One of the best political observers of my day, Jeff Greenfield, observes Barack Obama and the Democratic Party and their future:

As historians begin to assess Barack Obama’s record as president, there’s at least one legacy he’ll leave that will indeed be historic—but not in the way he would have hoped. Even as Democrats look favorably ahead to the presidential landscape of 2016, the strength in the Electoral College belies huge losses across much of the country. In fact, no president in modern times has presided over so disastrous a stretch for his party, at almost every level of politics.

Legacies are often tough to measure. If you want to see just how tricky they can be, consider the campaign to get Andrew Jackson off the $20 bill 178 years after he left the White House. Working class hero? How about slave owner and champion of Native American genocide? Or watch how JFK went from beloved martyr to the man whose imperial overreach entrapped us in Vietnam, and then back to the president whose prudence kept the Cuban Missile Crisis from turning into World War III.

Yet when you move from policy to politics, the task is a lot simpler—just measure the clout of the president’s party when he took office and when he left it. By that measure, Obama’s six years have been terrible.

Under Obama, the party started strong. “When Obama was elected in 2008, Democrats were at a high water mark,” says David Axelrod, who served as one of Obama’s top strategists. “Driven by antipathy to George W. Bush and then the Obama wave, Democrats had enjoyed two banner elections in ’06 and ’08. We won dozens of improbable congressional elections in states and districts that normally would tack Republican, and that effect trickled down to other offices. You add to that the fact that we would take office in the midst of the worst recession since the Great Depression, and it was apparent, from Day One, that we had nowhere to go but down.”

The first signs of the slowly unfolding debacle that has meant the decimation of the Democratic Party nationally began early—with the special election of Scott Brown to Ted Kennedy’s empty Senate seat in Massachusetts. That early loss, even though the seat was won back eventually by Elizabeth Warren, presaged the 2010 midterms, which saw the loss of 63 House and six Senate seats. It was disaster that came as no surprise to the White House, but also proved a signal of what was to come.

The party’s record over the past six years has made clear that when Barack Obama leaves office in January 2017 the Democratic Party will have ceded vast sections of the country to Republicans, and will be left with a weak bench of high-level elected officials. It is, in fact, so bleak a record that even if the Democrats hold the White House and retake the Senate in 2016, the party’s wounds will remain deep and enduring, threatening the enactment of anything like a “progressive” agenda across much of the nation and eliminating nearly a decade’s worth of rising stars who might help strengthen the party in elections ahead.

When Obama came into the White House, it seemed like the Democrats had turned a corner generationally; at just 47, he was one of the youngest men to be elected as president. But the party has struggled to build a new generation of leaders around him. Eight years later, when he leaves office in 2017 at 55, he’ll actually be one of the party’s only leaders not eligible for Social Security. Even as the party has recently captured more young voters at the ballot box in presidential elections, its leaders are increasingly of an entirely different generation; most of the party’s leaders will fade from the national scene in the years ahead. Its two leading presidential candidates, Hillary Clinton and Bernie Sanders are 67 and 73. The sitting vice president, Joe Biden, is 72. The Democratic House leader, Nancy Pelosi, is 75; House Whip Steny Hoyer is 76 and caucus Chair James Clyburn is 75, as is Harry Reid, the Senate Democratic leader, who will retire next year. It’s a party that will be turning to a new generation of leaders in the coming years—and yet, there are precious few looking around the nation’s state houses, U.S. House or Senate seats.

***

Barack Obama took office in 2009 with 60 Democrats in the Senate—counting two independents who caucused with the party—and 257 House members. Today, there are 46 members of the Senate Democratic caucus, the worst showing since the first year after the Reagan landslide. Across the Capitol, there are 188 Democrats in the House, giving Republicans their best showing since Herbert Hoover took the White House in 1929.

This is, however, the tip of the iceberg. When you look at the states, the collapse of the party’s fortunes are worse. Republicans now hold 31 governorships, nine more than they held when Obama was inaugurated. During the last six years the GOP has won governorships in purple and even deep blue states: Maine, Massachusetts, New Jersey, Maryland, Wisconsin, Michigan, Illinois, New Mexico, Nevada, Ohio. In the last midterms, only one endangered Republican governor—Tom Corbett in Pennsylvania—was replaced by a Democrat. (Sean Parnell in Alaska lost to an independent.) Every other endangered Republican returned to office.

