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Does She Know About Shrinkage?

January 11th, 2013 - 2:22 pm

Zero Hedge:

According to at least one model created by Goldman, the total consumption hit for all of 2013 (not just H1), may well be higher than what most people assume. In fact, as Goldman shows, based on a model conceived by Christina and David Romer, it is possible that US GDP growth in the second half is slashed by an additional 2-2.5%, something which very likely will tip the country into recession as the combined impact over the entire year could be as high as 3.5%, eliminating even the most optimistic forecasts for organic growth in the US for the new year.

The story continues:

So the worst case scenario for GDP growth from tax hikes alone is already 3.5%, and one may have to add to that another several percent in GDP reduction from an spending cuts, which might well lead to a 4-5% GDP drop in 2013 in the worst case, a case determined solely by the dysfunction in Washington.

Goldman’s numbers take into effect the tax hikes of the first of the year, and another kick-the-can on the sequester into 2014. The former has already happened; the latter seems likely. What I don’t know is if this report takes into account ObamaCare’s taxes and fees. Also, as reported earlier, insurance premiums are going to go up higher, faster, “unexpectedly.” That, too, will add sticker shock to people’s shrinking paychecks.

I remember reading in one of Politico’s campaign ebooks that Obama was furious at the idea that if Romney won, then Romney would get credit for the recovery Obama’s policies finally effected.

Well: Here’s Obama’s recovery. He can have it.

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