Observation #1: Bush and the Iraq debacle lost it for the Republicans
The main reasons why the Republicans lost can be spelled in 4 letters: B-U-S-H. Whenever you saw a TV ad featuring Bush, it was nearly always in a Democratic ad, where it tried to tie their Republican opponent with Bush. Republican ads virtually never featured Bush.
While exit polls are not always 100% reliable, this poll clealy indicated that this was an anti-Bush and anti-Iraq war election. 36% said they voted to oppose Bush, versus only 22% who said they voted to support him.
We can also see how there is a strong antiwar opinion, with 56% disapproving and 42% approving of the war. And the passions are much stronger on the antiwar side, with 40% strongly disapproving versus only 19% strongly approving. Among those who strongly disapproved, the Democrats won an overwhelming victory ( 87% to 12%).
The economy, by contrast doesn't appear to be a factor at all. While many listed this as an important issue, the Republicans and Democrats shared their vote roughly 50-50. Similarly, in another important issue, corruption and scandals, the Democrats won only a slight victory, despite the fact that the biggest scandal involved Republican Mark Foley.
The implication of this is also that unless Bush comes up with a plan to turn things around in Iraq, Republicans will lose even greater in 2008. With the economy likely to be weak, this factor is likely to be much more negative in 2008. With a weak economy and two more years of "staying the losing course", the Democrats will not only likely secure even more Congressional seats in 2008, they will also win the White House.
Observation #2 Libertarians proved to be an important factor in many cases
The most prominent libertarian politician, Republican Ron Paul, was re-elected with an overwhelming majority, 60% to 40% (see the 14th district) despite the general Democratic tide and despite his "extremism".
No candidate for the Libertarian Party won any seats in the U.S. House of Representatives or the U.S. Senate, but they did win a few seats in local assemblies. And more importantly,in many cases the votes they took likely deprived Republicans of victory. In for example the Montana Senate race, Libertarian Stan Jones got 10,166 votes or 2.6%. Compare this to the 1,735 votes lead that Democrat Jon Tester now holds over Republican incumbent Conrad Burns.
Similarly, in the Wyoming House race, Libertarian Thom Rankin got 7,300 votes or 3.9%. Compare this to the 822 vote lead that incumbent Republican Barbara Cubin have over Democrat Gary Trauner. The fact that Libertarian candidates often gets so many votes that if they had gone to the Republicans they would have won, could put pressure on Republicans to return to the small government philosophy they're supposed to stand for, instead of the big government "compassionate conservatism" of George W. Bush.
Observation # 3 Referendums usually had good outcomes.
There were a lot of referendums this day. There were some bad referendum results, such as the increased minimum wages in a few states, but because American minimum wages are so low now, that will only cause very limited damage.
But in the two referendums I considered important, the outcome was good. In California, the ridiculus and idiotic "Proposition 87" that proposed taxation of California oil production in order to reduce dependence of foreign oil lost by a margin of 55% to 45%. Still, that a full 45% of Californians could support such a stupid measure is ominous.
And in Michigan, a ballot measure to ban the racist affirmative action policies of that state passed by a margin of 58% to 42%.
This despite the fact that the no-campaign had the support of virtually the entire Michigan establishment. All Democratic politicians and the Republican leadership in that state campaigned to keep the current racial discrimination policies. The no-campaign also received massive financial support from the "Big 3" car companies in Detroit. Here we may see a clue as to why Japanese car companies keep beating the shit out of them, namely the fact that they supported a measure to select people on the color of skin rather their qualifications indicate that they hire people on other grounds than competence. And so these incompetent employess pursue incompetent strategies that means that they lose market share to the Japanese.
Observation # 4 It remains to be seen whether this is good and bad
The optimistic view of this outcome is based on the observation that divided governments usually spend a lot less than governments where the same party holds both the White House.
Hopefully, that's how things will turn out and it might very well happen. However, the problem is that in the past, the Republican White House or Congress that shared power with a Democratic Congress or White House, was basically committed to reducing government. But George W. Bush with his "compassionate conservatism" is not interested in limiting spending, just as the Democrats aren't. So spending might increase just as much or more in the coming two years.
Moreover, the Democrats are committed to raising taxes and pursuing protectionist trade policies. And since Bush's tax cuts were made only temporary, it requires an active decision not to raise taxes. Had an active decision been required to raise taxes, Bush could have vetoed it. But he can't use his veto power to force Congress to make the active decision to extend the tax cuts, and so the Democratic victory is likely to imply tax increases. And as there are now more protectionists in Congress and with America heading into a recession with hugh trade deficits, the risk is very high of protectionist trade policies actually being implemented.