Commentary: Here's what's ahead in 2013

The Kansas City StarJanuary 17, 2013 

A dozen years into the new century, we still hadn’t settled on what to call the 2000s.

The oughts?

But as we begin 2013, we also enter the teens. So there.

And with the new year it’s time again for my slate of provocative predictions — forecasts that don’t rest on the notion they will come to pass. (Just look at my tea-leaf reading from last year. Romney was going to win!)

No, they’re offered to provoke discussion and thought.

It’s going to be a troublesome teen year:

• The big question will be whether the Dracula-like dysfunction in Washington saps the recovery, which is showing some precociousness with better housing and auto sale and steady job creation.

The fiscal cliff mini deal does nothing to help.

It did increase progressivity, although it left intact many tax breaks mainly benefiting the ultra-rich. They make more of their money on capital gains and dividends, so they’ll hardly feel the income tax boost. The “Buffett rule” went by the wayside and the “carried interest” loophole remains.

The upper middle class will miss the money lost to tax increases much more, while the ending of the payroll tax holiday hits average consumers immediately and even harder.

That will take some steam out of the recovery— GDP growth will slow to a 1 percent annual rate in the first half of the year. But here’s betting that it has enough momentum to survive, and that growth will hit 3 percent in the second half. Unlike Washington politicians, more American consumers have gotten a handle on their debt. They’re going to continue buying more houses and replacing more older cars.

But forget any “grand bargain” this year on tax and entitlement reforms that will ease economic uncertainty. Instead, prepare for an epic battle over the debt ceiling. Its outcome will be tilted toward meat-ax spending cuts, and that also won’t do anything for growth.

• The U.S. energy boom will drive down the price of oil to, say, $70 a barrel. The reduced energy costs will propel the economy out of any doldrums.

• But the drought continues and food prices rise much faster than the rate of inflation.

More banks will fail this year than last. The “zombie” banks kept alive through TARP and other measures will finally be allowed to expire.

• Interest rates will tick up slightly because the recovery does survive and investors are tiring of low yields. The uptick will call into question the efficacy of the Fed’s asset-buying program. And it will make people worry more about how much money the government has to pay to fund the debt, money that could be spent on better purposes.

• The stock markets will do OK — racking up at least 5 percent gains — as more investors switch out of bonds.

• The Affordable Health Care Act will become even more disliked. In 2013, we begin paying taxes for it, but any benefits don’t begin until next year. Also, let’s hope Washington simplifies implementation of the act as much as possible. Smaller businesses don’t have the time or resources that corporations do to deal with it, and individuals will need clear guidelines to understand their options.

• The euro crisis will effectively end. Mario Draghi, head of the European Central Bank, has made it clear that the bank will fend off any attacks on the value of the euro. And Angela Merkel has persuaded Germans it’s a good idea to help out struggling euro partners.

• Despite Newtown, Conn., there will be no gun control changes that keep guns out of the hands of criminals. Maybe we should cast the debate in terms of how much gun violence costs the economy. The Pacific Institute for Research and Evaluation in Calverton, Md., estimates that the cost of work lost, medical care, insurance, criminal-justice expenses, and pain and suffering amounted to as much as $174 billion in 2010.

• The U.S. Supreme Court will rule the Defense of Marriage Act unconstitutional but not declare gay marriage a federal right. It will leave that up to individual states.

• More states will legalize marijuana.

The fiscal wrecks that are California and Illinois will ask U.S. taxpayers to bail out their state employee pension systems.

• Somewhere in the United States this year, a person will be born who will live to 150 thanks to medical advances. Think what that will mean to our workplaces and entitlement systems.

On local matters:

• Sprint, leveraging the cash provided by new owner SoftBank, will actually record a profit in the fourth quarter.

• YRC will finally be moving full speed down the road to recovery.

• Here’s an easy one: Cerner will have another good year.

• GM or Ford will announce something big for one of the area’s plants.

• It will be even more fun watching Google Fiber and Time Warner Cable battle it out.

• Neither side in the economic Border War between Missouri and Kansas will retreat.

• Kansas Citians will finally see Tom McDonnell, the former secretive head of DST but now the new chief of the Kauffman Foundation, up close and more personal.

The scariest prediction comes last:

• Iran’s nuclear ambitions hit a crisis point. Karim Sadjadpour of the Carnegie Endowment for International Peace told The Wall Street Journal that President Barack Obama “may be forced to choose: bombing Iran or an Iranian bomb.”

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