No issue other than jobs, (outside of an unexpected major domestic/international crisis or a major scandal), has so great a political capacity to short-circuit both the Democratic Party's majority party status in Congress and the Obama administration's tenure.
Historically, the economy's health has had a major impact on voters' decisions, and a key measure of that health has been job creation, and by extension, the U.S. unemployment rate. (There's considerable political science research and polling data to support the above, and much of that knowledge was first discovered by scholar Angus Campbell, et al., in The American Voter.)
Here's where Obama and the congressional Democrats stand now:
During off-year Congressional elections, the party in charge of the White House typically loses 10 to 14 House seats and a few Senate seats, and the reason has little to do with whatever issues are current at the time. Off-year Congressional elections are party-line elections -- historically, most independent/unaffiliated voters don't vote in them because nothing "really big" is at stake, like the presidency -- and this typically depresses voter turnout. Subtract those independent voters (many of whom may have been swayed to vote for the president, and by extension, his party, in the previous election), and you get the notorious off-year seat loss for the party in charge of the White House.
However, add an important issue -- like the economy (good or bad), or a war, or a scandal (such as Watergate), and turnout is affected. If the party in charge of the White House is solving the problem, it gains votes; if it isn't solving the problem, it can lose a lot of votes, and hence a lot of seats in Congress.
Therefore, given the nation's high unemployment rate of 10.2%, if the 2010 congressional election were held today, the Democrats would get swamped: They'd lose about 20 to 25 seats in the House, and two or three, perhaps even as many as five Senate seats. And it doesn't matter if the party in power, in this case the Democrats, didn't cause the problem. The American people say: "There's a problem (in this case jobs/unemployment rate). You're in charge. Now fix it."
Essentially, once a party wins the presidency/gains control of Congress, that party takes ownership of the problems facing the nation, economic and otherwise. Fair? Hardly. But that's how the American people think and vote.
That's why it doesn't matter, politically, that the recession started during the presidency of George W. Bush: The recession, and the U.S. economy's inadequate number of jobs are President Obama's -- and congressional Democrats' -- problems.
The Clock Is Ticking for Democrats
However, there is some good news for Obama and the Democrats: The 2010 election is not today. (And, conversely, what the Republicans wouldn't give to be able to move up the 2010 election to January 2010!)
But the 2010 election approaches. Now, the big question is, how long do Obama and the Democrats have to solve the jobs problem?
In a nutshell, they have about six months, or until June 1, 2010, to get the jobs needle pointed in the right direction. And the reason is that most voters make up their mind who (or which party) they're going to vote for about six months prior to the election. Essentially, voters assess the state of the nation through Memorial Day, then take the summer off, and when they start paying attention again to politics at summer's end, rarely do issues facing the nation change enough in September and October to change their vote in November.
But investors should note that I said "get the jobs needle pointed in the right direction." Obama and the Democrats do not have to create 7.6 million jobs the U.S. economy has lost to-date in six months, or even anything close to that.
Rather, what the American people want to see is an end to job losses and a U.S economy that's creating between 150,000 and 200,000 jobs per month, etc. They also want to see the unemployment rate start to decline. In other words, by June, the American people want to see tangible improvement in economic conditions that affect their lives.
To be sure, other economic issues and international issues historically have influenced voters' decisions: inflation, taxes, trade and, of course, wars. Some pundits argue a potential tax cut will attract voters from across the spectrum to Republicans in 2010. Nope -- the issue won't mean much politically: Tax cuts have little appeal for citizens with little or no income.
So Obama and congressional Democrats should devote most of their political capital to implementing economic policies that will get the great American job creation machine going again.
If those jobs don't appear by June 2010, the Democrats will suffer a major defeat in November 2010, and the Obama era will be jeopardized. However, if job creation resumes, the Democrats could actually gain seats in the House and Senate, and the Obama presidency will be strengthened.
Financial Editor Joseph Lazzaro is writing a book on the U.S. presidency and the U.S. economy.