If Mitt Romney wins the election, he will preside over a divided government and find it nearly impossible to accomplish anything in his agenda. If Barack Obama wins the election, he will preside over a divided government and find it nearly impossible to accomplish anything in his agenda.
Repeal Obamacare over a Democratic Senate majority? Forget about it. Raise taxes on a GOP Congress? Can't wait to see it. Nominations for the Federal Reserve and Supreme Court are important events where the White House does seem to hold home-field advantage; and a Supreme Court ruling that overturns Roe v. Wade would be truly momentous. But when it comes to passing laws, both parties have made it repeatedly clear they don't want what the other guy is serving, and they're not terribly interested in discussing matters further. It that environment, who controls the congressional caucuses matters as much as who sits in the Oval Office.
THE FUNDAMENTALS PRESIDENTS DON'T CONTROL
When it comes to economics, I'm dovish about the significance of this election, not only because divided government will blunt either candidate's agenda, but also because global fundamentals will probably outweigh whatever they accomplish.
The U.S. today suffers from a jobs gap, a wage gap, and an innovation gap -- and the president doesn't have much control over any of them right now. The jobs gap is being filled, albeit too slowly. The end of government austerity means that we've gone from losing 200,000 public sector jobs a year to gaining more than 20,000 this year. That's a big deal. The other big deal is housing, where a nascent recovery will expedite hiring, first in construction, and then throughout the industry, while rising home prices should make consumers and businesses more confident about spending. Barring some awful news from Europe or Asia, this is going to happen no matter whom we call president next January.
As jobs return, incomes will rise, but middle class salaries will continue to fall behind their historical rate of growth. This wage gap isn't Obama's fault, and it wouldn't be a President Romney's fault, either. It's globalization, and automation, and rising health care costs, and labor's decline matching the fall of U.S. manufacturing, and a lot of other trends you have heard of, and are easily considered opaque, because they have no easy solution. Some public problems have logical matching policies (e.g.: If Social Security is underfunded, we raise taxes or tweak spending). But some middle class problems are just ... problems. When multinational companies discover that American workers within a global supply chain are replaceable with cheaper workers around the globe, that's not the president's fault; it's just a part of global business.
Creating tens of millions of well-paying middle class jobs means giving tens of millions of people something to do with high added value. Presidents can't do that. Innovations can. But as Clayton Christensen described brilliantly in the Times, the U.S. economy has, for the moment, moved beyond "empowering" innovations that create new scalable products that require more workers toward "efficiency" innovations that make existing processes cheaper and easier -- and replace workers. The fixation on efficiency isn't evil. It's not a function of bad governance. Instead, Christensen writes, it's a stage of capitalism, and a dilemma for capitalists.
Any U.S. president in a divided government today faces two distinct challenges to enacting an economic agenda that makes a difference for average people. The first challenge is that the architecture of divided government prohibits any one branch from getting its way on domestic policy. The second challenge is that even getting one's way on domestic policy is probably insufficient to take on the huge global forces threatening the middle class.