Thursday, December 29, 2016

Economic Downturn

I am not good at predictions, so take this with a grain of salt. Yet I'll have a go at one for 2017 anyway.  Despite the recent euphoria, we are still headed for a significant economic downturn based on debt, rent-seeking, and gaming the system to transfer risk from the decision-makers to the citizens. I find David Stockman and Nicholas Nassim Taleb quite persuasive on this. Partisans will blame either Obama or Trump for any problem regardless of the data, but we credit and blame presidents far too much for our economy.  We apparently prefer symbolism and reframing.  1. Congress is twice as influential as the POTUS   2. Political solutions take almost two years to take effect, so we are forever late in our timing of who caused what  3. World events are a greater influence - much greater - than president and Senate and House together. 

Hope I'm wrong.


Sam L. said...

I hope you're wrong,too, but I agree with what you said.

Christopher B said...

I'm cautiously optimistic, given two assumptions

1) Trump has the political capital to regularize the current population of illegal immigrants, and bring them fully into economic and civic participation. Build The Wall was a negotiating position, but the emphasis on 'enforcement first' gives him credibility that the GOPe squandered (and their alliance with the Democrats on this issue would never allow) dating back to the Reagan amnesty.

2) Rapid action on repealing Obamacare. Small to mid-size business are employment drivers, and the Obamacare target was squarely on their backs. There is enough anecdotal evidence to believe that this alone has been a significant drag on employment, especially increasing hours worked. The uncertainty regarding enforcement didn't help, either.

These do align with you post in that they are primarily Congressional actions, and probably won't have an impact for a couple of years.

Decent economic growth solves a lot of problems.

Edith Hook said...

Decent economic growth solves a lot of problems.

Yes, if the benefit goes beyond the top 5-10% and reaches into the Middle. The last 8 years weren't that horrible until you realize that the benefit reached mainly the skimming class, and those who game the system along with their minions. If the economy can generate something more than dead end, temp service jobs for the foreseeable future, a lot of problems just go away or become manageable. Much, much easier said than done.

james said...

I was predicting the same for 2016. I'm good at predictions, but not so good at seeing them actually happen. I worry a bit that the longer the bubble lasts, the bigger the pop will be, since I have no faith that powers-that-be will actually try to address root problems.

engineerlite said...

Your difficulty in predicting this future puts you in good company. Dr. Thomas Sowell, economist and social commentator, says about predicting the future, "Economists are often asked to predict what the economy is going to do. But economic predictions require predicting what politicians are going to do– and nothing is more unpredictable.

Assistant Village Idiot said...

Predictions are easy, except about the future.