16 Predictions for 2012

Continued Conflict

---

 ~ 2012 is going to be rather similar to 2011 politically, but there will be some changes on the economic front.

It's an election year, and, although it seems like the election started a year ago (right after the last one ended), this cycle will see yet higher levels of obsession with the election by politicians, journalists, pundits, and, hence, everyone. So, in government, there will be even fewer policy accomplishments than in 2011 (is that even possible?) and science, reason, and critical thinking will be marginalized to the point of invisibility.

The election will change a number of the players, but regrettably will change none of the political dynamic. The dysfunction will continue, public anger and disgust will increase, and only economic downdrafts in Europe and Asia will prevent precipitous erosion in America's global competitiveness.

This year's predictions:

1. President Obama will be re-elected. In the end, it won't be terribly close, largely because Republican nominee Romney won't get very high turnout from the more extreme part of the GOP base (which is to say most of the base.)
2. The US Congress will switch sides. The Republicans will take the Senate and the Democrats will re-take the House as many of the Tea Party freshmen lose.
3. US economic growth continues to gain. With de-leveraging well along, the US economy will show decent GDP growth, along with improvements in confidence/sentiment. With the rest of the world's large economies turning more sickly, the US will look increasingly strong and attract foreign investment.
4. Unemployment will continue to inch down. But it will still be above 7% at year-end.
5. The foreclosure crisis will get worse. Only half of the homes that will eventually be foreclosed have been yet, and the shadow inventory of the banksters is large. There will be no government help for the foreclosed or the new (or existing) homeless; meanwhile, the banks will roll on. Housing prices in the outer suburbs continue to swoon, putting pressure on the entire housing market and further eviscerating the middle class.
6. The Euro will survive. Germany will at length see its self-interest is advanced by monetary easing as Europe enters a recession.
7. The Chinese bubble will burst. Growth slowed this year and will really fall off in 2012. Overseas demand will decline with global economic problems and Chinese of overbuilding of residential real estate will trigger the first Chinese market economy recession. The leadership will not handle it well and unrest will grow. The rest of the BRIC economies also experience turbulence/headwinds, and problems develop.
8. Federal energy policy will continue to go nowhere while state policy goes backwards. Yeah, yeah, really sticking my neck out on this one, but in this election year there will be absolutely no compromise on anything. Deadlock will prevent all but the barest minimum action necessary to keep the government on life-support, and members of Congress pampered in the style to which they've sadly become accustomed.
9. US government support for cleantech shrivels. The 1603 program has ended and will not be renewed. Other support, such as the production tax credit, will be allowed to expire. Oil and gas subsidies will continue as always, while any other energy support will serve only as a bone of electoral contention.
10. The Keystone XL pipeline will be denied, then revived. Everything about the process will be political. First, Obama will deny the permit, as his administration has clearly signaled before and after Congress mandated a 60-day timeline. This will let Obama get much of his base on board for the campaign. Next Congress, with the eager cooperation of a broad number of Democrats, will fast-track a slightly revised route with expedited permitting, allowing the GOP to claim victory and the Democrats to posture as doing something about job creation (despite the fact that KXL will create many fewer jobs than renewable energy has been doing for years.) Issues of climate change, the environmental horrors of the tar sands, and the transparently bogus nature of the claims for energy security will be ignored.
11. Fracking will grow as regulatory fighting continues. The EPA wants to, you know, protect the environment, but proponents will carp bitterly about regulatory burdens. Science will take a back seat to politics and talk of jobs and environmental incidents will serve only to sharpen the political disagreement.
12. The decline in startup investment levels off. However, investment remains highly selective, with a focus on later stage companies in software and IT. Cleantech investment continues to wither as government support all but completely evaporates.
13. Oil will rise to over $120/BBL and gasoline will hit $4.50/gallon next summer.
14. The smart grid will still not be built. Some progress will occur in small pots, especially the customer side of the meter, but without federal support, which will not be forthcoming, nothing will be done to the larger grid infrastructure.
15. Sustainability practices grow in business. There's no political support or acknowledgement for the value of sustainability, but business recognizes that such practices are better for both profitability and long-term stakeholder value.
16. Public support for public transportation grows. A trend towards walkable urban communities well-served by public transportation continues. Government does not meaningfully respond, and any discussions of transportation infrastructure remain dominated by road building.

Finally, I agree with all of these other predictions.

Best wishes for a healthy, happy and prosperous 2012 to my friends, family, clients and colleagues.