A Prediction for 2011
by Jeffrey Miron on December 31st, 2010
3 Comments
The economic recovery will pick up steam. Tax revenues will increase, and certain components of expenditure will decline or grow more slowly, so budget deficits will shrink. Politicians and the public will act as thought these improvements are enough to address the long-term state and federal debt situations, and they will start spending again like drunken sailors.
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Vake
If part A of your prediction proves true, then part B will certainly come to fruition.
puzzling
This assumes that:
1. Interest rates will not rise, negating any expenditure cuts due to vast debt service across all levels of government
2. QE III happens and it keeps the stock market inflated, thus keeping retail spending up, eventually raising tax revenues.
3. No price-shock events occur, such as could be the case with oil if the administration advances the Iran war to before the 2012 election cycle.
4. Municipalities do not begin to default like dominos, perhaps to be bailed out by states and eventually the feds.
Lots of uncertainty out there. It may be fairly sunny out, but I’m not sure this isn’t the perspective of one in the eye of a massive hurricane.
Rocket Scientist
I am afraid that if the economy improves and tax revenues increase as a result, politicians at local, state and national levels will see this as permission to spend like progressives. I have some respect for drunken sailors. Most of the time they are sober.