November 8, 2012

FROM THE GRUMPY ECONOMIST, SOME PREDICTIONS: “Forecast in three parts: The sound and fury will be over big fights on taxes and spending. They will look like replays of the last four years and not end up accomplishing much. The big changes to our economy will be the metastatic expansion of regulation, let by ACA, Dodd-Frank, and EPA. There will be no change on our long run problems: entitlements, deficits or fundamental reform of our chaotic tax system. 4 more years, $4 trillion more debt. Why? I think this follows inevitably from the situation: normal (AFU). Nothing has changed. The President is a Democrat, now lame duck. The congress is Republican. The Senate is asleep. Congressional Republicans think the President is a socialist. The President thinks Congressional Republicans are neanderthals. The President cannot compromise on the centerpieces of his campaign. Result: we certainly are not going to see big legislation. Anything new will happen by executive order or by regulation.”

Plus: “We’re still sitting on a debt bomb. Remember 2004, when a few chicken-littles were saying ‘there is trouble brewing, there is a huge amount of debt (mortgages) that is in danger of defaulting, and the banks are stuffed with it?’ And how everyone made fun of them? That is our situation now, but it’s sovereign debt.”