Apart from being a critical moment for the United States’ fiscal policy, the budget debates are an inflection point in the 2012 campaign. Particularly if an especially large deal is struck, like the Senate’s “Gang of Six” plan, or if negotiations break down and Congress struggles to raise the debt ceiling, it could dictate the strategies of both presidential and Congressional candidates.
Incumbent presidents fundamentally have two strategies that they might want to pursue. The first path, the Referendum Path, is usually the preferred one if the president’s approval ratings are strong and if voters are in a positive mood about the direction of the country. The strategy is no more complicated than asserting that the president has done a good job and deserves another term, the paradigm case perhaps being Ronald Reagan’s 1984 “Morning in America” campaign.
If however the White House has doubts about whether it can win a referendum, it can instead pursue the Partisan Path. It’s also pretty simple: the message is that however well the president might be doing, the alternative is worse.
The Partisan Path has been less likely to succeed because it tends to be undertaken under more difficult circumstances. But it has worked occasionally, like in 1948, when Harry Truman persuaded voters that the “Do-Nothing” Republican Congress was to blame for the country’s economic problems. The Partisan Path was also adopted successfully in 2004 by George W. Bush, although Mr. Bush’s approval ratings and the country’s economic performance were probably just strong enough for him to have won re-election on the merits.
If the budget negotiations break down, it’s going to more natural for President Obama to pursue the Partisan Path. The conditions for it are probably better than normal. Congress is even more unpopular than it is ordinarily. Many Republican presidential candidates are quite conservative, and none are especially popular. In the budget debate, Republicans appear to have lost credibility with the public, with opinion having shifted against them quite rapidly, both in terms of policy specifics and their overall approach.
A grand bargain on the deficit, on the other hand, would add to Mr. Obama’s résumé, which already includes the passage of a major health care bill and the killing of Osama Bin Laden. Mr. Obama’s campaign would probably not be as sunny as Mr. Reagan’s in 1984 due to the tepid economy (and since the health care bill is a bug rather than a feature for many voters). But it would emphasize having made tough choices and having solved big problems. Aided by relatively strong personal favorability ratings and what would probably be favorable press coverage coming out of the budget negotiations, Mr. Obama would position himself as the “adult in the room” and suggest that he had done reasonably well under difficult circumstances. This is a version of the Referendum Path.
Which of these strategies is more effective is likely to be determined by the condition of the economy.
If the economy performs about in line with current forecasts — with growth being somewhere between slow and moderate — the Referendum Path might be more likely to put Mr. Obama over the hump. It would be more consistent with his “post-partisan” branding from 2008 and Mr. Obama could point toward some signs that his approach had been successful, especially if the budget debate produces a major compromise.
On the other hand, if economic growth is more sluggish than expected (meaning that the country would be on the verge of recession since current expectations are already low) the “post-partisan” message might fall on deaf ears. In particular, it might fail to resonate with the Democratic base, many of whose members are unhappy with virtually all iterations of the budget proposals because they focus more on spending cuts than tax increases. The extremely poor results for Democrats in the 2010 elections were based to a large extent on turnout discrepancies and if the same conditions were to manifest themselves in 2012, Mr. Obama’s re-election prospects would be dim. Even if some independent voters gave him credit for bipartisanship, at least as many might punish him for the poor condition of the economy.
The Partisan Path, in this instance, would give Mr. Obama more of a puncher’s chance, particularly against a subpar Republican nominee.
Finally there is the possibility that economic growth is faster than expected and is genuinely good by 2012. In this scenario, Mr. Obama’s choice of strategy is less important, since he is likely to win re-election either way. It could, however, plausibly affect elections to Congress. When government is divided, the party in charge of Congress does not necessarily “suffer” from a good economy. Instead, it is at least as likely to share in the credit, with all incumbents being positioned more strongly.
Under these circumstances, the president’s Referendum Path message can implicitly, or even explicitly, become an endorsement of divided government. And the other party may be willing to play along. Republicans, for example, stuck a number of compromises with President Bill Clinton in 1996, making it harder for Bob Dole to draw contrasts with him. But their strategy produced a dividend: Republicans lost just 9 seats in the House and actually gained 2 in the Senate, retaining their majorities in both chambers.
My view, then, is that the electoral consequences of the budget debates are rather ambiguous. A “big deal” might tend to help Mr. Obama if economic growth is moderate, giving him another accomplishment to pitch to the public. But it could make his messaging awkward if growth is subpar, sacrificing some potential advantages stemming from the unpopularity of the Republican Congress. A major compromise on the budget also might not help Democrats if economic growth is stronger than expected, in which case their focus would turn to winning control of the Congress and would want to draw more rather than fewer contrasts.
There are also a couple of wild cards. One is how the budget debates might affect the cohesion of the Republican Party and the identity of their presidential nominee. A second is how a budget deal might affect the economy, either positively or negatively. These factors are well worth considering, although beyond the scope of this column. There is also the possibility that the country, rather than merely flirting with a default, actually endures one, which could produce a different trajectory without meaningful historical precedent.
In general, however, I would advise both sides in the budget debate to prioritize policy considerations: they may tend to dictate the political outcomes rather than the other way around.