Analysts: Improving economy could benefit Obama in 2012

The sagging economy laid the groundwork for what looks to be a stunning defeat for congressional Democrats in Tuesday’s elections, but two years from now a solidly recovering economy could lift President Obama’s prospects for a second term, analysts say.

Recent history provides two examples of presidents who paid a price for a bad economy in the mid-term elections, only to turn around and sail to re-election because of a turnaround in the economy. That happened both to President Reagan in the 1980s and President Clinton in the 1990s.

While the economy seems dead in the water to many people today, despite more than a year of recovery and growth, two years hence most economists expect it to be in full-recovery mode and exhibiting momentum and job growth that is needed to satisfy the demands of voters.

“For the voter, these things really start to matter about a year or so before the election,” said Michael Lewis-Beck, a political science professor at the University of Iowa and author of the book “Forecasting Elections.”

“Obama still has time to turn the key economic indicators around.”

The economy is always the most important factor in a presidential election. But as President George H.W. Bush found in 1992, simply being in a recovery is not enough if recession is still fresh in the public’s mind.

In Mr. Reagan’s case, his approval ratings dipped even lower than Mr. Obama’s by the mid-term election of 1982, when a deep, double-dip recession seemed to darken the outlook for his re-election and unemployment reached a high of 10.8 percent.

But two years later when he was running for re-election, unemployment had dropped to 7.2 percent and the economy was surging at a 7.2 percent growth rate, enabling him to coast to a resounding victory while proclaiming “Morning in America.”

In Mr. Clinton’s case, the economy grew at a healthy 3.7 percent rate in 1996, and several years of solid growth had pushed down the unemployment rate to 5.4 percent, giving a substantial boost to his re-election bid.

By the time Mr. Obama is campaigning for re-election in 2012, economists expect growth to be in the 3 percent range, though unemployment could still be elevated at between 7 percent and 8 percent.

“If the economy is improving or in better shape, that’s good for Obama,” said Stanford University professor David Brady, but he added that how Republicans behave now that they have regained partial control of Congress will matter just as much.

Mr. Brady sees the possibility of a repeat not only of Mr. Clinton’s experience with the economy, but also with the drama following the Democrats’ loss of control over Congress in the 1994 election.

“Everybody said Clinton was dead” after the devastating loss of 54 House seats, eight Senate seats and control of both chambers, he said. But miscalculations by Republicans, who “overreacted” to their midterm victory in 1994, proved to be a benefit for the president by the time he ran for re-election.

The same thing happened to President Harry S. Truman when Republicans overreached after taking control of Congress from the Democrats in the 1946 midterm elections, he said.

“History tells us that a Republican Congress can overreact and make the Democrats look good,” he said. “Six months is an infinity in politics. Who knows what the Republicans will do?”

Mr. Brady added that Republicans currently do not have a potential presidential candidate who is attractive enough to beat Mr. Obama. He discounted the chances of the most-named front-runners - former Alaska Gov. Sarah Palin, former Massachusetts Gov. Mitt Romney and former Arkansas Gov. Mike Huckabee.

Mark Berniat, an economist who writes a political economy blog, gives Mr. Obama a 55 percent chance of winning the election against any of the current Republican front-runners.

“The state of the economy determines who will win,” he said. Mr. Obama remains “appealing,” he said. “Despite hard Republican criticism of him, he maintains a good image and is liked by the international community.”