This post is a sort of addendum to yesterday's. Lots of other interesting stuff is going on that will bear watching in 2012. Here are just a few of those:
* Governor Walker Recall: About 515,000 valid signatures supporting a recall vote for Governor Scott Walker of Wisconsin must be submitted by mid-Janury in order to force a recall election.It looks like this will happen, with a sufficient surplus to survive challenges. Polls show Walker should lose; and if so, this would be just the third recall of a governor in history. If Walker loses, this will be interpreted by many as evidence that Republicans, after November 2010, overreached, and that their anti-union, anti-Medicare, anti-entitlements, anti-taxing the wealthy programs are not supported by the Majority. This might be a harbinger of what happens come November.
* Healthcare: The Supreme Court will hear the ACA case in March, and will probably rule in August. I believe it will be ruled constitutional. If so, this would be a boost for Obama. Also watch trends in healthcare costs. There was a significant slowdown in Medicare cost increases in 2010 and 2011, with analysts suggesting this might be due to health care organizations getting ready for the ACA going live in 2014. If the cost moderation trend continues, this would be a strong positive, suggesting the ACA might help moderate costs. Also keep track of what employers begin to do with their healthcare coverage as 2014 approaches. One of the "doomsday" scenarios has 50 million plus employees being dropped from employer healthcare programs, versus the forecasted 15 million. If this proves to be the case, the forecasted ACA budgets will be busted wide open; if not, we might come to find this bill will pay for itself.
* Occupy Wall Street: Will this movement continue through the Winter of 2012 and into the Spring? If so, it could significantly shape the election conversation around the themes of fairness, dignity, America's priorities, job creation, and what might be needed to "reinvent" American democracy. The media has mostly downplayed or ignored OWS, and popular perceptions turned from quite positive to moderately negative, most likely based on conflicts with local authorities (police) and a feeling that "the occupiers have made their point and it's time to go home." But if OWS proves to be a "durable energy", not a short term burst, it might well have a game changing affect on the coming election.
*Taxes/Tax Reform: Republicans are coming off a loss on the payroll tax extension debate. What will they do in the Conference Committee charged with working out a full year extension (versus the current two months)? Some analysts predict another stalemate, like the Supercommittee, which might lead to another PR hit to Republicans, with the charge that the only tax cuts they like are ones for the wealthy. The next interesting question is what, if anything, will happen to discussions on the Bush tax cuts over the Spring and summer? If Republicans are confident of winning the Presidency and holding the House, they might choose to do nothing. When the tax cuts expire on January 1, they can be quickly reinstated when the new Republican President comes into office. But if GOP leaders are not certain of winning, they might choose to enter serious negotiations with Democrats under the tax reform banner. They will seek to make the Bush tax cuts permanent in return for broad tax reform and (in theory) offering new tax revenues from the reform program to Democrats. This is the same discussion Boehner and Obama had, or attempted to have over the summer, during the debt ceiling talks; but at that time, Republicans had the leverage (they were willing to force the Government to default). Now the leverage is reversed: if Obama wins and then does nothing, the Bush tax cuts will expire, and Republicans would not be able to overcome Obama's veto of any legislation put forward by Republicans extending, or making the tax cuts permanent. This will be interesting to watch. Republicans don't want to give the President a big win on tax reform; but they want to keep the Bush tax cuts in place even more.
* China: China may crack a bit this year. There are signs the economy is slowing and that there are a lot of bad loans out there in the countryside, following the huge stimulus in 2008-2009. Lots of evidence of a real estate bubble. Capital is starting to leave. And more and more protests are kicking up. With a deep slowdown in Europe very likely, this export dependent country may be in a bit of trouble. Keep an eye out for a devaluation of the yen to kick up exports, which could cause a chain reaction of protectionist counters. China may be headed for troubles, economic and political, just as they are preparing for a leadership transition. I do not feel China will prove to be the invulnerable, endlessly successful, perpetual creditor nation that we have feared. In the next few years, she will come more or less down to earth. The problem is that this will mean the world economy is suffering, and all exporting counties will struggle.
* Japan: Following the Fukushima earthquake/tsunami disaster, hard money analysts and inflation hawks are, once again predicting disaster for Japan. This country, with its perpetual deficits, huge public debt levels, low inflation, low unemployment, and rock bottom interest rates has been a perpetual irritant to conservative economists. The neoliberal, austerity-promoting, deficit/debt critiquing, sovereign default-fearing IMF/EU/UK Tories/US Conservatives/conservative economists are uniformly appalled by Japan's fiscal and monetary "extravagance": where the authorities should be cutting fiercely, they are spending relatively freely and suffering no apparent ill effects. The only explanation any of the hawks can come up with is that the Japanese are very loyal, and have simply continued to buy Japanese Government Bonds (JGBs'), despite the underlying bad economics. So prices stay up and rates stay low, and inflation never has a chance to take off. Right now, one or two major pension investors in Japan are starting to question their JGB holdings, and the hawks are predicting imminent disaster, and quite possibly sovereign default. It won't happen. A sovereign country, issuing a non-pegged, non-convertible currency cannot default on debts in its own currency. It has an infinite amount of that currency, and it can buy its own bonds all day, in any quantity. And this will not lead to runaway inflation, if there is slack in the economy, as the post 1990 example of Japan shows us. Why economists and policymakers cannot look at Japan, and revise their theories is beyond me. But please do not short Japanese bonds!