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Sea Change in 2006?   (January 9, 2006)

The stars may be aligning for a sea change in the nation's political leadership. An Associated Press story, Public Uneasy With GOP Leadership, outlines the growing recognition, at least among independent voters, that the Republicans (a.k.a. the party of Abramoff) have become as ossified and corrupt as any Democratic Congress in recent history--in other words, they've reached the same state of self-serving greed and hubris which caused voters to reject the Democratic Congressional slate in 1994.

More important than unease, however, is the nation's deteriorating finances. The cliche is that Americans vote their pocketbooks, and when the economy tanks, they blame (rather naturally) the incumbent party. Herewith is a prediction that the financial damage the Bush administration has inflicted on the nation's fiscal house will become apparent as 2006 unfolds:

  • Inflation will not go away, despite the Fed's 14 straight interest rate increases.

  • Oil prices will continue to be a tax on consumers and the economy at large, driving inflation at the most perniciously ubiquitous level--transportation.

  • As interest rates click ever higher, the rising interest we pay to on the ballooning Federal debt will finally enter the public consciousness as a dangerous, unsustainable weight on the nation's future.

  • The stock market will tank this year, reaching its nadir in October, just as voters prepare to go to the polls.

  • The housing bubble will begin deflating, removing the sole source of fiscal stimulus in the economy (other than the vast Federal borrow-and-spend programs). Once consumers are unable to borrow more, then consumer spending tanks, bringing the economy down with it.

  • The vicious addiction we as a nation have developed for cheap money provided by our primary Asian trading partners (see the reference to "addict and junkie" in the January 5th entry below) will start unraveling, as the sheer size of U.S. debt and foreign holdings of that debt crumble under their own weight.

    Will the Democrats have solutions to these horrendous problems? Of course they won't; but in the past 20 years, it was the Democratic administration in the 1990s which showed the courage to rein in spending and raise taxes to pay the benefits the citizens demanded. Meanwhile, the Republican administrations have proven themselves unable to do anything but raise benefits, cut taxes to the wealthy and run up mind-boggling deficits. That is most assuredly the road to ruin, as the nation will begin learning in 2006.

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    copyright © 2006 Charles Hugh Smith. All rights reserved in all media.

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