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POLITICS SEPTEMBER 22, 2009

Job One

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Barack Obama looks like he will succeed where three Democratic presidents, Harry Truman, Jimmy Carter, and Bill Clinton, so famously failed--by passing health care reform. That is an achievement for which posterity will likely reward him. But it may not help him and his party avoid setbacks at the polls.

Consider the danger signs slowly accumulating. The off-year gubernatorial elections in New Jersey and Virginia are usually a harbinger of political success or failure for the party in power. When Republicans George Allen and Christine Todd Whitman won those races in November 1993, it was a clear indication of trouble ahead for the Democrats nationally. Currently, Republicans are leading in the polls in both states--states that Obama won in 2008.

Then there are Obama's approval ratings and what they portend for the 2010 midterms. In January, when he gave his inaugural address, Obama enjoyed a 69 percent approval rating, with just 13 percent disapproving. Since late August, his approval numbers have been hovering around 50 percent, and his disapproval numbers have been mostly in the low forties. Clinton's ratings suffered a similar decline in his first year, and it spelled disaster for the 1994 congressional elections. The same thing appears to be happening again: If current polls hold up, Democrats could fail to keep Senate seats in Nevada, Colorado, Illinois, and Connecticut next year. Political analyst Charlie Cook has recently estimated that the Democrats could lose more than 20 House seats.

Are these signs of voter discontent the result of tactical errors by Obama? Would the numbers look different if he had given his impassioned defense of national health care in February, or if he and Treasury Secretary Timothy Geithner had been tougher on the banks earlier this year? Perhaps these tactics would have led to a temporary bounce in Obama's popularity, but they would not have changed its overall trajectory. That's because Obama's fortunes are being driven mainly by one thing: not health care, but the economy.

To understand the lockstep relationship between Obama's popularity and the state of the economy, it helps to look at two previous presidents who, like Obama, confronted a failing economy: Franklin Roosevelt and Ronald Reagan.

When Roosevelt took office in 1933, unemployment was almost 25 percent, but, during his first term, it fell steadily-- to less than 14 percent in November 1936. The economy, in other words, seemed to be healing. Gallup wasn't measuring presidential approval then, but FDR's rising popularity was evident in election results: Democrats picked up congressional seats in 1934 and 1936, despite already enjoying huge majorities; and, in 1936, Roosevelt won in a landslide, carrying the Electoral College by the largest margin ever.

The arc of Reagan's popularity illustrates the same phenomenon. In July 1981, when unemployment stood at 7.2 percent--what it had been at the end of Carter's presidency--only 28 percent of Gallup's respondents disapproved of Reagan. But, by January 1983, after unemployment had risen to 10.8 percent the previous month, Reagan's disapproval rating was a whopping 54 percent. In November 1982, even a crippled Democratic Party had been able to win seats in the House and Senate. During the same time, Reagan benefited politically from surviving an assassination attempt, got Congress to approve his signature tax and budget programs, and certainly didn't make egregious political errors. What mattered, finally, was the economy. And, as the economy turned around, so did the GOP's political prospects. By November 1984, unemployment had dropped back to 7.2 percent, and only 30 percent of respondents disapproved of Reagan. In that month's election, he claimed a landslide victory over Walter Mondale. (To see how closely Reagan's disapproval ratings tracked unemployment, see Figure 1.)

For both Roosevelt and Reagan, what mattered was not the actual state of the economy, but whether things were getting better or worse. The unemployment rate was still incredibly high when FDR won reelection in 1936, and Reagan didn't actually lower unemployment between the time he took office and the time he was reelected--he only managed to get it back to where it had been at the start of his term. But, in both 1936 and 1984, the trajectory of unemployment was downward, and that was the key.

Moreover, history suggests that it is not enough for the economy to be headed in the right direction; it has to be headed in the right direction in tangible ways that voters can see. Economists pronounced the recession of the early 1990s over in March 1991. But, when unemployment continued to rise through 1991 and most of 1992 and real wages stagnated, the public perceived the economy to still be declining--and it punished George H.W. Bush accordingly.

Clinton, who was harmed by wage stagnation during his first two years, benefited dramatically in his second term from the public's perception of economic improvement. In 1998, Clinton was involved in the first impeachment scandal since Watergate, and it was widely expected that his party would lose seats in the midterm elections. But economic good news trumped Monica Lewinsky. As the unemployment rate went down during this period, Clinton's popularity increased. And Democrats ended up winning House seats in 1998 and House and Senate seats in 2000. (Figure 2 shows the close correlation between Clinton's disapproval numbers and the unemployment rate.)

To be sure, there can be mitigating factors that counter the effect a declining economy has on a president's popularity. In the first nine months of George W. Bush's administration, as the unemployment rate rose from 4.2 percent to 5 percent, his disapproval numbers rose from 25 percent to 39 percent. That was to be expected. But unemployment continued to rise, climbing to 5.9 percent in April 2002, while Bush's disapproval rating fell to 19 percent. The reason, of course, was that public approval of Bush's response to September 11 overshadowed doubts about his handling of the economy.

Similar factors could certainly make the state of the economy less important in shaping Obama's popularity--dramatic success or failure in Afghanistan, for instance, or a new terrorist attack--but, for now, these factors are not in play. And that means Obama's fortunes, like those of so many of his predecessors, are tethered to the economy.

