Some Not So Bold Predictions for 2009

Following the financial market debacle of 2008 most people over age 21 (that are voters with either a direct or indirect interest in the domestic stock markets….which means almost everyone) may wonder what may be in store for them in 2009. The list below details the carnage in the stock markets:

2008: The year in markets:

Dow Jones Industrial Average -34%
S&P 500 -38%
Nasdaq -40%
Dow Jones Financials -55%

The bad news is that private sector wealth decreased by approximately 40% in 2008. The good news is that this reduction in private wealth is essentially non partisan. In other words, we are all in this together. It’s an equal opportunity recession…..except for government employees and the beneficiaries of “special” government support.

Congress already has an automatic pay raise dialed into the current budget. The UAW is angling to preserve, via the TARP bailout, the indefensible job security and benefit payments that most of the private sector had to jettison years ago. The viability of government pension plans, which are primarily defined benefit plans, is totally disconnected from the success or failure of private sector enterprises (i.e. the stock markets and small businesses), which are the very entities that pay for these government pensions and benefits through taxes.

Every dollar of wealth in our economy is created by the private sector. While government may be a conduit for spending that wealth and income (infrastructure spending, entitlement programs, defense), the dollars it spends are derived exclusively from taxes on private sector profits and wealth.

Let that reality sink in: every dollar of all local, state, and federal government (agency/entity/cabinet/GSE, (think FNMA), or tax subsidy) expenditure is a dollar that has its origin in the profit or accumulated wealth of the private sector. All of the businesses and individuals that create these profits and pay those taxes have lost significant value in 2008. Many of these same businesses, in fact most of them, are shedding employees and reducing expenses. The question every taxpayer should ask is: will my local, state and federal government reduce their budget and expenditures this year? Will they cut back on pension and benefit promises just as the private sector has been forced to do?

Historically, the federal government has not volunteered to take the bitter medicine that the private sector has had forced upon it by economic reality. However, the sudden and steep losses of the past year (the worst in eighty years) may cause Congress to pause in its spending gluttony and force president elect Obama to change some promises he made during the 2008 campaign. The sharp losses experienced may also cause voters to demand some accountability for the first time in a long time.

My not so bold predictions for 2009/2010 are:

1) If Congress passes any tax increase in 2009 the Democrats will lose net seats in the 2010 interim election.

2) If Congress allows the Big 2.5 auto makers any additional funds from TARP in 2009 the Democrats will lose net seats in 2010.

3) If Congress keeps its pay increase scheduled for 2009 it will have the same effect as the House check cashing/ post office scandal from the early 1990’s.

4) Chris Dodd is toast. Already. He’s in even bigger trouble if Congress chooses to really investigate the mortgage debacle and the Friends of Anthony Mozilo.

5) Charlie Rangel is toast. Already.

6) If Congress formally investigates the SEC and Chris Cox the body count will include far more Democrats than Republicans.

What will a President Obama do during the next two years?

That’s a far more complicated question because he may find his hands tied by foreign policy challenges that continue to unfold faster than David Axelrod can formulate responses. Collapsing energy prices will change the negotiating dynamic with oligarchs from Russia to Iran. A resolute Israeli response to terrorists such as Hamas may change the calculus of forty years of Middle East foreign policy.

Obama may find that dealing with desperate foreign nations (such as Russia and Iran, both currently becoming insolvent by the day with crude oil at $40 per barrel) requires not the nuance and finesse that his sycophant far left base so worships. Instead, the president elect may find himself in a street fight that has only one solution that delivers to Americans their demand for safety and security: the projection of U S military force in strategic actions not unlike the policies of President Bush and Vice President Cheney.

Irony may be the operative word in describing U S foreign policy in 2009, but comedic farce will be the theme of the Democrat Congress this year.

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