Now turn to state legislatures—although if you’re a loyal Democrat, you may want to avert your eyes. In 2009, Democrats were in full control of 27 state legislatures; Republicans held full power in 14. Now? The GOP is in full control of 30 state legislatures; Democrats hold full power in just 11. In 24 states, Republicans control the governorship and both houses of the legislature—giving them total control over the political process. That increased power at the state level has already led to serious consequences for Democrats, for their political future and for their goals.

“It’s almost a crime,” Democratic Party Vice Chair Donna Brazile says. “We have been absolutely decimated at the state and local level.”

Taken as a whole, these six years have been almost historically awful for Democrats. You have to go back to the Great Depression and the Watergate years to find so dramatic a reversal of fortunes for a party. And this time, there’s neither a Great Depression nor a criminal conspiracy in the White House to explain what has happened.

Some of the party’s national erosion may well have been inevitable. The transformation of the South from a one-party Democratic region to a (virtual) one-party Republican region accounts for some of the losses to the Democratic ranks. That 2010 election gave Republicans in nine states control over redistricting, which gave them more seats in the U.S. House and state legislatures four years later. And the dramatic fallout in support from white working-class voters can be explained, in some progressives’ eyes, by a failure to address the plight of what was once the party’s base.

“These voters,” pollster Stan Greenberg wrote recently in the Washington Monthly, “are open to an expansive Democratic economic agenda—to more benefits for child care and higher education, to tax hikes on the wealthy, to investment in infrastructure spending, and to economic policies that lead employers to boost salaries for middle- and working-class Americans, especially women. Yet they are only ready to listen when they think that Democrats understand their deeply held belief that politics has been corrupted and government has failed. Championing reform of government and the political process is the price of admission with these voters.”

Whatever the explanations, there is an unsettling reality for Democrats: While they may warm themselves over presidential prospects—demographic shifts and a Republican Party deeply at war with itself and consumed by a chaotic primary highlighted by the debate earlier this month, starring Donald Trump at the center of the stage—the weather where so much of our politics and policies will be shaped looks distinctly chiller.

“We are fooling ourselves,” says one well-placed Democratic operative, “if we think we can advance a progressive agenda in Washington, if half the Congress and half the states are controlled by a Republican Party enthusiastically working to undo every trace of progressive policy.” …

Wait, you are asking: Don’t Democrats, with the demographic wind at their backs, have a good chance of holding the White House? Doesn’t the Senate map give them a real shot at retaking the Senate? Don’t national polls show that the GOP is far more unpopular than the Democratic Party?

Yes—and a third term for Democrats along with a recaptured Senate would clearly affect Obama’s political legacy. Even with those victories, however, the afflictions of Democrats at every other level would ensure enduring political trouble.

Looking out across the national landscape, the Democratic Party has a notably weak bench of top-level candidates. The losses of U.S. Senate seats and gubernatorial offices across the country have left the party starved for next generation leaders; stars like California’s Kamala Harris and New Jersey’s Cory Booker are few and far between, and red-state success stories like Kentucky’s Steve Beshear or Arkansas’s Mike Beebe are hardly household names.

There is no Unified Field Theory that accounts for all the Democrats’ woes, according to observers on both sides of the aisle. Even as the party has powered through to strong victories at the presidential level, Democrats down-ballot over the past six years have been hit with economic uncertainty, the realignment of many congressional districts and a midterm electorate that increasing looks different than the voter base of presidential elections.

“The historic voter dropoff from presidential to non-presidential years, when most state elections are held, only compounded the challenge,” Axelrod says. “The electorate in non-presidential years generally is a third smaller, and the majority of the dropoff is among Democratic-leaning voters—minorities, the poor, the young.”

For longtime Democratic operative Joe Trippi, the problems began at the end of the 1980s, when Republicans, after decades in the minority, “put everything in their energy and funding towards solving their problems in winning the House of Representatives. And [in 1994] it worked. And they also recruited for state races—we didn’t. None of the Washington committees of the Democratic Party really gave a damn who was running for attorney general or secretary of state.”

For many Democrats, the 2010 results help explain 2014; when Republicans took over nine state legislatures after the first midterms, they took with them the power to redraw legislative and congressional districts; and that, in turn, guaranteed them more seats at both the federal and state level. That explanation, though, only goes so far. The big GOP gains in the House came in 2010, when Democrats lost 64 House seats—the worst midterm showing for a party since 1894. Moreover, in 2014, the Republicans won nine Senate seats—and you can’t gerrymander a state. (What did make things worse was the spate of retirements; likely Democratic holds in West Virginia, South Dakota, Montana and Iowa all fell to Republicans.) Nor can Democrats take comfort in the constitutionally mandated structure of the Senate, where every state has two senators. Contrary to the assumption that this favors the GOP, the 10 least populous states are evenly divided—10 Republicans and 10 Democrats (counting Angus King and Bernie Sanders). And among the 10 largest states? The split is exactly the same: 10 and 10.

