It seems like it'd be worthwhile to put down something I've thought for some time.
Since Barack Obama won the 2008 presidential elections, there has been a group on the blue side of the aisle that has been secretly hoping Sarah Palin would run in 2012 and become the Republican candidate. This is because she's considered easy for Obama to beat. Lots of voters strongly dislike her, and if she ran, it might set up a 1964- or 1984-style blowout election. See here or here. Even David Plouffe thinks so. But this kind of sentiment is wrong: this is a much more dangerous scenario than people recognize.
It became pretty clear after the 2008 elections, in early 2009 or so, that the economy was going to still be bad by the time of the 2010 elections, which was going to play to the benefit of the Republicans. The scale and impact of the 2007-2009 recession was badly underestimated by many, from John McCain's famous "the fundamentals of the economy are strong" gaffe at a time when many Republicans denied that there was a recession underway at all, to the Obama administration's underestimates of the rise in unemployment absent stimulus and subsequent decision to lowball the stimulus.
Although the media loves the tactical fallacy and dramatic narratives, structural factors like war deaths and economic conditions drive election results. Real disposable personal income predicts elections and presidential approval often tracks unemployment. The rest is window dressing. The 2007-2009 recession was another jobless recovery. Economic weakness can persist for years following the collapse of a major housing or asset price bubble: look at Japan. And so the Republicans are to have a big year this cycle.
It's pretty normal for the coattail effect to cause a hangover in the next midterm election. Since the Civil War, the president's party loses House seats in the midterm elections, averaging losses of about 32 seats. Here's a picture:
In that 100-plus years of midterm elections, there have been three exceptions. The Republicans need to win 39 seats to reclaim the House, so if they win 40-50 seats or so, their victory will be somewhat above average that will leave them with a very narrow majority. But hardly the blowout "apocalypse" that Republicans have been exulting about this season. Republicans are likely to overinterpret the results of this election, and the media will be complicit in propagating a narrative of a surging GOP winning a "referendum" on the president.
The opposition party campaigns on the deficit, which is driven by the cyclical fall in tax revenues despite flat government spending. The Republicans are probably deluded as usual about their desire to enact spending cuts to popular government programs, or will focus on inconsequential but high-profile gimmicks over the budget. Or they might be serious for once and try an ill-conceived austerity plan at a time of economic weakness. The "growth through austerity" argument is wrong in the short term; the IMF surveyed growth-through-austerity attempts and found "...that the typical such episode is clearly contractionary: a fiscal consolidation equivalent to 1% of GDP leads on average to a 0.5% decline in GDP after two years, and to an increase of 0.3 percentage points in the unemployment rate." Perhaps monetary policy and QE could counterbalance this. But in any case, divided government is unlikelier to respond accommodatingly if the economy receives another financial shock similar to the Lehman failure that neccesitated TARP. Problems with the euro may spark such a crisis, given Greece's problems. Who knows. In any case, given the scale of the output gap, likelihood of a continuingly jobless recovery, and serious downside potential to a weak political response to a new economic shock, there's a significant chance that the economy will be weak in 2012.
If the economy is too stagnant, weak, or recessionary in 2012, the Republican will probably win, regardless of who the candidate is. And although people wrote off her chances following the 2008 elections, the odds that Sarah Palin would be the Republican candidate for president in 2012 have been growing since then. Much of the excitement, media coverage, and money she has generated over the last two years has been driven by the speculation that she would run for president: that fades away if she runs and fails, and it fades away if she fails to run. Many of the current primary competitiors are boring technocrats, people who failed to ignite the base before, or elites or phonies like Mitt Romney that too many would have to hold their nose for to support (like they hated doing with John McCain). Palin encapsulates everything the base loved about President George W. Bush, and nothing they hated about him. Two years out, South Carolina Senator Jim DeMint looks to be Palin's only real competitor for Tea Party energy, and possibly the conservative elites could rally around him. But Palin thrives on the scorn of the media and Republican elites: the more they dismiss or belittle her, the more the base gathers around her. So there is a significant chance that she could win the Republican primary in 2012.
So, here it is: There is a nontrivial chance that Sarah Palin could win the primary, and a nontrivial chance that any Republican candidate could win the presidency in 2012. This is what has come to be known as a fat tail or a black swan. People think there's small chance of it happening, but the consequences would be large and very negative.
Sarah Palin would be a terrible president, a dreadful president. And that's reason enough to hope she never gets anywhere near the office.