I’m horrible at making predictions. So far, I don’t think I’ve predicted anything correctly when it comes to politics. Having learned nothing from my past experience, I offer a few predictions for President Obama’s second term.
Tax Reform No meaningful tax reform will occur during the Obama administration. While it’s possible that a deal will be reached by December 31, 2012 to extend the current tax rates – minus those making more than $250k – I doubt it. Tax rates will definitely inch upward at the high end, and may jump significantly. I consider it likely that by the end of Obama’s second term tax rates will go up for the middle class, and more people at the low end will be removed from the tax rolls altogether.
Immigration Reform No deal will be struck to secure the southern border physically and the DREAM Act will not pass. While politicians from both parties will tout some agreement and an immigration bill will be passed, the effect on the border will be negligible. The Obama policy to allow illegal immigrants who arrived when they were children to remain here legally will become the law of the land, supported by at least 50% of Republicans.
Health Care Costs I predict that health care costs will rise for the average American at a higher rate than they rose between 2000 and 2012. This will be a direct result of the Affordable Care Act, although ObamaCare deniers will continue to blame health insurance companies.
Unemployment The unemployment rate will never get below George W. Bush’s average rate of 5.1% (at least, not at an equivalent labor force participation rate). In fact, while the U3 rate may drop back to the 6%-7% range, U6 will spike as a result of employers shifting the workforce to part-time to avoid ObamaCare penalties.
Recession The Obama administration will experience at least one recession, and we may have already entered one. I won’t rule out two recessions in the next four years as new tax policies and the full implementation of ObamaCare and Dodd-Frank occur. I consider it likely that we’ll experience at least six quarters of negative GDP growth in the next 48 months.
Economic Growth Over the coming four years, expect GDP growth below the Bush era average of 4.9%. Obviously, an Obama recession would reduce growth, but I predict that non-recession GDP will remain below historical averages as the economy struggles under new regulation and higher tax rates.
War No formal declarations of war will occur under the Obama administration. That doesn’t mean we won’t get involved in controversial overseas contingency operations, just that Obama won’t let it be called “war.” It’s likely that the Middle East will generate two or three military conflicts, although American involvement will be limited or materially insignificant.
Iran Iran will develop nuclear weapons, significantly destabilizing the Middle East. The U.S. will take no military action to prevent them from finishing their nuclear program. Israel will continue its covert efforts against Iran, but will not openly attack. In the end, all efforts will fail, Iran will become the first Islamic nuclear power, and Israel will adopt a permanent warlike footing.
Elections Republicans will see a net gain in the U.S. House of Representatives in the 2014 election. Democrats will see no net gain in Senate seats or governorships, and Republicans may actually gain a couple of Senate seats in the off-year.