audience members to hire people as a great patriotic act. (Watch for Moe Howard!)

Obviously, Obama has tried to sell his stimulus efforts in a very different way than Roosevelt tried to sell his. It's frankly difficult to imagine the modern White House working with a major studio to put out a film clip like this in which Jessica Alba urges business owners to take on more employees in front of a portrait of Obama. It would be labeled dictatorial socialism -- as FDR's efforts were. Somewhat more problematically, it would probably be seen as a joke.

Also, Jimmy Durante was never young.

Challenging a sitting president

Rhodes Cook says that Obama's in relatively good shape for reelection because he's not facing a challenge from within the Democratic Party:

For some time now there has been a political rule of thumb: Presidents with little or no opposition in their party’s presidential primaries go on to win reelection, while those who must weather a significant primary challenge are defeated in the fall election.

At this point, there are no signs of a Democratic primary challenge to Obama.

If there was, he would have reelection problems of the first magnitude. For if a president has trouble uniting his own party, how can he successfully reach out to independents and voters from the other party in the fall? The answer over the last century has been that he can’t.

I must respectfully disagree with the direction of Cook's causal arrow. Obama is not facing a challenge from within the party because he's in decent shape for reelection.

Yes, Carter faced a primary challenge in 1980 and lost in the general election, and the same thing happened to Ford in 1976. But the only reason those presidents faced primary challenges was because high quality candidates (Teddy Kennedy and Ronald Reagan, respectively) and their funders and endorsers calculated (correctly!) that their incumbent president was weak, would likely lose, and would likely drag down others in their party should they be at the top of the ticket.

Obama's path to reelection is far from certain, but it will largely depend on what happens with economic growth over the next year. Democrats with presidential ambitions realize that the economy will probably not slip into a recession in the next year and that presidents rarely lose their reelection bids unless the economy is in a recession. Just that much information is enough to keep the high quality challengers at bay until 2016.

Collective action and the stimulus

So it looks like Obama is trying to push through a second stimulus package, but Democrats don't want to touch it.  Even Michael Bennet, who is about as closely tied with Obama politically as one can get, is distancing himself from the president on this one.

This is a classic Prisoner's Dilemma.  Democrats no doubt want a stimulus to pass -- it would be good for their constituencies -- but none of them wants to be seen as the one that allowed it to happen.  Any vote for more government spending right now will just be more fodder for Republicans in a very, very tough election for Democrats.  Now, that doesn't mean that opposing a stimulus bill will earn a Democrat immunity from being portrayed as a big spender (although that seems to be Bennet's rationale), but it deprives the Republicans of one more piece of ammunition.

Well, now that I think about it, it's not a perfect Prisoner's Dilemma.  It would be perfect if passage of the stimulus (the collective goal) would save Democratic seats in November.  It won't.  The only thing that could do that is some serious economic growth, and no stimulus is going to do that inside of two months.

So opposing Obama on this is a smart move politically for Democrats.  Hell, Obama might have expected that, but is just offering a stimulus so that endangered Democrats have something on which they can distance themselves from him.  The downside, however, is that the stimulus would probably help people get jobs, and that's not going to happen.  And given what the Congress is likely to look like next January, that's not going to happen for a long, long time.

Weak growth means the House is in play

It's the end of July and second quarter 2010 economic figures are now available from the Bureau of Economic Analysis.  And they're not good.  Anyway, these are the numbers I've been waiting for in order to calculate a forecast for the 2010 midterm elections.

Now, before I do that, a note about forecasts.  I do not claim to have any special powers to foresee the future.  I am not doing this to make money.  I think forecast models are helpful when issued before an election for two reasons.  First, they allow us political scientists to test what we know.  It's relatively easy to fit curves after the fact, but it can be very useful to say that this is what we think drives elections, and here's a test based on what's going to happen in the next few months.  Second, they give us a baseline for interpreting the election when it happens.  Republicans will no doubt crow about any electoral gains they make in the fall, but it's helpful to know whether they did better or worse than the models predicted.

Anyway, onto the forecasts.  In my previous posts on this topic (like here), my economic variable has been the growth in per capita real disposable income between the third quarter of the year prior to the election and the second quarter of the election year.  And growth for the current cycle has been pretty anemic -- just 0.88%, while the average prior to midterm elections since 1950 has been 1.69%.  The other figure I include in my calculations is the president's approval rating as of Labor Day, which I'm guessing will be 45%.  That's right about where he's been lately, and his numbers don't bounce around all that much.

Based on these figures, I calculate that Republicans will gain 40 seats in the House.  And guess what?  That's just one more seat than they need to control the chamber.  These figures also predict that the Democrats will lose control of seven state legislatures.

Now, it turns out that I can get a slightly better fit (an R-squared of .64 as opposed to .59) if I instead use the economic growth from the second quarter of the year prior to the election to the second quarter of the election year.  By that measure, Republicans stand to pick up 50 seats, and the Democrats could lose control of 10 state legislatures.

So what does this all mean?  Obviously, these numbers are aren't set in stone, and there are substantial error terms associated with these forecasts.  This is also a pretty simple model: I'm not using data on candidate quality or regional variations, which can be important.  I've used the two variables (economic growth and presidential popularity) that seem the most predictive of midterm election results, but of course these numbers could change drastically between now and November.  The economy could rally, or stall.  (A prediction based on second quarter economic numbers in 2008 would have totally missed the economic collapse that started in September of that year.)  Obama could capture Osama Bin Laden and beat him to death with a shovel on "The View," which I'm guessing would have some short-term impact on his approval ratings.  But barring any major surprises, this is where we are -- a very close contest with a better-than-even chance of a Speaker Boehner being sworn in next January.

Note: My data are available here.

Does the economy affect state legislative control?

Earlier today, I wondered if it was possible to predict patterns in state legislative elections the same way we do for congressional and presidential elections.  Well, political scientist, heal thyself.  The NCSL has data on partisan control of state legislatures going back to 1938.  So I plugged that into my dataset on midterm elections and produced the following graph.  The horizontal axis charts the growth in real disposable income between the 3rd quarter of the year preceding the election and the 2nd quarter of the election year.  The vertical axis shows the increase in control of state legislatures by the president's party.

Some observations:

1. The president's party never gains state legislatures in a midterm election, at least as far back as the data go.  The best a president can hope for is to lose no state legislatures, as happened with Truman in 1950 and Clinton in 1998.
2. The national economy predicts changes in control of state legislatures even better than it predicts changes in the composition of the U.S. House.  The R-squared for this bivariate relationship is an impressive .54.  It was only .13 for House elections.
3. The change in control of state legislatures correlates with the change in House seat shares at .82.
4. While the national economy does a good job explaining changes in control of state legislatures during midterm elections, it falls flat during presidential elections.

You can make of this what you want, but this strikes me as good fodder for the debate over whether the economy structures everything that happens in elections or only structures about 95% of what happens in elections.

UPDATE: Tim Storey at NCSL was kind enough to share his data on state legislative seat shares.  I've used that to make the following scatterplot:

I used percentages rather than raw numbers since the total number of state legislative seats isn't constant over time (Hawaii and Alaska add theirs in starting in 1962).  The relationship between national economic growth and changing state legislative seat shares is statistically significant (p=.003), suggesting that for each percentage point drop in disposable income, the president's party will lose just shy of one percent of its share of state legislative seats.  This bivariate regression has an R-squared of .28, only about half of what it was for statehouse turnover above.