2012: Setting the Baseline
With the realistic 2012 presidential candidates – Obama, Romney, Pawlenty – launching their campaigns amid little chance of major bipartisan budget compromise, it is useful to understand the metrics that will determine success before they get too twisted by the candidates and the media. Where are we now, really; and where will we likely be in the fall of 2012.
1. Current prosperity.
- Jobs. Headline unemployment is 8.8% – a point above what Obama said we would face without his stimulus plan and 3.4 % above when he took office. The full number is more like 16%. Both are trending down a bit – the recession officially ended 18 months ago - but are unlikely to be anywhere near the normal 4 to 5% considered “full employment. Average hourly pay is also down. Extended unemployment benefits – now up to 99 weeks – will expire in January 2012.
- Inflation. The “core” CPI rate has started to creep up to a still benign 1.1 % in February; with food and energy it is 2.1%. With unemployment high, labor costs are not a problem and housing prices continue to fall, but commodity costs (oil etc.) are rising fast, and import prices are rising due to a weak dollar. For those with short memories, Jimmy Carter got us to 13% in 1980.
The campaign thread: we didn’t know how bad Bush left things. Reality: most of the other G-20 countries are doing better than our 3% growth rate and are taking stronger steps to reduce deficits and control inflation.
2. Future prosperity.
- The public understands that the current $14.2 trillion dollar debt is a big problem for our kids and grand-kids and will presumably punish any candidate that doesn’t have a realistic plan to control it. The arc hasn’t changed yet and the amount will probably be $16 trillion before the election – with the current deficit of 10.8% of GDP the greatest in the developed economies.
- The Fed’s program ( click here for a humorous explanation of Quantitative Easing II) of buying almost all of the new government debt to finance deficits will end in June. The largest private purchaser of bonds, Bill Gross’ PIMCO, has stopped buying Treasuries and has started shorting them. Look for a big rise in rates from today’s 3.6% for 10 year treasuries with a huge negative impact on borrowing costs as Treasury looks for somebody to buy a net increase of $30 billion per week.
The campaign thread: we didn’t know how bad Bush left things. Reality: President Obama has increased the debt from $9.2 to $14.2 trillion in 2 plus years.
3. National security.
- Wars. We currently have 47,000 troops in Iraq, and 98,000 in Afghanistan. Pentagon officials have been hedging on commitments to be out of Iraq by year’s end and to start withdrawing from Afghanistan by July 1. A muddled “kinetic military activity” continues in Libya.
- Proliferation. North Korea has been quietly starving as the transition to Kim Jong-un proceeds. Iran’s joining of the nuclear club has been slowed by the Stuxnet computer worm which has apparently set back the Iranian nuclear program by a couple of years. Pakistan remains a risk with the US relationship badly deteriorating. The best that anybody can hope for is no news.
- Terrorism. Osama bin Laden remains hunkered down while the “Arab Awakening” contains risks of new Al Queda refuges in Yemen, Libya, and elsewhere. The best that anybody can hope for is no news.
The campaign thread: we didn’t know how bad Bush left things. Reality: the Obama policies look more and more like Bush’s – lock up terrorists and promote democracy; there is no plan for the Arab world.
Things will definitely change between now and next November, but history won’t – except in the speeches of the politicians and their media supporters.
For the full post see www.RightinSanFrancisco.com.