At the peak of Obama's popularity in January, when 69 percent approved and only 13 percent disapproved of his presidency, the unemployment rate was 7.6 percent. In September, after unemployment had climbed to 9.7 percent, 52 percent approved and 41 percent disapproved. Indeed, except during the spring, there has been a close correlation between unemployment and Obama's disapproval ratings throughout the last nine months (see Figure 3).

These numbers are ominous. Obama's disapproval ratings exceed those of every president since Eisenhower at this early stage--except for Clinton, who had similar disapproval ratings nine months into his first term. And they can't be explained as the inevitable result of the administration's honeymoon period coming to an end: Eisenhower, Kennedy, and George H.W. Bush all saw their popularity rise during the same period Obama's has fallen.

So what can Obama do? It's easy to say what would really help: rapid job growth, the revival of the housing market, transit systems that aren't breaking down, the reinstitution of after-school programs, crowded shopping malls and auto showrooms--the kind of things that go with a robust economic recovery. But the U.S. economy isn't going to morph overnight from its current woeful condition to a state of buoyant full employment. In a September 14 speech, Janet Yellen, president of the Federal Reserve Bank of San Francisco, warned of a "tepid" recovery that is "vulnerable to shocks" and an "unemployment rate [that] will remain elevated for a few more years."

What Obama and the Democrats have to hope for, then, is not a full recovery, but sufficient improvement in jobs, wages, and public services to convince voters that the economy is on the mend. That's what helped Roosevelt and Reagan keep their majorities--and, in Roosevelt's case, what lay the basis for nearly four decades of Democratic hegemony. With the Republicans in disarray and demographic trends favoring the Democrats, an uptick in the economy for which voters credit Obama could lay the basis for a new Democratic majority. But, to accomplish this, Obama must promote programs that visibly and immediately provide economic relief.

In that respect, even a successful resolution to the current health care debate is unlikely to do Obama much good. Yes, it will ward off the stigma of incompetence and ineffective leadership that haunted Carter and Clinton during their first two years, but it isn't likely to overcome the drag on Obama's popularity of continuing joblessness.

As presently designed, the health care bill won't take effect until 2013--after the 2012 election. Even then, its effects may not be felt by many voters who already have insurance. Over the years, I've heard Democrats hope and Republicans fear that a health care bill will do for Democratic electoral prospects what the introduction of Social Security in 1935 did for Roosevelt. But this assertion is based on a misunderstanding of the original Social Security Act. That bill included old-age insurance, unemployment compensation, and public assistance for poor seniors and children. The introduction of unemployment compensation probably did help FDR, since the concrete economic benefits could be felt immediately. But old-age insurance--what we now call Social Security-- remained controversial and open to attack from anti-tax Republicans for years to come. Taxes for old-age insurance began in 1937 (and were later seen as contributing to the downturn that year), but benefits, which were very small, were not slated to be paid until 1942. Many workers, including farm laborers, domestic employees, professionals, and the self-employed, were not even eligible for old-age pensions.

It wasn't until 1950, when Congress expanded the scope of the program to include most employees and the self-employed, and when the benefits were increased to exceed those of welfare, that Social Security became a boon to the Democratic Party. And that was 15 years after it was created. Obama's health care bill could suffer a similar political fate--both because the initial benefits will take years to come into play and because, even when they do, the system will probably remain a work in progress for a very long time. Eventually, health care reform could undergird a liberal majority. But, in the short term, it will not necessarily keep Obama and congressional Democrats in office.

What dramatized the New Deal's contribution to the economy--ensuring that Roosevelt was given credit for the rise in employment--was the advent of colorful new agencies like the Civilian Conservation Corps, the Rural Electrification Administration, the Works Progress Administration, and the Public Works Administration. If Obama wants to follow Roosevelt's precedent, he'll introduce programs that provide jobs and capture the public's imagination. In a late August CNN poll showing that the public narrowly disapproved of Obama's "handling of the economy," respondents still deemed "cash for clunkers"--a perfect example of a visible and imaginative stimulus program--a success rather than a failure by 55 percent to 40 percent.

Moreover, to avoid what marred Roosevelt's second term--the precipitous double-dip in the depression that occurred in 1937–1938--Obama should turn a deaf ear to those who are calling for fiscal responsibility. He should keep pouring money into jobs and into the pockets of people who will spend until the unemployment rate begins going down and wages begin going up. That may mean a second stimulus (despite the current hostility toward spending in Congress) would be worth pushing. He might also be wise to follow Reagan's example and get tough with foreign competitors who are using import barriers, export subsidies, and currency manipulation to inflict large trade deficits on the United States. And, whatever he does to try to mend the economy, Obama should never stop loudly trumpeting his efforts--so that he is able to reap the credit when improvements occur.

None of this is to say that Obama shouldn't try to pass a major health care overhaul. He is correct that Democrats may not have another chance to do so for decades--and, as the experience of Social Security shows, an imperfect program can be improved over time. There is good reason to applaud the president's statement to Congress that "we did not come here just to clean up crises, we came here to build a future." But, if Obama doesn't clean up the crisis and get the economy moving again, his administration may not be around to enjoy the future he is building.

John B. Judis is a senior editor at The New Republic.

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