A year ago Barack Obama was elected President and the Democrats won a 60 seat super-majority in the Senate largely as the result of events having little to do with the political philosophy or legislative ambitions of the victorious candidates.

Candidate Obama

Don’t get me wrong, President Obama ran an extraordinarily effective campaign, is a charismatic figure, an exceptional orator and has a compelling story.  He crafted an effective, non-specific set of campaign messages which resonated with a broad swath of the electorate.  No one is against hope, and few resist the assumption of positive change. 

Candidate Obama was further aided by a series of political events beyond his control: 

• George Bush was an unpopular President waging an unpopular war.
• The Republicans had openly abused their power and defied their stated values of small government and limited spending
• The media allowed Mr. Obama to campaign on undefined, generalized positions which appealed to a majority and could be beneficially interpreted individually by each voter
• The media and the McCain campaign allowed Mr. Obama to define a more-centrist political philosophy than his voting record, historical statements and affiliations
• McCain ran a wretchedly unorganized and uninspiring campaign

Predicting the Outcome of the 2008 Election Based on Economic Understanding

The 2008 election was an unusual outcome in that the United States generally does not elect known, aggressively liberal Democrats to the office of President.  The only election which approaches this outcome in my estimation was the 1936 Presidential Election, which coincidentally also occurred during an economic Depression.  (In 1932 FDR ran against the policies he later enacted.  In 1940 WWII was the only real campaign issue and a change in leadership understandable unlikely)

It was my belief during 2007-2008 that the economic fall-out from collapsing housing prices would trigger public angst and a stock market crisis which would result in the election of a Democrat as President regardless of who the candidates were.

Based on my expectations for the impact of a deflating Housing Bubble, in August 2007 I wrote:

“Dow 10,000 by 2009.  You heard it here first.” 

Based on my predictions of falling housing prices, rising unemployment and the "real world" impact of a stock market correction, in January 2008 I wrote:

Economic “Armageddon is here and it’s mostly the Government's fault.  Now the Democrats will get into office and the miserable social programs we have been saddled with since the last Great Depression will look tame after Hillary is done with us.”

At that time I had not heard of Barack Obama and Hillary Clinton seemed to be the presumptive Democratic candidate and our next President.  But my expectations were fulfilled as the worst economic crisis since The Great Depression was responsible for a Democrat being elected and the pursuit of a New Deal-like agenda including Stimulus, Bail-Outs, Health Care, Cap and Trade, Card Check, Price Fixing, Minimum Wage and Regulatory Reform.

It is my stated understanding that The Great Depression was created by Government policies which exacerbated and perpetuated an economic crisis.  It is my well-chronicled concern (and the reason this blog exists) that Government policies since late 2008 unnecessarily risk a long-lived economic Depression.

The Political Aftermath

While no individual American in November 2008 voted to bestow a 60 seat Senate majority upon the Democrats, the nationwide angst over the looming Depression resulted in that outcome. 

The Democrats wrongly claimed a national mandate to fulfill their social ambitions believing they were elected based on campaign proposals rather than the result of an economic crisis.  Exit polls support this contention as the majority of voters then and now define themselves as fiscally conservative and reject specific proposals such as health care reform.  

It is ironical that the political party primarily responsible for gestating the Housing Bubble benefitted so astonishingly from its collapse.  It is further fascinating that the political party which largely manufactured and perpetuated the current, unsustainable health care system has used its failure as an argument to take control of it entirely. 

The Democrats have used their super-majority unapologetically, passing legislation on strictly partisan votes that in some cases have not even been read by members of Congress.  The Stimulus Spending Bill being one such example. 

Pursuing undesired social legislation and forcing these proposals through Congress has resulted in a backlash by the electorate.  The President’s approval ratings have evidently fallen at the fastest pace on record, and recent polls and retirement announcements bode poorly for the Democrats in the coming election.  It appears that the Senate Majority Leader will lose his Congressional seat in November.  But the Democrats still enjoy a super-majority in the Senate and may pursue their unwanted social agenda unopposed… until today.

In what represents one of the more shocking political events in memory, a non-Democratic candidate has come out of nowhere to claim the Senate seat vacated by Ted Kennedy.  This event may not be understated in terms of its political and economic importance.  The seat had been held by Senator Kennedy for 46 years and was assumed to be the de facto 60th vote to pass partisan legislation in the Senate. 

In what I am describing as a Political Miracle, the Democrats have been deprived of their ability to force through economically devastating public policy which would have the effect of permanently impairing job creation and real GDP growth, limiting an eventual recovery and risking an unnecessarily prolonged Depression.

Much damage has already been done, and I do not expect the Government to take the proper response to the downturn pre or post the November 2010 election.  But it is possible that we may avoid the creation of new legacy burdens, similar to those imposed on the country during The Great Depression, which even today risk our nation’s solvency.

For the first time since October 2008 I feel hopeful that the Government’s contribution to intensifying economic damage may be limited.  

It is a strange, strange world we live in where a President and Congressional super-majority may be elected primarily due to the arbitrary timing of an economic crisis.  It is bizarre that the most ambitious and potentially damaging public policy initiative undertaken by that filibuster-proof majority may be derailed by the untimely passing of one of health care reform's greatest supporters.  We live during interesting times.