Last January, I identified five things that worried me for 2011. Here’s what had me concerned, along with some ex post facto analysis about whether I was right to fret:
1. A back-door bailout of the states from the Federal Reserve – Thankfully, I was way off base with this concern. Not only was there no bailout, but Congress even got rid of Obama’s wretched “build America bonds.”
2. A front-door bailout of Europe by the United States – The bad news is that there have been bailouts of Greece, Ireland, and Portugal via the clowns at the IMF. The good news is that the bailouts haven’t been as big or extensive as I originally feared.
3. Republicans getting duped by Obama and supporting a VAT – I was needlessly concerned about a VAT sellout, but I was right to worry about tax increases. GOPers repeatedly expressed willingness to surrender, notwithstanding their anti-tax hike promises.
4. Regulatory imposition of global warming policy – The EPA has been busy imposing lots of costly regulation, but it appears that my fears on this issue were misplaced.
5. U.N. control of the Internet – As far as I can tell, the statists did not make any progress on this issue, so my concerns were unfounded.
This year, I’m not going to put together a list of things that should make us worry. After all, we should always be concerned. As Thomas Jefferson is reported to have warned, “eternal vigilance is the price of liberty.” And Gideon Tucker correctly noted that, “No man’s life, liberty, or property are safe while the legislature is in session.”
Instead, I’m going to come up with a list of predictions. But I won’t try to predict the economy. As I already have explained, economists are lousy short-term forecasters. If we actually knew what was going to happen, we’d be rich.
So here are some policy and political predictions for 2012.
1. Obama will win reelection – Unless I’m wildly wrong, Romney will be the nominee, and he is a very uninspiring choice. That gives Obama somewhat of an advantage. More important, I think the unemployment rate will continue to drift downwards (even if only because workers get discouraged and drop out of the labor force) and that will allow Obama to claim – with lots of help from the media – that his policies have started to work.
2. Greece will drop the euro – Politicians have three ways of financing government spending. They can tax, they can borrow, and they can print money. Nations such as Greece already impose stifling tax burdens and further tax increases probably would reduce revenue because of the Laffer Curve. Nations such as Greece already are so indebted that nobody will lend them money, especially since they’ve already defaulted on existing debt payments. This means Greece has to go with the final option and drop the euro so it can print lots of drachmas. (Greece could solve its problems by cutting spending, of course, but let’s not engage in ridiculous fantasy).
3. At least one major European nation will default – Yes, the Baltic nations have shown it is possible to make real spending cuts and restore fiscal stability, but I don’t expect other European nations to learn from those success stories. So the only question is whether nations such as Spain and Italy default right away, or whether they get additional bailouts that set the stage for even bigger defaults in the future. The answer probably depends on Germany, and I’m guessing Merkel will finally do the right thing (if only for political reasons) and reject additional bailouts.
4. China and Japan have major problems, but will survive 2012 without crisis – I’ve already written that I’m not overly impressed by China and that I think there’s a bubble in the Chinese economy. And I’ve commented on the enormous debt burden in Japan. But even though I think both nations are very vulnerable to economic trouble, I’m going out on a limb and predicting that they’ll make it through this year without a major problem.
5. The Georgia Bulldogs will win college football’s national championship, demonstrating that there is justice in the universe.
P.S. I have been somewhat accurate in my election predictions and I’ve been getting some requests to predict what will happen in Iowa. If I get motivated, I may do that on Tuesday morning.
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“Politicians have three ways of financing government spending. They can tax, they can borrow, and they can print money. […] Greece has to go with the final option and drop the euro so it can print lots of drachmas. (Greece could solve its problems by cutting spending, of course, but let’s not engage in ridiculous fantasy).”
Printing lots of drachmas to maintain a nominally high public spending implies cutting spending in real terms.
Unless the Greek gov. caves in and raises public spending to keep up with inflation, in which case there was no point in going back to the drachma in the first place.
My forecast: In general things will go on slightly better than what Mr. Dan Mitchell forecasts precisely because people like Mr. Dan Mitchell are doing a great job in demolishing the astronomically big piles of socialist nonsense that are perpetually coming from mainstream academia and media.
I do not agree with Mr. Mitchell on Obama being reelected, at this moment I would bet a very small amount for Romney being the next US president.
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Reblogged this on BC Richardson and commented:
I tend to agree with his line of thought & G.O.P. will most likely get Obama re-elected.
Obama and a Republican congress would probably be better than an all Republican executive lead by Romney. Of course this will be Obama unbound, unrestrained by prospects of further re-election, so expect him to propose some of the most pernicious policies this country has seen in generations. Hopefully congress will be Republican and will hang in tight. Or maybe not…
For all practical purposes Obama has already nailed America with ObamaCare alone. The cost of that legislation both in terms of direct costs and, more importantly, as an invitation to indolence has been grossly underestimated by all. The margin of advantage that Americans enjoyed over the rest of the world had already worn thin. ObamaCare put America past the tipping point. The decline will now take a life of its own and Americans are now on auto-pilot to become a declining welfare state.
But don’t be sad. Decline can be fun if you have secured a life boat. Look forward to 2012 and especially 2014, the first year that you’ll have the opportunity to have most of your healthcare paid by others — provided you relax a bit and don’t contribute more than $90K to the US economy, something I’m sure will be very difficult to do for most people 🙂
So sit back and enjoy as the American voter continues his predictable ideological convergence to the rest of the world and his economic convergence to the world average inevitably continues… The decline will prompt a gloomy electorate to vote itself a lot more additional “care” government packages …paid by others… some other greedy fools that will keep working outcompeting the rest of the world so that an increasingly indolent American middle class can maintain its six times world average standard of living… sure… just have HOPE and it’ll happen…
The boat is going down, so might as well speed things up and have some fun, like burn the furniture to keep nice warm and cozy. What the heck! One last big party where we burn down the house will be fun. Just secure a life boat first…
The SOPA is going to help the U.N. to control the Internet, as it the internetional bureaucracy is perceived as a more reliable steward than the corrupt U.S. government. Note how disgraced Chris Dodd is reinstated as the head of MPAA. Seeing the blatant corruption of this magnitude blunts any rhethoric against U.N.
Love your articles, Global warming will not be imposed upon us by the UN, Obama will not be re-elected. He has done virtually nothing right that appeals to the single issue voters making up his base. The economic picture will not be changed in spite of the numbers that will be put up which will be false by the administration. The media will do its part as shills for the great upturn and the need for 4 more years. People don’t vote on statistics, they vote with their wallets. Gas up, utilities up, unemployment factually stagnant, food prices up. Want to bet on your prediction Amigo? Let me know. J.C.
Gosh Dan, I hope you are wrong about the Obama reelection. While a Romney presidency is a bad dream, another Obama term is a nightmare.
We have at least an outside chance to somehow eliminate Obama-care with Romney, and barring a complete overturn by the SCOTUS (something I have very little hope for), almost no chance with a second Obama term.
Neither one will probably adequately address the spending and debt problems, so the meaningful difference is at least a possibility of dodging socialized medicine and the virtual destruction of the flawed but still superior heath-care system we now enjoy.
I’m rooting for a “Dan Prediction” failure in that regard.
Wow I almost believed everything you said until number five and now I’m thinking you might be full of crap! Haha!
But I’ll do a trade with you. I will root for Uga, (and his bag of ice he sits on) if we can just get Obama out of office.
Deal?
You can improve your election prediction record if you wait until Wednesday morning.
You are so optimistic.