Megan McArdle argues that Obama won't see a Reaganesque turnaround in the economy or his political fortunes. That is probably true but that doesn't mean Republicans have a clear path to winning in 2012. 2012 won't be some Democratic version of 1984. The economy almost certainly won't be growing as fast as it was in 193-1984. Obama hasn't shown Reagan's ability to lop off large chunks of voters from the other party's coalition. Obama's strengths were his ability to win large margins (and get large turnouts) among voters from Democratic-leaning groups and make gains among upper income and higher educated whites who were not reliable voters for either coalition. That is a good place to start from, but not the stuff of 49 state sweeps.
2012 also won't be 1996. This recession was worse that the early 90s recession and the unemployment rate won't be in the 5s when Obama is running for reelection. Obama also won't go as far to the center as Clinton. I don't know what the current equivalent of Welfare Reform would be, but I don't see Obama signing a major piece of rightish policy change.
The problem is that Obama doesn't have to win a reelection landslide in order shift the country to the left in an enduring way. Obama's administration is in a consolidationist phase. He has already passed a law that puts the country on the glide path to government-run medicine. Obamacare will raise premiums while making middle-class Americans more dependent on government subsidies, guaranteed issue and community rating just to make health care coverage affordable. The likely result of the problems Obamacare creates is a more government-run system that transitions to government price controls and the replacement of the health insurers with a single-payer system. He only has to hang on and let the dynamics play out. If even one of the five non-liberal (or rather nonconsistently liberal) Supreme Court Justices retire we can expect a transformational liberal majority on the Supreme Court.
If the labor market of 2012 is the same one we have now, Obama's skills won't matter and the Republicans would have a tough time losing the election. But there is another potential scenario where Obama's chances are uncertain, but much better. Imagine the economy is growing slowly. The unemployment rate is in the 7s but falling very, very slowly. Obama and his media allies have been assailing the congressional Republicans as Medicare and Social Security cutters - shades of 1995. It doesn't help that this is a plausible interpretation of the Ryan Roadmap. Even if congressional Republicans don't sign up for the Roadmap, it is hard to see how a Republican majority in the House can seriously cut into the deficit without cutting entitlements or defense or raising taxes. It is probably possible but who trusts John Boehner to either come up with the right plan or find an effective way to defend it? The ensuing arguments could do the GOP enormous damage. Obama will be able to plausibly argue that his spending program averted a depression and put the country back on the road to recovery. It doesn't have to be true. It only has top seem true to some wavering voters. As Peter Lawler says, when the answer isn't obvious, spin matters alot. No amount of spin ("recovery summer") is going to help when the unemployment rate is 9.5%. A slightly better labor market puts the economic discussion back in the spin zone and I'm not ready to bet against Obama in a spin contest. This isn't even getting into Obama's demonstrated skill at crafting an enormously well funded GOTV and media operation in a year when the turnout model will be more favorable to Democrats.
None of this means that Republicans are doomed under this scenario. They would need a good candidate, a good media message and a good GOTV operation. Basically the opposite of the McCain campaign. They will also need some answers on economic growth and getting the deficit under control that offer tangible benefits to the middle and aspiring working-classes without terrifying them (as most talk of entitlement cuts and market-oriented health care reform have a tendency to do.) This will be incredibly complicated (as Paul Ryan will be the first to tell you), and the stakes are huge. If Obama wins reelection and retains enough Democrats in congress to uphold his vetoes, Obama will be on the way to being a far more significant (from the liberal perspective) President than Clinton, even if he wins reelection by a much smaller margin.