Sunday, January 02, 2005

Prediction for 2005

Predictions hold the greatest dangers for an Author, as it is here that he turns into a laughingstock. Prophets suffer from a very short life expectency. Predictions, though, still hold some value to Readers and Authors; they allow All to realize the utility of the central core thought. So this Author again sinks into the masochistic, suicidal art of propheteering.

The American Economy will grow at Two percent or less over this year. Reevaluation of economic data since the last Recession will find this to be the realistic rate of growth yearly from the confirmed low point. Consumer Prices will rise 14% over 2005, due to the devaluation of the Dollar and heavy American consumption of both foreign products and materials. Economists will attempt to hide this increase from the CPI, but they are able to reshuffle the bag of Goods only so much. The one bright spot is the drop in Oil prices, due to the increase in productivity coupled to a reduction in demand--due to higher American prices overall restricting usage both inside and exterior to this Country. American Exports will find zero growth, while American Imports will only be restricted by American Consumer inability to pay.

The Federal Budget estimate will predict the highest growth in Tax revenues on record, while actual economic growth rates would suggest no greater increase than $40 billion, and lower American Consumption figures may entail actual decrease in Tax revenues. Most Economists estimate the total cost of Iraq will be an additional $100 billion over a decade. Maintenance of current Troop levels in Iraq will require $30 billion per year, or $300 billion over a decade. Two things are relevant in this Estimate: 1) Troop levels cannot decrease without a huge upswing in Casualties--Troop levels are too low for Presence now; 2) Iraqi insurrection against American occupation will only increase, especially if no uncompromised Iraqi Government is emplaced.

Privatization of Social Security through Private Accounts will prove of far greater Cost than Economists perdict; their estimates adjuding no exterior effects to the functional increase in investment. P/E ratios will be adversely affected for Stocks, Bonds, and Hedge funds for at least a decade. Interest on Treasuries will have to increase by two percentage points to gain the funds to replace the tax losses to Private Accounts. Reduced Consumption due to higher Consumer Prices, due to the fiscal irresponsibility of Government debt, will reduce FICA taxes overall (this Author estimates a percentage amount greater than the percentage loss to Private Accounts).

Two factors glare out to All who study the Issues. Factor One states the Expenditure Curve of U.S. Government--Federal, State, and Local--stands as ridiculeous, and serves as actual detriment to economic growth. Factor Two expresses a real need for Tax reform, not with the goal of reducing taxes, but with the goal of increasing Tax revenues. The U.S. economy has had about as much needed stimulus, as a blind man falling off a cliff has need for encouragement to learn how to walk by himself. Republican and Democrat are equally at fault, with the Corporate Executive and Economist equally guilty. The Bush economic stimulus has been nothing but inflationary, though the real inflation has been hidden by transference Overseas. The Proscription: We must balance Government budgets, and do so by taxation, and not by cutting domestic spending; Domestic welfare programs are already deplorable unfunded. These Factors must be adjusted before sustainable economic growth and living standards can be realized.

The secondary goal of Tax reform must be spur of domestic production. This cannot be accomplished by tax concessions, as the primary goal must be increased tax revenues. This means Tax regulation which penalizes foreign sourcing of Product to sell in the American Consumer market. This penalty should be split between American Consumer and Business; this meaning a special Sales tax on imported Consumer Goods, and elimination of tax concessions and higher Business tax rates on Profits made from importation of Finished Goods.

Such is the Author's thought on the new Year. lgl

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