Tuesday, June 5, 2012

If Obama Wins, There Will Be Another Recession

I had an interesting conversation today with a friend of mine who indicated that if President Obama is re-elected, he will--in all likelihood--purposefully take the economy into another recession.  The power of never having to stand again for election will be on display for all to see.  Here's what my friend said will happen:

1.  He will veto any extension of the Bush Era Tax Rates--in the interest of "fairness".  Oh, he'll try and separate out the "rich" so that the "middle class" don't get their rates increased, but that won't fly, and Congress won't have the votes to override.
2.  He will let "sequestration happen".  This will immediately take $1.2 trillion out of the budget for the next ten years, impacting both defense and other non-defense discretionary accounts.

What do these two things do?  For one, they will dramatically slow the economy, bringing on the new recession.  But--they will also--using incredibly blunt instruments--return SOME measure of fiscal balance to the nation's books.  That's right--the nation's largest ever tax increase coupled with substantial spending cuts--will result in a "new normal", with substantially higher revenues and somewhat lower outlays. 

I think this is an interesting theory.  I'm not willing to dismiss it; Mr. Obama--if he wins--is likely to have even less favorable sledding with the Congress, and "doing nothing" and letting the new normal assert itself might just be A-OK with him.


Tom de Plume said...

"If Obama wins..."

Are you saying there will be a recession in addition to the one we are heading into right now? So by HIS count we will have the Bush recession, the Euro-caused recession, and then the Obama recession. Will HE even refer to it as the Obama recession? Hard to balance out the need to lay blame to others with a basic narcissistic personality disorder.

But how 'bout Scott Walker!

"The Hammer" said...

I agree with Tom, a recession is almost inevitable so Obama (if re-elected) won't have a choice. Also, I disagree he will let automatic cuts happen. He ignored Simpson-Bowles so why would he?

But this is all just talk anyway. Obama ain't winning nothing! The Wisconsin vote yesterday is proof positive that Obama's days are numbered. He's going to lose and he's going to lose big. Tell your friend if he wants engage in fantastic "what ifs" he should perhaps talk about UVA having a winning season in football or something like that.

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