Victor Davis Hanson

After 2010, will he be Carter or Clinton?

That is the ongoing parlor game now played among pundits over how President Obama will react to a probable shellacking of the Democrats in midterm elections next month.

Jimmy Carter stuck to his liberal agenda after suffering a modest rebuke in the 1978 midterms amid sky-high inflation, interest rates and unemployment. He didn't take voters' hint and went on to get clobbered two years later by Ronald Reagan.

In contrast, after his party was slaughtered in the 1994 midterms (losing 51 House and eight Senate seats), a triangulating Bill Clinton moved to the center and handily won re-election in 1996.

So what will Obama do if he loses a Democratic majority in the House and quite possibly the Senate, as his approval ratings tank to 40 percent?

Most likely, he will stick to his liberal orthodoxy -- but in a way unlike Carter. Yet, like Clinton, Obama may still have a good chance at re-election.

Here's why.

Currently, banks, corporations and small businesses are sitting on trillions of dollars in cash from two years of low interest rates, a rebounding world economy, and massive cutbacks and downsizing. But they will continue to stay on the sidelines as long as they are unsure of the actual costs of Obamacare and a proposed federal income tax hike. A constant barrage of anti-business and anti-wealth diatribes from the president makes them even more skittish.

Yet, if the Republicans regain the House, the entire Obama redistributive agenda will stall. That stasis will give far more certainly to the business cycle -- and probably provide the necessary psychological lift for businesses to start hiring and buying.

In a weird way, by losing the Congress, Obama may well see the economy rebound -- a turnabout for which he'll take credit, despite the failure of his earlier massive borrowing schemes that will seem like ancient history by 2012.

Without Democratic congressional majorities, the president will also have to agree to vast budget cuts, as Republicans try to stave off fiscal insolvency.

Again, the president can let the Republican Congress take the hit for the unpopular pruning of entitlements, even as he points to a more encouraging balance sheet. In a Zen sort of way, Obama will allow Republicans to restore financial sanity to his administration, even as he blasts them for cutting programs and hurting the needy.

Victor Davis Hanson

Victor Davis Hanson is a classicist and historian at the Hoover Institution, Stanford University, and a recipient of the 2007 National Humanities Medal.