Democrats in 2008?

DEMOCRATS IN 2008?….I said in passing yesterday that I thought 2008 would be a Democratic year. Maybe even a landslide win for the Dem presidential candidate. Unsurprisingly, many people were skeptical. Why exactly do I think this? (And: even if I’m right, shouldn’t I keep my mouth shut about it?)

On the “keeping my mouth shut” part, what can I say? I wouldn’t be a very good blogger if I were in the habit of keeping my mouth shut, would I? On the “why do I think this” part, however, some explanation is in order. So here it is.

Warning: No, I can’t prove any of what follows. What’s more, I’m not an economist. And maybe I’m just blinded by partisanship. All true. But here it is anyway.

As preface, I agree that it’s possible that George Bush’s foreign policy will turn out to be a disaster. If Iraq fails to improve and instead remains a festering, Vietnam-like quagmire four years from now, that would probably be enough all by itself to sweep a Democrat into office.

What’s more, if the culture wars light up again and the Republican party goes over the cliff with a candidate less adept at finessing the Christian right than George Bush, that could do it too.

But although those are possibilities, four years is a long time and they remain just possibilities, certainly not something I’d be willing to bet on. However, there are two other reasons for taking a Democratic victory in 2008 more seriously.

First is simply the rhythm of American politics. Since World War II, the presidency has switched parties every eight years like clockwork. The only exception has been 1976-1992, in which Democrats got shortchanged a term. Considering that George Bush won both his terms by tiny margins and that the country appears to be just as evenly divided today as it was in 2000, I expect that the pendulum will swing back in the usual way.

But here’s the real reason I think a Democrat will win in 2008: the economy. I’m not sure what will happen with Iraq or the culture wars, but the economy looks to me to be headed for disaster. Four years after the 2001 recession, the labor market is still slack and economic growth is mediocre, despite massive amounts of conventional fiscal stimulus. The budget deficit is out of control, and Bush is plainly not serious about reining it in (the first priorities of his second term have been Social Security privatization, an energy bill, and estate tax elimination, all of which would make the deficit even worse). The housing bubble is likely to end soon and rising interest rates have already killed off the refi boom ? which in turn will tighten the spigot on consumer spending. The current account deficit continues to skyrocket, and rising oil prices will likely make it even worse. As Paul Volcker wrote a week ago, current economic circumstances “seem to me as dangerous and intractable as any I can remember, and I can remember quite a lot.”

This is all bad stuff, but not necessarily catastrophic. Ronald Reagan faced many of the same problems, for example, but despite his reputation as an ideologue he raised taxes six years in a row after cutting them once (chart here), addressed trade deficits, and faced down his corporate donor base to pass a genuinely useful tax reform bill. (He also had the good fortune to preside over declining oil prices.)

That’s not the case today. George Bush is an extremist who has no apparent intention of facing up to reality. He will continue to push taxes down, he will continue to spend heavily, and he will continue to ignore global imbalances. This is a recipe for disaster.

How long can this state of affairs last? It’s possible that it can last more than four years, but I doubt it. My guess is more like two or three at the outside, and a serious shock ? most likely an oil shock of some kind ? might cause it to happen sooner.

There are no good solutions to this any longer, but there are still reasonable (if painful) actions that could be taken to soften the blow. Unfortunately, George Bush gives no sign of believing that he should take any of them. What’s more, his economic team is far too weak to react to an economic crisis effectively if and when we have one.

So: that’s why I think a Democrat will win in 2008. George Bush is a true believer who will keep a firm and confident hand on the wheel as he drives the United States off a cliff. And then we’ll have an election.