Predicting the Recession of 2011

Over at The Futurist, they have a pretty good track record of predicting bubbles, busts, and recessions long before they happen. So it is with interest that I pass on information from the following post called The Next Two US Recessions:

1) 2011 : The tax cuts enacted by President Bush are set to expire at the end of 2010, returning tax brackets to what they were in 2000. Most middle class brackets will rise by 3%, and the top bracket will rise 4.6% from 35% to 39.6%. This is effectively a tax increase that will be upon us in 14 months. At the same time, the Fed Funds rate is at a record low near 0%, and has been for several months. This low interest rate has ended the current recession, but virtually guarantees future inflation. As the Federal Reserve is forced to raise interest rates, liquidity contracts again, the housing prices continue on the correction that was not allowed to complete itself in 2009. A mere rise in the rate back up to 3% could push housing prices down another leg, battering household wealth yet again, and driving yet more people into negative net worth. The housing correction is not fully complete until we have sustained a Fed Funds rate over 3% for at least a year. The timing of this could combine with the tax increase, which would create a joint burden too heavy for the economy to bear, causing a new recession in 2011.

This situation could be avoided easily, by reducing the budget deficit through the quaint notion of spending cuts instead of tax increases that stifle incentives and encumber small businesses. However, barring a seismic shift in the 2010 congressional elections that dispose of many Democrats and replace them with fiscally conservative Republicans (themselves an endangered group within the Republican Party), I do not see the government taking prudent preventive action.

I agree with this assessment. It does not take a genius to recognize the effects of the Democrats push to end the Bush Tax Cuts and raise our taxes. Businesses that can move profits and investments to 2010 will do so, and this shifting will artificially lower profits and investments in 2011, causing an already weak economy to drop into a double-dip recession.

This coming recession, like the one that we are in today, will be directly caused by policy decisions made by Democratic Congressman, Senators, and our Democratic President, helped along by Democrats in state governments around the nation. There is no way to avoid it. Jobs will be lost, our standard of living will drop, long-term prospects for our nation will suffer as our federal government piles up more debt, and our children and grand-children will pay for our mistakes today.