Monday, January 11, 2010

2009 Predictions Revisited

Last February, after Barack Obama had been president for about a month, I posted a series of predictions for the next several years on my blog, CaptainKudzu. Almost a year later, as Obama’s first anniversary in office approaches, I decided to revisit my forecasts and see how well I fared. The unedited version of my original predictions can be found at I should note that I did not say that my predictions would be fulfilled within 2009, but over the next several years.

The current stimulus bill will fail, just as the TARP program and the 2008 stimulus checks failed.

At this point, it is generally agreed (outside the Obama Administration at least), that the stimulus bill had little or no stimulative effect on the economy. In truth, the stimulus bill was a special interest spending bill that cobbled together numerous pork-barrel projects.

The ineffectiveness of the bill can be seen in the administration’s claim that without the stimulus, the unemployment rate could top 8.5% [FNC]. With the stimulus, unemployment continued past the 8.5% and remained at 10% for December 2009 (

While some sectors of the economy have seen short-term surges through programs such as cash-for clunkers and mortgage modifications, these have not lasted. These surges reflect government-created bubbles rather than a truly recovering economy.

Additionally, there have been widespread reports that many of jobs that were reported as created by the stimulus were reported incorrectly or fraudulently. The stimulus job numbers were often inflated to ridiculous proportions or were outright fabrications.

When the current stimulus bill fails, the government’s solution will be enact another, probably larger, stimulus bill.

A second stimulus bill is still in the future. Such a bill has been discussed throughout 2009, but has been slowed by both voter anger and the gridlock that has met the healthcare reform bill. This is still a possibility for the future.

Massive government spending will create high inflation as the government prints money to pay its debts.

Inflation is also a possibility for the future that has not been realized. Currently the inflation rate remains very low with some economists concerned about the possibility of deflation due to the contracting economy.

The Obama Administration has already over more than $1 trillion to the national debt and there are no signs that the spending spree is drawing to a conclusion. There remains a strong possibility that as the government prints money to pay its debts, the dollar will become further devalued and inflation will return. This is especially true if China slows or stops its purchase of US government securities.

The government will also raise taxes. They may not call it raising taxes. They may call it “allowing the Bush tax cuts to expire,” but most Americans who pay taxes will be keeping less of their own money.

Some taxes have already been increased. Others are yet to come.

The first Obama tax increase came in April 2009 when the federal tobacco tax increased by 62 cents per pack. This tax increase primarily affected the middle and lower-class taxpayers that Obama had pledged would pay higher taxes under his administration.

Next will likely be an extension for the estate tax. Under Bush-era legislation, the estate tax was scheduled to be repealed for one year in 2010. Democrats tried, but failed, to reach an agreement to extend the tax into 2010 at 2009 levels. Extending the tax retroactively is likely to be a priority for the first sessions of Congress in 2010.

Another upcoming tax is related to the healthcare reform bill. Most obviously, the bill would require Americans to buy health insurance and fine those who do not. Senator Max Baucus calls the fine an “excise tax” (fnc).

Additionally, however, the bill also contains a surtax on the wealthy and a tax on so-called “Cadillac” health plans. Some reports are that the surtax is not indexed for inflation and will capture more and more middle-class taxpayers in a manner similar to the alternative minimum tax. Many union workers would find their health plans taxed.

The recession will be long and the recovery will be slow.

The accuracy of this prediction is self-evident.

Job creation will be stagnant in most sectors of the economy. Government jobs will be an exception.

As noted earlier, the unemployment rate remains at 10%. It has been noted that the real unemployment rate, counting underemployed workers and those who have given up looking for work may be as high as 17.5% [cnbc].

As to the second half of the prediction, government jobs have increased since Obama took office. Not only are there more government workers, they are also earning more than in the past. USA Today reports that the number of federal workers earning more than $100,000 is at an all-time high, even before bonuses and overtime are considered.

Unemployment will continue to remain at or above current levels for the next several years.

As noted earlier, unemployment remains at 10% with real unemployment rates as high as 17.5%.

A nationalized healthcare system will be enacted in some form.

The enactment of a national healthcare system is still ongoing. There are two healthcare bills at this point, one of which includes the so-called “public option.” The senate version has no public option, but either bill would stack the deck against private insurance. As insurance rates skyrocket due to federal mandates, congress would likely blame a failure of the market and revisit the idea of a national healthcare system.

There will be new restrictions on guns and ammunition.

The Obama Administration has not attempted to enact new gun control legislation yet. To this point, they have been pre-occupied with their version of healthcare reform.

There is a real concern that if the government takes control of the healthcare industry, they could pursue gun control as a matter of public health. This has already been considered by the Centers for Disease Control and the National Institutes of Health.

The Supreme Court’s 2008 decision in District of Columbia v. Heller affirmed an individual right to keep and bear arms. Public opinion is also firmly against strict gun control. Neither obstacle should be considered as a permanent impediment to the desire of many Democrats to enact strict gun control laws. Again, the fact that healthcare reform has become so bogged down in Congress has likely slowed the Democratic agenda.

There will be at least one terrorist attack on US soil.

Sadly, there were several terrorist attacks in 2009. Two of the most notable were US Army Major Nidal Malik Hasan’s massacre of soldiers at Fort Hood, Texas on November 5 and the failed bombing of a Delta airliner on Christmas day. Umar Farouk Abdulmutallab, now known as the “Dingaling Bomber” or the “Underpants Bomber,” failed to successfully set off his bomb, but his attack called a success by a Yemeni branch of al Qaeda because it exposed holes in US security.

