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The latest job numbers are discouraging. The economists’ debate on the stimulus package will go on forever. Fans will explain that it wasn’t big enough, it didn’t get spent quickly enough, it wasn’t focused enough, the rest of the world let us down, the situation was worse than we thought. Opponents will say that you can’t help the construction sector by keeping state employees working, borrowing crowds out private more productive investment, frenetic fiddling destroys confidence and discourages investment and risk-taking, the whole thing was a boondoggle for special interests and a third of the stimulus consisted of tax rebates which never do any good. The stimulus bill made things worse, not better.

That debate will never be settled. It will just rage on.

But the politics of the stimulus is over. It has failed. Unemployment has barely budged. When it has fallen it has been because of discouraged workers. Private job growth (where almost all of the jobs were lost) has been anemic. Forget about the economics. The economy, particularly the job market, which is what voters look at first, stinks. Of course it could be even stinkier without the stimulus. But that argument is much harder to defend on the campaign trail. The party in power has not created a recovery. That may be unfair but it’s irrelevant. The Democrats are going to take a major whipping in November. Maybe they lose the Senate. They are likely to lose the House.

How will the President respond, especially if he loses both the House and the Senate? Some see him as an ideologue who will persist in his top-down policies and collectivist agenda both at home and abroad. If he does that, he will lose in 2012 and as I suggested yesterday, he may struggle to even get the nomination. So I presume he will move to the center as Bill Clinton did. We’ll see.

In response to my post yesterdayt, many argued that the Republicans aren’t exactly the party of small government. I agree. They are the party of small government rhetoric. Alas, not the same thing. So many argue that it is unreasonable to be excited about potential Republican gains in November.

I do not agree, though I have no love of the Republicans. They spent money like crazy when they were in power and who turned their back on their principles to save Wall St before the Democrats kept making it worse. But the success of the Republicans this fall will make a difference in the following sense.

I think many Republicans and Democrats will campaign on an explicit promise to repeal Obamacare. They may or may not succeed but there is a chance it will happen. Cap and trade will be dead. Government spending isn’t going to shrink dramatically but it will shrink relative to recent levels. There will be proposals to cut taxes, particularly corporate taxes as a way to stimulate job growth. There will be more gridlock, which is good.

And not only will Republicans do very well in November. Democrats will move to the center and away from Obama’s agenda to keep their jobs. They may not keep their promises. But that will eventually cost some of them.

It doesn’t really matter if the Republicans do particularly well or not. The legislative agenda will be moving back to the center.

The bottom line. Obama took a gamble. He has tried to achieve a lot. He passed a health care bill that still fails to garner majority support and a financial reform that no one understands. The economy is not improving. Throw in the oil spill and you have an administration that no one wants to embrace. We are in for a lot of change in the next 6 months.


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