Will President Obama get re-elected in 2012 if his party suffers a crushing midterm defeat? His political team likes to point to the example of Ronald Reagan. Congressional Republicans were crushed in the 1982 midterms, but the Gipper cruised to victory two years later.
Of course, the "Morning in America II" scenario depends on a fast economic recovery. Unemployment fell from 10.8 percent in November 1982 to 7.2 percent in November 1984. GDP growth was 4.5 percent in 1983 and 7.2 percent in 1984.
But most economic forecasts don't anticipate such a boom in America's near future. More likely is trend growth -- about 3 percent or so -- with unemployment still over 8 percent by the end of 2012. At best, those numbers suggest a very close presidential contest. And current polls show the president will have a tough time again winning such electoral-vote rich states as Ohio, Michigan, Florida, Indiana, Pennsylvania, Wisconsin and North Carolina.
Obama could try to emulate Reagan by proposing a massive tax cut, but that seems unlikely given the administration's belief that America is under-taxed right now.
But there is another way, although it is amazingly risky. A Bloomberg story, using a simulation run by Macroeconomic Advisers predicts a 10 percent decline in the dollar in the first six months of next year would do the following: