Commentary: Peering into the 2012 economical crystal ball

The Kansas City StarJanuary 16, 2012 

Every year at this time we peer into the murky future, bracing ourselves. We grasp for answers and make predictions.

We can show great confidence in our predictive powers, delivering sensible judgments so people think we’re smart.

Or we can be provocative.

That’s the way I’m going this year.

Provocative predictions are more often wrong, but they’re also often most worth thinking about. And they’re more fun.

Will the U.S. economy grow more than 1.8 percent, the consensus prediction?

Yes. It will hit 2.5 percent to 3 percent, fed by pent-up demand for cars and other consumer goods. But housing remains in the dumps. Too many consumers have too much debt to feel confident about big purchases.

The extra growth will help the stock markets — the Dow surges 10 percent — but even that won’t make us feel much better. The jobless rate will end the year right where it is now — 8.5 percent — because more people will start looking for work.

You have to figure in this, snips James Pethokoukis of the American Enterprise Institute: “If the size of the U.S. labor force was as large as it was when Barack Obama took office, the unemployment rate would be 10.9 percent.”

Also, job hunters still face stiffening headwinds from technology and globalization, headwinds that super-low interest rates and $1 trillion in annual deficits aren’t going to ease.

Will the United States make any progress on its long-term debt problem, revamping its corporate tax structure or avoiding its looming Medicare deficit?

No. It’s an election year.

Will the United States raise taxes on the wealthy?

No. Didn’t you get it in the last answer?

But what’s that quacking?

Look for progress after the election in the lame-duck Congress. The Bush tax cuts are set to expire, and even more severe spending cuts are due in 2013.

So what about the presidential election?

Mitt Romney wins in a split decision. Obama tops the popular vote, but Romney takes the Electoral College. Republicans keep the House and grab the Senate.

Would a GOP-dominated government be good for the economy?

Moot. The Democrats will keep enough of the Senate to filibuster. After decrying Republican obstructionism, Democrats will pick up that banner.

Who could turn it Obama’s way?

Germany’s Angela Merkel — if she works through the European debt crisis without tipping the continent into a deep recession. If Europe falters, the dollar will strengthen against the euro, making U.S. exports more expensive. Job growth will stall.

In the end, will the euro be saved?

Yes. The Europeans have too much at stake.

How will the U.S. Supreme Court rule on the individual mandate in the Affordable Health Care Act?

The oral arguments in front of the court in late March should be gripping. I bet the justices uphold the mandate.

As U.S. Circuit Judge Laurence Silberman ruled, the courts have allowed Congress to expand the Commerce Clause to so many other areas of our lives that they can’t put that horse back in the barn.

But don’t surprised if the court derails the health care act on technical grounds: Did Congress exceed its constitutional authority by expanding Medicaid rules that states must adopt? Can the act survive if you “sever” one part of it?

Or if the court could punt, ruling that it’s premature to challenge provisions like the mandate until they take effect in coming years.

Now for questions I don’t have answers for.

Will the bubble in U.S. Treasuries burst? Will gold add another year to its 12-year winning streak? Are gasoline prices headed above $4 a gallon this summer?

Will Apple TV come into focus? Can RIM save the spoiling BlackBerry? Will we like the Facebook IPO? Can GM put some spark into Volt sales? Is fracking turning the green energy revolution brown?

Will the Arab Spring continue to blossom? Will there be a Russian Spring? Are the Taliban really serious about negotiating? Can we talk Iran off the nuclear ledge? And what’s really up with China’s economy?

Important to Kansas Citians: Will Sprint link up with T-Mobile? Can Garmin continue to find its way? Will YRC put on a load of profits? Can KCP&L plug consumers into its conservation plans?

Will our search for the impact of Google Fiber show progress? Will we go forward with a downtown Kansas City convention hotel? Will the Kansas City Public Schools district collapse? Will the Big 5 ideas from the Greater Kansas City Chamber of Commerce gain any traction?

Will there be any letup in the business border war? Can MU and KU work out a way to continue theirs?

Tough questions. Let’s conclude with an easy one:

Will the world end in 2012?

No.

ABOUT THE WRITER

To reach Keith Chrostowski, business editor of The Star, call 816-234-4466 or send email to chrostowski@kcstar.com. Follow him on Twitter at keithc3.

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