It's axiomatic that recessions sink presidents. A mild recession helped bounce George H. W. Bush from office in 1992. Double-digit inflation and rising unemployment scotched Jimmy Carter's reelection bid in 1980. No incumbent president since FDR in the 1930s has been reelected in the midst of an economic downturn.
President Obama may be looking to beat those odds next November. The economy isn't in a recession now, at least not in technical terms, but by Election Day it very well could be.
Chronic joblessness, falling incomes, a paralyzed housing market and dismal confidence have suppressed the recovery and left the economy very vulnerable to shocks—which seem to be abundant. A financial crisis in Europe could easily spread to American shores in 2012. Another surge in oil prices, which typically happens in the spring and summer, could clock consumers at a critical moment in next year's campaign.
A recession could be home-grown, too, especially if Congress blows its own mandate to cut the national debt or cuts spending too deeply, too fast.
Economists at the San Francisco Federal Reserve recently estimated that the likelihood of a double-dip recession is going up, not down, with about 50-50 odds of a fresh downturn in 2012. Even if there's no official recession, many Americans will still be struggling to get ahead and provide for their families.
At best, Obama will be seeking votes amidst sky-high unemployment and deep anxiety about the future. He may have the added task of convincing voters to disregard the second recession in four years, and send him back to the White House anyway. History suggests that a reeling economy would doom Obama's reelection bid. But like many other aspects of today's turbulent economy, it might be different this time.
Here are four scenarios in which Obama could get reelected, even if a recession is underway on Election Day:
Republicans cause a recession (or can plausibly be blamed for it). The economy's problems are widespread, and it's trite to blame Republicans or Democrats for them. But each political party will certainly try. At the moment, Republicans are fairly safe from blame, because Obama's been the man in charge for the last three years. But at least three developments over the next 12 months could trigger a shift that makes the GOP look responsible for a backsliding economy.
The first is the battle to tame the national debt. Fiscal sanity has been a GOP rallying cry, and Republicans have now gotten what they want: A showdown over cutting government spending. But Republicans have boxed themselves in by pledging not to raise taxes, which means they'd have to gut Medicare, Social Security, defense and other things that are popular to get the debt under control. That creates an incentive to stall. But if Congress does that, the consequences could include another downgrade of the U.S. credit rating, plus automatic cuts in defense and other programs. If Republicans refuse to consider tax hikes, and that scuttles a debt deal, they could easily come off as intransigent and reckless.
Since Republicans control the House of Representatives and have a strong minority in the Senate, they also have the power to kill any further stimulus measures, which they're generally against. That could mean the end of two programs set to expire at the end of this year: The temporary cut in payroll taxes and the federal extension of jobless benefits. Those are costly measures that add to the debt and can't continue forever, but many economists feel they're needed for another year at least, to help prop up the weak economy. If Republicans end those programs and a recession hits, they will have set themselves up as the fall guys—while Obama can say that Republicans negated his plans to create jobs and help the average Joe.
The third risky thing Republicans could do is cut government spending too fast. There's wide agreement that Washington spends too much, but the steep and immediate cuts that some reformers advocate would promptly reduce GDP and trigger a recession. Obama would have to sign any sort of bill that included draconian spending cuts, so it's not likely any time soon. But if Republicans got the kind of spending cuts they say they want, they'd have an ugly recession to explain.
Europe causes a U.S. recession. This isn't far-fetched. European politicians have a lot of tough decisions to make in order to prevent a financial crisis that could hit the continent's entire banking system and spread from there. The U.S. economy doesn't move in lockstep with Europe's, but the two are still closely linked, and Europe is probably headed for a recession already. That alone will reduce demand for some American exports and hurt many U.S. firms that do business in Europe. If economic woes explode into a full-blown financial crisis, banks everywhere will sharply curtail lending and businesses will revert to a bunker mentality, in a euro-flavored replay of the 2008-2009 crash.
If that happens, Obama will be able to say credibly that the recession isn't his fault, and there was nothing he could do to prevent it. Americans don't expect their leaders to bail out Europe, even if it the damage could migrate here. A European contagion might even generate a bit of national unity and boost support for the president, as overseas threats tend to do. It probably helps Obama's case that the European crisis has been building for months, giving Americans time to digest and understand what's happening.
Voters fear excessive Republicanism. Some Republicans have gotten away with radical-sounding proposals because with Obama in the White House, there's no chance they'll get voted into law. Rep. Michelle Bachmann, for instance, suggested over the summer that it would be no big deal for the United States to default on its debt. Rep. Paul Ryan has proposed a detailed plan for replacing Medicare with a voucher system that would double the out-of-pocket healthcare cost for a typical 65-year-old. Republican leaders, including House Speaker John Boehner and Senate Minority Leader Mitch McConnell, recently urged Federal Reserve chairman Ben Bernanke to stop intervening to boost the economy, even though we might still be in a recession—or a depression—if not for action by the Fed.
Though it's popular to bash the federal government, voters tend to dislike changes to the status quo—and the Republicans' most disruptive ideas are sure to get more attention as the campaign progresses. So even if the economy stinks on Election Day, voters sensing a Republican sweep may reluctantly give the nod to Obama, simply to check Republican ideas that make them uncomfortable.
Mitt Romney bombs. Barring something unforeseen, Obama is likely to end up running against Mitt Romney. The former Massachusetts governor is a competent, centrist candidate who spent most of his private-sector career as a businessman running a private-equity firm. But he's got several vulnerabilities. First, he's a charter member of the 1 percent—a multimillionaire who rode his family's good fortune into Harvard, then business, then politics. Romney may be presidential timber, but he's not the sort of populist candidate that disenchanted 99 percenters will ever embrace.
While his business acumen is a plus, Romney also spent much of his time as a private-equity honcho laying off workers, thinning out companies and loading them up with debt that generated cash for his firm. That's hardly a template for the type of "job creators" we need today, and the Obama campaign will be certain to make sure every sentient voter knows that before heading to the election booth. In a face-off against Romney, Obama will win the most points for charisma and compassion. Even in a recession.