Wednesday, March 2, 2011

Republicans putting in motion their strategy for a win in 2012

If the economy tanks next year we will almost certainly see a Republican elected president in 2012.

Warren Buffet was on CNBC this morning and he was very optimistic about the growth outlook this year. He did raise one caution flag when it came to oil prices, though.

It's funny...none of these "gurus" even mention the effect of gov't spending cuts. And given the way Republicans are routinely getting what they want in Congress, it suggests that we could see the full, $61 bln in spending cuts that they are asking for. Since spending cuts are the exact fiscal equivalent of tax increases (funny, Republicans don't quite seem to understand this, or if they do, they're keeping it secret), the economy is going to be hit with a $61 billion TAX INCREASE this year and next.

Using the typical fiscal multipler of "3" that the CBO uses, that equates to a 1.2% reduction in GDP, which is currently running at 2.8%. So the economy downshifts significantly in the second half of this year and into 2012. Unemployment spikes, stocks come down hard. A perfect setup for a Republican win in the 2012 presidential election!

Brilliant strategy!

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