Tuesday, February 02, 2010

Another bold prediction

I predict that the latest seasonally adjusted underemployment rate (U-6) available at the time of the 2012 election will be at or above 17%. The seasonally adjusted standard unemployment rate (U-3) will be above 9% unless a lot of discouraged workers have stopped looking for work.

Furthermore, the median income at the time of the election should will be down slightly from now, and income inequality will be greater.

The Obama administration is backing off of both health care reform as well as economic stimulus. This is precisely the error FDR made in the mid-1930s, and the result will probably be similar: something like a double-dip recession. It's much easier for the capitalist ruling class to manipulate the GDP (they ran it up in 2008 selling each other bad loans), so the telling metrics will be unemployment and income distribution.

Paradoxically, all of these statistics will result in a win for the Republican party in the 2012 elections. Then things will really go to shit.

Update: This prediction is based in part on Paul Krugman's post:
There is a lot of near-term fiscal tightening built into the budget, mainly because of the fading out of the stimulus, but reinforced by the freeze and the expected wind-down of Iraq/Afghanistan and the planned expiration of Bush high-end tax cuts. All of this will take place in the face of high unemployment, with the Fed unable or unwilling to take offsetting action. 1937!
Unlike FDR, Obama is not going to have any room to maneuver. He's going to trot out the old "Hope and Change" bullshit, which will stink on ice by 2012. All the Republicans have to say is, "We're not ineffectual half-assed whiny babies like the Democrats. Elect us and we'll purge the rottenness and corruption from American society." Americans will eat it up in 2012 just like the Germans ate it up in 1939.

Update 2: From what I'm reading, it looks like the Bush tax cuts Krugman refers to may well be made permanent, leading to additional fiscal tightening. (More precisely severely retarding fiscal loosening.)

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