Iran will obtain a nuclear weapon.

Iran is still edging closer to obtaining a nuclear weapon. So far as we know, they have not yet been successful. Likewise, western efforts to convince Ahmadinejad to abandon his nuclear weapons programs have also been unsuccessful.

Iran’s announcement may come in the form of an attack on Israel. Even Iran does not attack, it will cause an increase in tensions in the Middle East.

Iran has not yet attacked Israel… or vice versa. Tensions remain high, however.

In an unforeseen development, the Ahmadinejad regime is fighting for its life against its own subjects. A protest movement launched several protests in 2009 after fraudulent elections which President Ahmadinejad won handily. Shamefully, the US has done little to support the dissidents. The ultimate outcome of the second Iranian revolution is yet to be seen, but is the best hope for peace in the Middle East.

The slow economy will keep oil prices fairly low for the next few years unless/until an Iran-Israel war drives prices higher.

In recent weeks, gas and oil prices have increased, due largely to cuts in production. January 2010 saw an increase to $80 per barrel. Oil consumption is still down from 2008 levels due to the recession and winter weather. In the short term, prices are forecast to remain near this level throughout the winter.

The Wall Street Journal recently reported that both oil and food prices have been inching upwards. Many economists see this as a sign of a recovery. Others believe that the recovery will be “W” shaped with a second dip to come. No forecasts that I have seen predict a return to the near $150 per barrel prices of July 2008 in the near future.

A federal carbon tax, probably in the form of a cap-and-trade system, will drive energy prices, including electric bills, higher.

Again, a cap-and-trade bill is on the Democratic agenda, but has been slowed by the failure to pass a healthcare bill.

The carbon tax will also drive the prices of other goods and services higher, due to increased production costs.

It has been suggested that one reason for the slow recovery is that businesses are waiting to see the effect of impending legislation. This applies to both the healthcare bill and cap-and-trade.

An attempt will be made to censor conservative media with a revived Fairness Doctrine, although it probably will have a different name.

This has not yet been introduced, but might be in the future.

The situation in Pakistan will continue to deteriorate. Militants from Afghanistan will flee across the border to safe havens there.

Afghanistan and Pakistan remained a hotbed of terrorists in 2009. The situation in Afghanistan deteriorated even as Iraq became more stable. President Obama committed more US troops, and asked our allies for more, in the spring and finally decided to commit even more troops in the fall. Taliban attacks and both allied and American troop deaths increased in 2009.

In Pakistan, Taliban militants actually took control of the Swat Valley before being ousted by the Pakistani army. The Pakistani army also took on the insurgents in the province of South Waziristan. There are reports that insurgents who escaped the government offensives have regrouped in the mountainous areas around the Afghan border.,2933,580076,00.html

The Republicans will make large gains in the 2010 elections, possibly taking control of one or both houses of Congress.

We will know the accuracy of this prediction in another few months. Early indications are that the Republicans will indeed make large gains in both houses of congress.

The Democratic Party will become fragmented as moderate Blue Dog Democrats are pressured to support increasingly leftist legislation and their constituents become more and more angry.

This prediction has already come true. Since the Democrats hold a 60 seat majority in the senate, the Republicans cannot defeat or block any legislation. It is moderate Democrats who are providing the key resistance to the healthcare bill and other controversial legislation.

Interestingly, abortion is the root of much of the dissension in the Democratic ranks. The original bills in both houses provided federal funds to pay for abortions, violating longstanding precedent. Pro-life Democrats were able to insert language in the bills to keep the ban on federal funds for abortion in place. It remains to be seen whether this language will survive into the final versions of the bill, but, if not, the loss of key Democratic votes may block the bill entirely.

By the time he leaves office, President Obama will have an approval rating that is equal to or lower than President George W. Bush’s approval rating at that future time.

As of this writing, a Real Clear Politics average of polls shows President Obama’s approval rating as 48.8% [RCP]. A new poll also shows that Obama is losing ground to George W. Bush with only 50% of people preferring him over Bush and 44% saying that they would prefer Bush as president [Politico].

According to Politifact, President Obama is tied for the worst approval rating at the end of the first calendar year in office. Interestingly enough, the other president with a 49% approval rating at the end of the first year was President Reagan. A key difference in subsequent approval ratings will be that President Reagan’s policies improved the economy and national security, where President Obama’s do not.

For the record, President Bush’s final approval rating while in office was 22% [CBS] to the low 30s (politifact), depending on the poll. Obama has some distance to go to reach that range, but he is off to a good start. His current rating is a sharp decline from the 70+% that he enjoyed when he took office.

The biggest unforeseen development of the year was the legislative quagmire that President Obama and the congressional Democrats found themselves in. I thought that they would use their majorities in both houses of congress to quickly ram through a healthcare bill on the heels of the stimulus package, followed quickly by cap-and-trade. The fear instilled by voters into the Blue Dog Democrats is the primary reason that this did not happen.

By my count, ten of my twenty predictions have already become fact. Another ten have not yet happened but are still likely to happen over the next few years. None of my predictions have been proven incorrect. Of the ten predictions that have not yet occurred, I will be happy if they turn out to be incorrect, but my belief is that we are still on course for their fulfillment. To prevent such predictions as inflation and nuclear Iran from happening, it will be necessary for the US to change course. That will likely require a Republican win in 2010. That, in turn, may prevent Obama from being more unpopular than George W. Bush as he leaves office.

January 8, 2009
Secaucus NJ

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