2012: Another year of politics wiping us out
ESTHER CEPEDA email@example.com January 15, 2012 8:16PM
Updated: February 17, 2012 8:06AM
The only question on everyone’s lips these days is “will the economy — employment levels, home values, wage increases — fully recover soon?”
According to the yearly gathering of brilliant economic minds at the Executives’ Club of Chicago Annual Economic Outlook luncheon, the answer is “not in 2012.”
Held the day after the first anniversary of Illinois’ 67 percent income tax increase and 50 percent increase in the state corporate tax — and just days after the state’s credit rating was downgraded by Moody’s to the detestable spot of lowest state in the country — the atmosphere was as glum as I’ve ever seen it.
The distinguished panelists, with our own Terry Savage as moderator, described the coming year as hinging on two things: the health of the European Union and our presidential election.
The three experts — Diane Swonk, cheif economist at Mesirow Financial, Dennis Gartman, editor of the Gartman Letter, and the hyperkinetic Robert Froehlich, chief investment strategist at the Hartford Financial Services Group — mostly agreed that the eurozone will keep limping along without a breakup or a major recession. But it’s the upcoming election that keeps them up at night.
The ever-plain-spoken Swonk put it this way: “Our biggest problem is that we’re suffering from political impotence.” Aside from jobs growth numbers that came from unsustainable low-income jobs like couriers and messengers, and a Christmas shopping season hype that far exceeded the sales reality, she told the crowd that politics is the country’s worst problem.
“We have tax cuts ready to expire and they cause distortions and uncertainty because no one knows what will expire when and what the tax code will be moving forward, the super committee failed and we’re looking at 1.2 trillion in automatic cuts and the rating agencies are ready to downgrade us,” Swonk said.
Even usually optimistic Froehlich wasn’t as sunny this year. Onto the pile of bad news he threw a housing market that won’t start healing for decades, continued high unemployment resulting from baby boomers who can’t afford to retire, and companies that will continue to overwork existing employees. His outlook, too, revolved around politics.
“The Democrats drew the short straw this election cycle; it’s the worst anti-incumbent mood in years and there’s nothing more divisive in this country right now than healthcare,” Froehlich said. “Unless the Supreme Court finds the mandate unconstitutional in June, if the Republicans can take the White House — or even just the Senate — they’ll throw out healthcare reform.” This, he said, would at least lead to a healthcare sector boom.
Gartman predicted that very little will happen until our political contests are settled at the end of the year. “I don’t think anybody can have any idea [what’s going to happen economically] until the Republican candidate, then the winner of presidency, and the [parties controlling] the Senate and the House are known. Anything that does happen will be relatively small.”
Swonk hoped that the lame duck congress will have time to put together a reasonable debt reduction plan, but she said, “The election in November is not likely to change the course of political decision-making in Washington unless everyone is willing to put individual agendas aside and do what democracy demands: legislate and be willing to make decisions.”
Ugh! If the last four years are any indicator, there’s little chance of that.
What a depressing set of predictions for 2012: We’re barely through the middle of January, some of us are already tired of the day-to-day election news coverage, and the year’s already a wash.