For Republicans, the explanation for Democratic travails is more straightforward: Voters don’t like what Obama and his party has been doing. “Today, the greatest problem Obama has is that the economy has not gotten better in the Obama years, except for those at the top. For most people, it’s either the same or worse,” says Stuart Stevens, who piloted Mitt Romney’s 2012 campaign. And, he adds, the signature achievement of the president, “Obamacare,” proved so unpopular in 2014—in large part thanks to the disastrous website rollout—that Democratic candidates were wary of even raising it.

As just one example, Stevens points to the 2014 Alaska Senate race, where one-term Democratic incumbent Mark Begich narrowly lost his reelection bid. “Begich ran ads defending many of the provisions of the law, but they never used ‘Affordable Care Act’ or ‘Obamacare,’” Stevens says. “Anytime you’re trying to defend something but won’t use its name, you’re in a tough spot.”

It’s a point given a nonpartisan spin by Norm Ornstein, who’s been observing Washington from his perch at the American Enterprise Institute for decades and argues that the Obama administration has done a remarkably poor job selling even its top accomplishments to the American people. “My puzzlement goes back to 2009,” he says. “From the beginning, it was clear that the Republicans had crafted the agenda. And Obama never offered a sense of what the stimulus did, or what his administration was doing. It’s remarkable that a campaign with incredible communications skills more or less abandoned them; it’s not that there’s magic in presidential communication, but they did nothing that was not related to the ordinary way of doing things.”

And, Ornstein adds, “the failure early on to haul at least one banker into court helped to trigger the populist uprising.”

Beyond all of these explanations, however, does lie one key factor: In 2010 and 2014, the Republicans and conservatives reaped the harvest from years of effort at the state and local levels—an effort the Democrats simply did not bother to match until very recently. …

More than a decade ago—years before the successive midterm disasters—one prominent Democrat sought to address his party’s grass-roots weaknesses. In 2005, former Vermont governor and presidential candidate Howard Dean became chair of the Democratic National Committee, and pronounced a “fifty state strategy,” looking to find candidates and foot soldiers even in deepest red America. It was a strategy that brought Dean into direct conflict with Rahm Emanuel, then head of the Democratic Congressional Campaign Committee, who wanted resources targeted to the most winnable districts. In the short run, Emanuel’s approach worked; Democrats won back control of the House in 2006. In the long run, however, it left the party virtually disarmed against a determined GOP drive to win state and local contests,

For his part, Dean—who left the DNC chairmanship in 2009—-told Governing Magazine back in 2013, “It would be a terrible mistake to leave even one state out of a basic package of training, IT and staffing,” he said. “I don’t advocate putting a zillion dollars into Alaska, but I do advocate having a competent, well-run Democratic Party in place, because you never know where lightning is going to strike.”

The political consequences of the grass-roots Democratic weakness are clear. State control means a determined party can enact laws that severely weaken the opposition. Gerrymandering is just one example. If newly Republican legislatures undo a series of laws to make voting easier—no more same-day registration, fewer early-voting days, more stringent voter ID laws—the impact will be felt most among likely Democratic voters. If states like Wisconsin weaken the power of public employee unions, or free public and private workers from paying union dues, it will mean fewer union dollars and fewer union foot soldiers for future Democratic campaigns. Politics, however, is only part of the story—and not the most important. Republican domination of state legislatures and state houses means an approach to tax policy, corporate regulation, education, the environment and abortion that is at least as consequential as the proclaimed views of a future Democratic president. …

Come January 2017, the Democratic Party may find that celebrating its third straight presidential victory comes with a distinctly hollow ring.

This is interesting given that that’s exactly what we had between 1994 and 2000, with Bill Clinton in the White House but Republicans controlling Congress. Over the past 20 years, in fact, Democrats have controlled the House just four years, despite their occupying the White House for 13 of those years.

If Greenfield is correct, if you’ve enjoyed the last five years of divided government, you’ll enjoy what happens starting, or continuing, in 2017.

Investors in the stock market should be long-term investors, which is why investors should not panic after one bad day in the stock market, as Monday was. (Or more than one, as today may well be based on last night’s Asian stock market reports.)

