Even if they didn't want to admit it until after Election Day, the writing seemed to be on the wall for Democrats in November. They suffered painful defeats in House, Senate and governors races and in state house contests throughout the country.
For the first time in four years, the GOP re-captured the House of Representatives, cruising to a new majority by winning some seats held by relatively new Democratic members as well as ousting long-time incumbents. Republicans also did well in Senate races, expanding their power base in the upper chamber, but falling short of a majority.
"People are frustrated," Obama said at a press conference after the November elections, describing his party's losses as a "shellacking." He continued, "They're deeply frustrated with the pace of our economic recovery."
The president also used the electoral rebuke as a moment of personal reflection, conceding that in his job it was too easy to "lose track of ... the ways that we connected with folks that got us here in the first place."
It was a profound victory for Republicans who quickly named a new House Speaker -- Ohio's John Boehner.
Sarah Palin's America
It seemed like Sarah Palin was the super nova of the political world this year, drawing just about everything and everybody into her orbit.
Through her political action committee, SarahPAC, which raised millions this year, her Facebook and Twitter pages, her public speeches, candidate endorsements and television appearances, Palin managed to insert herself into the thick of the electoral politics and command more media attention than perhaps any other Republican political figure.
And she was just as active in the realm of popular culture. She released a new book, "American By Heart," starred in her own reality television show "Sarah Palin's Alaska," and cheered on her daughter, Bristol, a contestant this year on "Dancing With the Stars."
Palin spent time trying to establish her policy credentials in a series of op-eds and missives on Facebook and she made news when she responded to a question from ABC's Barbara Walters who asked whether she thought she could beat President Obama in 2012.
"I believe so," Palin said in the interview, dropping yet another clue about her potential political ambitions.
Lame Duck Wasn't So Lame
With the midterm elections in the rearview mirror and the year drawing to a close, Congress was left with a raft of unfinished business. Lame duck sessions usually produce very little in the way of real legislation, but as we soon found out, this was no ordinary lame duck.
More major bills got passed during the month of December than in much of the rest of the year.
Accomplishments included a tax cut compromise negotiated by the White House and Congressional Republicans, the repeal of the military's "don't ask, don't tell" policy, ratification of the START arms reduction treaty with Russia and the passage of a bill to help 9/11 first responders.
Veteran Congressional observers called it the most produce lame duck session in history.
But not everybody was happy with all the legislative progress.
"I am not proud of this process. I'm not proud of this lame duck," said Sen. Lindsey Graham, R-S.C., who complained that Democrats steamrolled Republicans in the closing days of the session.