The annual predictions derby has started again. I wanted to resist getting into that race this year, but when I went back to see how I did at the beginning of 2010, I was pleasantly surprised. Here are the predictions I made for 2010 in my January 3, 2010 commentary:
- The economy will not improve in 2010. Check!
- The unemployment rate will remain above 9%. Check!
- Businesses will remain in a state of “stop”. Check!
- The $787 billion stimulus will just grow government. Check!
- Republicans will regain control of the House. Check!
- The Senate will be split 50/50 (It’s 51D/47R/2Ind). Close!
The overall economy will get no better or no worse. Even though President Obama believes he made a huge compromise by agreeing to extend the current tax rates for two years, that time period does not remove enough uncertainty from the business environment to stimulate robust investments.
Businesses will continue to be cautious with their cash, because they usually make big investments based on at least a five- to 10-year time frame to insure they get an adequate return on their investments.
The two-year extension of tax rates, plus the two-percentage-point payroll tax holiday for employees, will help, but it will not generate the robust economic growth we need to substantially reduce the unemployment rate, and stay ahead of the rapidly growing Chinese economy.
We cannot tickle our economy into robust growth. We need bold economic stimuli and that does not mean more government spending. The $787 billion stimulus bill and the billions more in failed pop tart programs have shown that in spades! Namely, we cannot spend our way to prosperity. We must grow our way back to economic prosperity.
The newly elected House will “repeal and replace” ObamaCare. They must do so because the same voters that gave Republicans control of the House overwhelmingly want it repealed and replaced. Secondly, soon-to-be Speaker of the House John Boehner has publicly stated many times that they will do so. If any of Boehner’s Republican colleagues do not support him in that endeavor, they will be political dead meat in 2012.
That’s not a threat on behalf of the voters. It’s obvious. All one has to do is look at what happened last November at the polls. The sleeping giant that changed the political landscape is not going back to sleep.
But it’s not expected that the Democrat-controlled Senate would pass the “repeal and replace” health care legislation, or that the president would sign it. So be it! The awakened giant will deal with them in 2012.
The House will pass a 2011 FY budget no bigger than the 2010 FY budget. Now this prediction is very risky and could severely damage my batting average when we look back next year, because of the inertia of social programs and the increasing number of eligible baby boomers. But I am hopeful that deficit hawk Paul Ryan (R-WI), the incoming Budget Committee chairman, will be able to fight off the spending vultures.
If the House is able to pass reduced federal budgets for FY 2011 and FY 2012 as Speaker Boehner has suggested, then the electorate would greatly reward the Republicans with more seats in 2012. That’s not a prediction, that’s just optimism.
If Congress and the administration exceed my predictions, then it would be good for the country. In that case, I would be happy to be wrong this time next year.
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