There are, however, policy lessons that apply to not just yesterday, but the late-2000s recession, identified by Will Freeland and Jonathan Williams:

It’s unclear whether this financial instability will turn into broader macroeconomic instability—the hope it that markets will rebound and the financial instability will not spill over from Wall Street to Main Street. But given the ever-present possibility of entering a recession or a period of substantially stagnant growth, this so-called “Black Monday” should provide a wake-up call for policymakers to reconsider how current economic policies may be harming our economic competitiveness.

At the federal level, the United States is suffering from a competitiveness deficit. Apart from numerous job-killing rules and regulations coming from Washington, our corporate tax rate is now the highest in the developed world. It comes as no surprise that our tax code is in dire need of repair and reform when iconic American companies like Burger King decide to “invert” and move their headquarters to another country in order to benefit from lower taxes. ALEC recently joined a broad coalition spearheaded by the National Taxpayers Union to highlight the need for “ a coherent, simpler, fairer tax code for individuals, small business, and corporations as part of a broad national strategy to ensure long term competitiveness.” Of course this summary just scratches the surface on needed reforms.

Apart from the pro-growth market reforms needed at the federal level, below are five things state policymakers should consider to protect their states from a potential financial and economic downturn.

1) Utilize a Predictable Tax System

Some taxes are much more sensitive to economic movements then others. Taxes on corporate income and personal income, particularly the portion paid by “pass-through” businesses filing in the personal income tax code and taxes on investment income, are extremely volatile relative to taxes on consumption such as sales taxes. Consider this chart from the 7^th Edition of Rich States, Poor States:

Shifting state revenue collection away from wage income, investment income and business income ensures that when an economy enters recession characterized to a drop in wage income due to wide-spread unemployment, depressed business revenues, and investments with negative returns, gross state tax returns have a softer decline. In short, though consumption falls in a recession, it falls far less than the various forms of income tend to drop, meaning taxes based on consumption decline less in a downturn than taxes the various forms of income.

2) Maintain a Positive Fiscal Gap in Order to Weather a Recession

In addition to ensuring stable revenue by picking a stable tax regime, states should maintain discipline on the spending side of the fiscal ledger. Often during recessions, “non-discretionary” state spending increases dramatically. In preparation for economic instability, states should maintain a conservative rainy day fund, structural budget surpluses and conservative state spending levels with reasonable budgetary growth. These safeguards allow a state to have ample fiscal slack in times of recessions.

One important step in ensuring sound fiscal practices involves moving to priority-based budgeting, which is detailed along with other important fiscal reforms in the ALEC State Budget Toolkit. This approach calls on a legislature to establish the core functions of government and spends only on those areas only government can and should uniquely perform.

3) Prepare Fiscal Contingency Plan that Prepares for Unexpected Federal Policy Action

Federal funding is a major part of every state’s budget, particularly non-discretionary spending. Those spending programs tend to increase in a recession and with it, federal funds transferred to states. Moreover, state reliance on federal spending often increases in a recession, when the federal government tends to inject fiscal stimulus into state coffers. But the states cannot rely on that spending, because future support from the deeply indebted federal government is uncertain at best. To protect against the risk of unexpected federal fiscal changes, states should engage in sound contingency planning for what the state would do in various scenarios of unexpected federal policy action.

States like Utah have established Financial Ready Utah, and ALEC model policy on a Federal Funds Commission reflects those best practices (additionally, ALEC has model policy on state dependence on federal funds and the need to reduce it). States should plan for worst-case fiscal scenarios in a downturn with strong contingency plans for unexpected changes in federal non-discretionary spending and unexpectedly low federal stimulus.

4) Utilize Sound State Pension Practices

States that rely on defined-benefit pension plans, even under the most responsible pension funding and investing practices, face the possibility of a major decline in economic downturns. Consider the case study of Utah in 2008 at the beginning of the Great Recession. As the ALEC publication, Keeping the Promise: State Solutions for Government Pension Reform, observes:

 “To offer a real world case, consider what happened in Utah. The state’s pension fund lost 22 percent of its value in 2008. It made a 13 percent return in 2009. Public employee unions cited the 2009 returns as evidence that the state was more than halfway out of its trouble. After all, 13 is more than half of 22. But the 22 percent loss actually led to a 30 percent gap between where the fund should have been and where it was. It was expected to have earned 7.75 percent in 2008. Instead, it ended 2008 far behind where its managers had called for—29.75 percent down, to be precise. To make up for loss, the pension fund would have had to generate a 68 percent return in 2009.”

