I believe the elections of 2008 are the least important in the last 16 years. Probably even less important than the one in 1992.
– Iraq / War on terrorism: Still a problem of course, but compared to a year ago is almost a non-issue. It is no surprise that it has mostly disappeared from the headlines and debates. It is also no surprise that McCain has re-surged.
– Crime: Rates in all types of crime in the US are the lowest in over 30 years. Even compared to 2006, 2007 has showed considerable improvement. It has been completely out of the agenda even for Democrats.
– Economy: We have seen very strong growth for the last 6 years. Even if we go into a recession, it will be most definitely a mild one. Unemployment is at 5% (which was considered full employment when Democrats were in power). The subprime crisis has been hugely blown out of proportion (only 4% of mortgages are in default!) and I think it is just because Iraq has improved (some issue needs to be in evidence and there was no better candidate).
There are ONLY two real issues: health care and the deficit. Both parties know there is no easy way to explore these issues, mostly because the simple solution is just less government interference (which is not a viable platform, even for Republicans, when they need to convince people that they are saviors). The Democrats have an uphill battle here because Americans are very skeptical about government run programs and because the real number of uninsured is really small. The deficit has been going down for the last 4 years, and there is also no magic bullet here (especially for Democrats who can raise some taxes but also want to increase spending).
In the end, I think that if the economy doesn’t go into a recession a Republican wins. If it does, Democrats will take it. But just like with Bill Clinton in 1992, I would expect a Democrat president to be very centrist and not to follow many of the most populist promises they are making now. Some of you might remember that Bill promised a “economy boost package” similar to what is being talked about now, and after he was elected nothing happened.
And of course, the economy recovered.