Tyler Cowen doesn’t have an answer to this question from a reader:
I love when you think through counterfactuals, so here’s one that’s been on my mind. Imagine John Kerry wins in 2004. What are the implications for the 2006 midterms and more importantly the 2008 presidential election? We probably pull out of Iraq without ever attempting the surge, and leave the country in chaos. But more importantly, the housing bubble collapses on a Democrat’s watch, not [a] Republican’s. Regardless of what anyone says, the housing bubble was going to burst. Maybe the collapse takes a different path under Kerry than Bush, but it still happens, leaving his administration to deal with it. Does he win re-election? Is McCain still the Republican candidate? And what becomes of a little known back bencher named Barack Obama?
For starters, I’m pretty sure this is wrong on Iraq. If you go back to what John Kerry was saying in 2004, and what key Kerry advisers thought in 2004, I think it’s very likely that we would have seen a surge much earlier—in 2005—before Iraq entered the big deterioration that really took place in 2006. The consequences of that for the course of events in Iraq are hard to predict.
Domestically, for his first two years President Kerry would be facing off against a GOP-controlled congress so I think we should expect that nothing noteworthy would have happened. But Democrats would still have been well-positioned for gains in 2006, and I think we should expect a lot of progressive success on small-bore legislative initiatives in 2007, though there would still be way too many Republican Senators for giant reforms. It’s a bit hard to imagine President Kerry stopping the housing bubble from building and then busting. We would presumably have had a much larger stimulus in 2008 with probably more efforts at direct relief for homeowners. Still, even if those policies worked relative to baseline, the situation would still have been deteriorating as we headed into campaign season and Kerry would almost certainly have lost.
To whom? I think it’s hard to imagine John McCain winning the nomination without the odds of Republicans retaining the White House looking very bleak. With the odds of a GOP win looking good in our counter-factual, they would go with a paint-by-numbers candidate like Mitt Romney. There would be a lot of talk about the “Mormon factor” perhaps undermining fundamentals-based models of election outcomes, but the final result would exactly mirror the fundamentals-based models, which would be attributed to the brilliance of Romney’s campaign strategy. Barack Obama would still be considered a rising star, and progressives would tell themselves that if only Kerry had been as charismatic as Obama we might have had more success—he’d be well-positioned for a 2012 faceoff with Hillary Clinton, once revelations of his extramarital affair killed former Vice President John Edwards’ hopes at the nomination.