Note Utah was a state that generally practiced strong fiscal responsibility with their pension plans. Once the effects of past recessions, imprudent investing and rampant underfunding are summed, state public pensions already stand at a staggering $4.7 trillion shortfall, according to State Budget Solutions. Worse, another recession ravaging investment returns will deepen this shortfall.

States can guard against this by turning their defined benefits plans into 401k-style defined contribution plans. This ensures states responsibly fund employee retirement plans at the full level every fiscal year and taxpayers are not forced to bear the entire brunt of all macroeconomic events.

To the extent states don’t take this important step, they should at least be sure that they select an investment target each year that is fiscally responsible. The more return a state chases, the higher risk it faces in a financial downturn. Moreover, accepting high risks can lead to plan underfunding when risk materializes in losses. This may force pension funds to chase even higher returns to make up for losses and therefore accept even greater risk. Moreover, pension fund boards should embrace a Prudent Investor Rule that ensures fund managers focus on maximizing investment returns, rather than bowing to political motivations and pressure.

5) Cultivate a Public Policy Environment that Maximizes Economic Growth

Given states have little ability to affect the underlying macroeconomic causes of many recessions or engage in traditional macro-stabilization efforts once a recession begins, one may incorrectly conclude state policymakers are left with few options in a recession. Of course, that assumption ignores the importance of pro-growth economic policies cultivating a strong economy before a downturn, shielding a state from the major downsides and speeding up the economic recovery, post-recession.

Rich States, Poor States details many important fundamentals to embracing economic growth. As we have noted, states that embrace these policy recommendations have higher preforming economies (see here and here, as well as chapter 3 of the 7^th edition of Rich States, Poor States). Moreover, embracing other important policies like strong growth in American energy extraction or reforming occupational licensing can have major impacts on economic growth, increasing incomes and entrepreneurial activity. ALEC has a massive cache of model policy directed towards the goal of a more open and market friendly economy that maximizes human potential and unlocks growth.

The bottom line is what state policymakers have control over is their economic climate, which they can ensure is consistent with greater economic performance. Such moves make for a softer landing in a recession and a quicker rebound afterwards.

States should have been doing this all along, because the economic “growth” that has taken place since the end of the Great Recession has been an illusion. When unemployment and underemployment are at post-World War II record levels as measured as best as possible by the U6 unemployment measure, this has been a Recovery In Name Only for the entire Obama administration.

Those who support Donald Trump for president need to read this, from Politico:

Donald Trump clashed with Bill O’Reilly on Tuesday night over the part of his immigration plan that would take away citizenship from the children who were born in the United States but whose parents came to the country illegally.

Under the 14th Amendment, O’Reilly told Trump on “The O’Reilly Factor,” mass deportations of so-called birthright citizens cannot happen.

Trump disagreed, and said that “many lawyers are saying that’s not the way it is in terms of this.”

“What happens is, they’re in Mexico, they’re going to have a baby, they move over here for a couple of days, they have the baby,” Trump said, telling O’Reilly that the lawyers said, “It’s not going to hold up in court, it’s going to have to be tested.

“Regardless, when people are illegally in the country, they have to go. Now, the good ones — there are plenty of good ones — will work, so it’s expedited, we can expedite it where they come back in, but they come back legally,” Trump clarified.

O’Reilly then asked Trump if he envisions “federal police kicking in the doors in barrios around the country dragging families out and putting them on a bus” as a means to deport everyone he intends to deport.

“I don’t think they have American citizenship, and if you speak to some very, very good lawyers — some would disagree. But many of them agree with me — you’re going to find they do not have American citizenship. We have to start a process where we take back our country. Our country is going to hell. We have to start a process, Bill, where we take back our country,” Trump said.

There is a way to do it, O’Reilly said, in amending the Constitution.

Trump also said that he would not pursue an amendment to the Constitution to remedy the situation.

“It’s a long process, and I think it would take too long. I’d much rather find out whether or not anchor babies are citizens because a lot of people don’t think they are,” he said. “We’re going to test it out. That’s going to happen, Bill.”

Trump supporters should find it curious that their preferred candidate is willing to completely ignore the Constitution because amending it — two-thirds vote of both houses of Congress and approval of 38 state legislatures — is “a long process, and I think it would take too long.”

I would also be interested in who Trump’s constitutional experts are that assert that birthright citizenship is not what the 14th Amendment says it is. I would be similarly interested in finding a judge in the liberal federal court system who would blow up 150 years of precedent, and then get that ruling upheld in a U.S. court of appeals, let alone the Supreme Court. Ain’t happening.