STUMP » Articles » Predictions for 2016 (Mostly Not Me) » 1 January 2016, 10:50

Happy New Year, Y’all!

As with last year, I needed to do my annual desk clean:

Oooh, some artifacts from doing the panorama thing. Oh well.

As mentioned before, I’m not much into the prediction game, but I do like keeping track of predictions and how they actually turn out. My pretty weak predictions did come true, but that’s an actuary for you.

I started picking up a few before, and I’ve found a few new ones I want to watch as well. Some of these are mutually exclusive. In some cases, they can all be wrong, but they definitely can’t all be correct.

ELECTION PREDICTIONS

Larry Correia:

My prediction is that the republican nominee will be Ted Cruz. The democrat nominee will be Hillary Clinton.

Prediction was made in August 2015.

Scott Adams:

Prediction: I’ll put the odds at 75% that we learn of an important Clinton health issue before the general election.

Scott Adams has written a lot of interesting stuff on the race thus far, mainly about Trump. Don Surber has a good roundup of Adams on Trump.

Smitty at The Other McCain had a bit of fun with the Adams prediction:

[Hillary Clinton] ran interference for BHO over Benghazi in 2012, when the truth kryptonite would have wilted Superwimp.

BHO runs legal interference, stifling any proper Benghazi inquiry for her campaing, with the proviso that she permit him to name the VP (Corey Booker? Deval Patrick), who is really going to be the President anyway.

Her majesty enjoys the first 100 days of honeymoon, so that she doesn’t look as bad as William Henry Harrison.

Then she retires for medical reasons, securing the Obama legacy.

Note that this is a Trump-free conspiracy theory. I still maintain that he is a mercenary, building up a large voter base to sell to whoever is writing the fattest check. If Hillary, he goes independent, or takes the GOP nomination and his speeches start giving it the Full Tarantino until the GOP implodes entirely.

If he stays GOP, he can either try to convince enough conservatives that he has a statesman bone somewhere under his ridiculous hairstyle, or just sell his endorsement to another candidate with something like a plausible political style.

Alas, that prediction bleeds into 2017. But the Trump stuff would occur in 2016, so let’s watch that one.

ECONOMIC PREDICTIONS

Saxo Bank has a bunch:

My “Real” 2016 Outlook

• US Dollar will weaken – It will follow the “normal path” of weaker US$ post the first hike.
  ….
• Inflation will be higher next year – higher than expectations: El Nino adds 0.2%, base effect another 0.2% and then some demand pull and more credit flow.

Federal Reserve Hikes

• Fed says four hikes, market says maximum two – I’m with the Fed

From the same post, Mish has a few:

It’s likely the dollar has peaked, or will soon do so, but not necessarily for the same reason Steen suggests. I doubt the Fed actually gets in four hikes. But if they do, I expect them to be unwound at a far faster pace than they rose.

I suggest a second-half collapse is more likely than a second-half surge in US equities, but that depends on where things go and how fast in the first half.

Mish does often mention that he really can’t time when bubbles burst – can take a while for that to happen.

But I agree with him that stocks are overvalued more now than 2000 or 2007. Prices seem to have been defying gravity.

I would like to see 4 Fed hikes, btw, but the one thing I’m looking for is an upswing in bond defaults.

Mish prediction from different post:

My prediction: A recession will arrive in 2016, assuming it has not already started.

There’s plenty more economic predictions out there, but I think that’s enough right now.

POLICY PREDICTIONS

Here is where I’m going to make my predictions, much of which relates to the predictions above.

1. Medicare and Social Security become huge issues in the general election race.

I saw some burbling go by in 2015, but they were small items. The reason I think Social Security will be a major election issue is two-fold: cash flows and demographics in the near term.

Social Security has been cash flow negative for a while. Digging into this report, which has 2013 numbers, shows what I mean: look at either Table 2 or Table 3 for what’s going on.

Trustees report accounting (Table 2):
Income from payroll taxes & income taxes — $745 billion
Cashflow outgo — $813 billion

Cash deficit: $68 billion

OMB accounting (Table 3):
Cash income — $673 billion
Cash outfo — $814 billion

Cash deficit: $140 billion

Notice that I’m excluding the interest on the Trust Fund (a fake asset) or “intergovernmental transfers” as the OMB calls it.

Now, these billions are just spit in the federal budget bucket. FY 2013 spending was $3.45 trillion. $140 billion is only 4% of the budget.

But it’s growing.

The cash flow pressures from Social Security programs going cash flow negative are going to only increase. The oldest Boomers turn 70 this year, and the Boomer peak (birth year 1957) has yet to hit age 60. Those Boomers did not have enough kids to keep that gravy train growing, so this Boomer tsunami hitting is a big deal. That’s the demographic reality.

Medicare has similar pressures with the bonus of Obamacare pressures thrown in.

I think the Medicare issue will burn lower. It’s harder to explain in campaign soundbites. But there will definitely be competing proposals. I predict the Democrat will recommend higher taxes: remove the payroll tax cap for those over $250K, plus make Social Security benefits for “the rich” more taxable.

I predict the Republican candidate will recommend benefit cuts for “the rich”, but less directly. And no payroll tax increase.

2. Public pensions will be big battles in statehouses… not so much on the federal stage.

There will be no federal bailouts, even of Puerto Rico, this year. Even if a law allowing PR to declare bankruptcy gets through Congress, I bet Obama would veto it.

I don’t think the Democrats want the precedent to allow for states to declare bankruptcy, especially as Illinois would be first up on the carpet for that one.

Now, of these two predictions, I’m a bit more rickety on the first. Events could overtake the election… something else entirely could take the spotlight.

I don’t think that Social Security/Medicare will be much of anything during the primary season, but I can see it taking hold during the general election fight.

CLEARING UP FOR THE NEW YEAR

My desk gets only so clean:

Let’s see how these predictions hold up in the year to come!