Herewith is a modest, and altogether dangerous, attempt to predict key trends for 2013.
1. Economic Hardship
Slow GDP growth. The consensus forecast for 2013 GDP growth hovers around 2%. The growth in the deficit is growing faster, resulting in a higher debt burden on the economy. Higher debt burdens impede growth, increase unemployment, and produce a lower standard of living.
Higher public debt. Increasing public debt obligations represented by unfunded liabilities from entitlements to bloated public employee pensions assures that more taxpayer bailouts (or broken promises) is one step closer to reality. The USPS, state of California, and city of Detroit are but a few examples of increasing 2013 distressed economic problems.
Higher unemployment. Unemployment will begin ticking upward as businesses close or cut back due to increased regulations, taxes, and government involvement.
Lower labor participation rate. The labor participation rate will drop to below 60% as millions more leave the workforce due to coercive departure or “early” retirement.
Increased government dependence. Food stamp recipients will exceed 50 million for the first time in US history. Obamaworld is characterized by increased dependence on the state for the declining middle class and an increased tax burden on the “rich”, a term that will be defined downward in years to come.
Trickle-down taxation. The reality is that “trickle-down” taxation means that all those who vote to tax the rich will see increased taxation on themselves, both from the government sector as well as reduced growth that attends increased government participation in the economy. In 1911, the total government percentage of US GDP was 8%. Fifty years later, it was 25%. And in 2013, it will exceed 40%. The Lorenz curve, a measure of income distribution, will show the gap widening between rich and poor in 2013. The increase in the payroll tax will also represent a drag on consumer expenditures.
Municipal and state financial challenges particularly in “blue” states. The states that are reforming their labor laws, rejecting the development of insurance exchanges required of Obamacare, and are focused on controlling spending will emerge as healthier economies. The “blue” states will continue to focus on increased taxation and devotion to government largess, resulting in slow growth and debt-burdened economies. In the end, free market economies always outperform government-controlled economies.
The arrogance of government will produce further cracks in the nation’s foundation. We will see additional cracks imposed by economic judgment. This judgment will take the form of an additional credit downgrade, bond wariness attending debt monetization (pressuring interest rates), and may stimulate a renewed interest within the Obama administration to use some parts of private 401(k) and IRA accounts to be used for supporting bond market purchases. Herb Stein’s law states that “If something cannot go on forever, it will stop.”
More storms, earthquakes, and drought conditions leading to increased distressed responses. There is not enough money available to compensate those who live in high-risk areas, whether due to fires, floods, hurricanes, or earthquakes. Citizens of Obamaworld will discover what moral hazard means from “privatizing the gain and socializing the loss.” Moral hazards yield unintended consequences that invoke insurance risk, often taking the form of costs higher than anticipated and a lower ability to honor those requests.
2. Increased Moral Decay
2013 will see an increased focus on social justice issues with an emphasis on income redistribution, the hallmark of socialism. This gets reflected in less freedom, fewer property protections, and higher taxes and elevates the moral problems of envy, discord, and theft.
Emphasis on same sex marriage/civil unions/gay rights. The attack on traditional marriage will increase by the media (symbolized by the efforts of multibillionaire and media mogul David Geffen), education, the judiciary, and the government.
Emphasis on gun control. The horrific tragedies seen in our schools, workplace, and private lives will increase the advocacy for gun control, despite the irony exemplified in Chicago (where rigorous gun control laws are operative, yet violent crime is exploding.) The deceptions will increase regarding what the founding fathers intended in the Second Amendment.
Increased neglect of public financial responsibilities. Debt is, at its root, a moral issue. The federal government is leading the march into debtors hell, with many states and municipalities following. The end of the road is either oppressive taxation or broken promises.
Increased hostility toward affluent Americans. 2013 will not be a time for the bragging rich. They have rapidly become the targets of scorn, derision, envy, and contempt. These are attributes of a declining society no longer desirous of freedom, opportunity, risk, and courage.
Privacy issues favor the state. Look forward to elevated domestic surveillance challenges (drones, renewed effort at the next generation REAL ID, and increased preference for security over liberty.)
3. International crisis
We are likely to see an increasingly destabilized Syria present foreign policy challenges, accompanied by increased Russian meddling from a leader who is anticipating greater “flexibility” from the American president.
There will be ongoing Middle East unrest with Iran possibly crossing the “red line” expressed by PM Netanyahu in 2013. Iran is a wild card scenario whose dangerous leadership exploits America’s leadership weakness. This administration does not understand radical Islam. This blind spot bodes poorly for successfully dealing with the world as it is, not what they want it to be. Benghazi is the hallmark of administration incompetence. This incompetence will certainly continue throughout 2013.
2013 will bring increased pressure on Jordanian stability, a key ally.
2013 will bring increased cyber war, including “country on country.” Economic cyber war is an “iceberg” issue that more people may come to appreciate as an imminent danger.
Financial instability in Eurozone markets (Spain, Portugal, etc.) will increase, bringing additional unrest and may result in food riots and more demonstrations. The Eurozone still has Germany to stabilize their volatility. America is philosophically following Europe but has no backstop as the Eurozone does. It is hard to believe that America is pursuing a path of self-destruction on purpose.
Photo credit: silversolo (Creative Commons)