The Wages of Competence: Obama, the Economy, and the 2010 Midterm Elections

The Democratic Party's huge loss in the 2010 election, coming after victories in 2006 and 2008 that had seemingly put them in charge of the government, registered the voters' verdict: the president and his congressional allies had failed to measure up. While other issues, most notably health care reform, played a role, most commentators agree that the election was largely a reaction to the economy. What explains the Democrats' poor showing on the economy? There are three obvious suspects. First, critics and defenders alike blamed the president's leadership. In the run-up to the 2010 election, conservatives argued that the administration could have restored prosperity by enacting the Republican economic agenda; the Democrats deserved those historic losses because Obama pursued the wrong policies. Liberals similarly insisted that the Democrats would have done better if President Obama had exerted better leadership on the economy. (1) This story line is familiar: in a presidential system, the bulk of attention focuses on what the chief executive does. But this perspective is inadequate as a foundation for understanding policy, either as a response to economic conditions or as a means to winning electoral support. It elides the fact that presidents have only limited power to influence the economy. Second, the severity of the financial crisis and the recession certainly constrained any government's ability to restore prosperity in the short run. As the economic historians Carmen Reinhart and Kenneth Rogoff show, over the last two centuries financial crises have caused recessions that are deep and prolonged, and that respond only slowly to fiscal and monetary policy. (2) Third, the president has limited control over the relevant policy instruments. Monetary policy is independent of the elected branches, and the main fiscal policy instruments can only be used if the Congress concurs with the president's plan. And focusing on the president slights the potential of the opposition in the U.S. separation of powers system to block the administration's proposals in Congress and to frame the electorate's impression of enacted policies--a potential that the Republicans used to dramatic effect. Understanding the dramatic decline in the Democrats'--and Obama's fortunes, in short, needs to consider three factors: the dire economic legacy left by George W. Bush, the actions of the president and his economic team, and Republican resistance in the Congress and the highly mobilized conservative populism at the grass roots. The president's actions are important, to be sure, but the other two factors capture the key constraints on the president's power. Ignoring these not only errs in attributing blame or praise, but undercuts the potential to learn from experience. This article reviews the developments of economic policy making in the first two years of the Obama administration in order to assess the relative importance of these three factors. The objective is to sharpen our account of the constraints and opportunities of the president in dealing with an economic crisis. Given the real-world constraints, could the White House have taken different actions that would have had a more potent impact at reenergizing the economy, and that would have been more favorably perceived by the public? The next section looks briefly at economic conditions as a potential explanation, showing that objective conditions take on political import only as they are framed in the campaign and reported in the media. The article then goes on to summarize the legislative history of the administration's key economic policy initiatives, the antirecession program and the financial reform law, and then to put these policy actions into the context of party competition by tracing the actions of the conservative opposition in the legislative arena and in the election campaign. The Ambiguous Political Implications of "Objective Conditions" It might seem as if simply looking to objective indicators would give a valid picture of the economy's political import. …