Via Matthew Yglesias, we have this report from the IMF with a very simple story: This recession is slowing, but recovery will be sluggish -- especially in the world's advanced economies, where the hurt has been deepest. Yglesias concludes: "If I were an incumbent U.S. Senator running for re-election in 2010 I would be terrified by these projections." Is that right?
On the one hand, I think Yglesias is right that this isn't gravy for incumbent senators in difficult reelection campaigns next year. Ideally you would want a 2010 GDP growth rate of something closer to five or six percent, ie one that recovers at least twice as quickly to bring unemployment down from a peak north of 10 percent that we'll probably see late this year or in early 2010. And since employment is a lagging indicator -- and the last two recessions have seen what the industry calls "jobless recoveries," where unemployment peaks linger for months -- we can't expect jobs to recover in harmony with a slow economic rebound.
On the other hand, my pet theory about the recession and the 2010 elections is that it's the Republicans who should be most concerned. Most of the economists I read seem to agree that we'll begin to see positive economic growth toward the end of 2009. The GOP is stuck in an unfortunate track of economic timing, because the mechanics of this recession are such that by next summer, the Democratic party will be able to say confidently: "Is this economy better off than you were two years ago, when we were mired in the suckhole of the worst financial crisis in 60 years?" And the answer, even by dour estimates like the IMF, will almost certainly be Yes.
Side note: It's for this reason that I've always defended, at least strategically if not virtuously, the tactics of Republicans in Obama's first few months in office, which has to build a unified fortress of opposition to the Obama White House. If we spring out of this recession with five-percent GDP growth in the first few quarters of 2010, Republicans are flat-out hosed, because Democrats will get all the credit. If we don't -- ie if growth is flattish and if unemployment lingers around 9 percent toward the end of 2009-- than Republicans stand to gain, but only if they can say: "We never stood with this White House, or this failed economic policy, and look where we are now." Inasmuch as 2010 will be an ultimatum on the economy, the GOP has little reason to be seen as secondary enablers of an unconservative economic policy.