Interesting year ahead for the United States

For anyone foolish enough to make New Year’s forecasts, the danger is confusing prophecy and wish. I admit to indulging in the foolishness of forecasting; I will do my best in what follows to distinguish between what I want to happen and what is likely to happen. I wish our country’s Covid-19 death numbers would come down – a lot. Down to roughly flu level, a few tens of thousands a year, not the current several hundred thousand. And logically, the numbers should plunge. More than 200 million Americans are fully vaccinated. Tens of millions more have had the disease, affording them a degree of natural immunity. But if I’m forecasting, I fear the safest bet is our society will continue to put up with way too many COVID deaths. Americans are determined to live their lives normally, whatever the risk, and authorities in many states are determined to ban some of the precautions we’ve been taking, like mandates for vaccinations and masks. The COVID death numbers will come down, but I predict the extent of the decline will disappoint. I wish inflation would come down a lot, and soon. The last thing the country needs is for Americans to start assuming big price increases are inevitable. Once that happens, inflation becomes a self-fulfilling prophecy. Workers demand higher wages to compensate for the expected inflation and the companies that employ them raise prices to maintain profit margins. To break such a wage-price spiral, the Federal Reserve would have to inflict much more interest-rate pain on the economy than the handful of quarter-point rises it’s currently mulling. My forecast is that inflation will ease in 2022, enough to avoid a full-scale wage-price spiral, but not enough to wring out the public’s inflationary expectations entirely. Whether those expectations strengthen or fade will balance on a knife’s edge. The Fed’s quarter-point rate increases will be necessary. I wish Congress would find a way to enact the agriculture-conservation provisions of the moribund Build Back Better bill, the ones that would have provided a $27.1 billion increase in USDA conservation programs over 10 years. If society wants farmers to put protecting the environment over profit, society should cover the cost. That’s a principle worth reinforcing, especially since the alternative to compensation is regulation. Once again, wish does not equal forecast. Agriculture is far from unanimous in its support for these provisions. One hopeful sign: The Democratic senator whose opposition killed Build Back Better, Joe Manchin of West Virginia, is said to have favored them. As the Democrats are likely to try again with a smaller version of the bill, there’s a good chance it will call for increased spending on ag conservation, and at least some chance the bill will pass. Some of my wishes and forecasts are even further at odds with each other. I wish blue-urban America and red-rural America would spend less time vilifying each other and more time exploring potential areas of cooperation. I predict today’s extreme polarization will persist. I wish the stock market would have another year like 2021, when the S&P 500 rose 27%, the NASDAQ 21% and the Dow 19%. With the Fed tightening, it’s a safe bet those kinds of gains won’t recur. The market will be lucky to revert to the mean, say a 6% or 7% increase. A decline wouldn’t be shocking. Finally, I wish 2022 would spare us nasty surprises. Consider, though, that 2020 gave us a pandemic we did not anticipate at the beginning of the year and 2021 gave us an un-forecast inflation surprise. A forecaster would be unwise to bet against a 2022 surprise. As the Wall Street Journal economic columnist Greg Ip has noted, “A world of existential uncertainty calls for humility and a willingness to revise one’s mental models in response to new information.” In other words, stand by. Whether we wish it or not, we can safely forecast 2022 will be an interesting year. Former longtime Wall Street Journal Asia correspondent and editor Urban Lehner is editor emeritus of DTN/The Progressive Farmer. This article, originally published on January 1 by the latter news organization and now republished by Asia Times with permission, is © Copyright 2022 DTN/The Progressive Farmer. All rights reserved.

Interesting year ahead for the United States

For anyone foolish enough to make New Year’s forecasts, the danger is confusing prophecy and wish. I admit to indulging in the foolishness of forecasting; I will do my best in what follows to distinguish between what I want to happen and what is likely to happen.

I wish our country’s Covid-19 death numbers would come down – a lot. Down to roughly flu level, a few tens of thousands a year, not the current several hundred thousand. And logically, the numbers should plunge. More than 200 million Americans are fully vaccinated. Tens of millions more have had the disease, affording them a degree of natural immunity.

But if I’m forecasting, I fear the safest bet is our society will continue to put up with way too many COVID deaths. Americans are determined to live their lives normally, whatever the risk, and authorities in many states are determined to ban some of the precautions we’ve been taking, like mandates for vaccinations and masks. The COVID death numbers will come down, but I predict the extent of the decline will disappoint.

I wish inflation would come down a lot, and soon. The last thing the country needs is for Americans to start assuming big price increases are inevitable. Once that happens, inflation becomes a self-fulfilling prophecy. Workers demand higher wages to compensate for the expected inflation and the companies that employ them raise prices to maintain profit margins.

To break such a wage-price spiral, the Federal Reserve would have to inflict much more interest-rate pain on the economy than the handful of quarter-point rises it’s currently mulling.

My forecast is that inflation will ease in 2022, enough to avoid a full-scale wage-price spiral, but not enough to wring out the public’s inflationary expectations entirely. Whether those expectations strengthen or fade will balance on a knife’s edge. The Fed’s quarter-point rate increases will be necessary.

I wish Congress would find a way to enact the agriculture-conservation provisions of the moribund Build Back Better bill, the ones that would have provided a $27.1 billion increase in USDA conservation programs over 10 years.

If society wants farmers to put protecting the environment over profit, society should cover the cost. That’s a principle worth reinforcing, especially since the alternative to compensation is regulation.

Once again, wish does not equal forecast. Agriculture is far from unanimous in its support for these provisions. One hopeful sign: The Democratic senator whose opposition killed Build Back Better, Joe Manchin of West Virginia, is said to have favored them. As the Democrats are likely to try again with a smaller version of the bill, there’s a good chance it will call for increased spending on ag conservation, and at least some chance the bill will pass.

Some of my wishes and forecasts are even further at odds with each other. I wish blue-urban America and red-rural America would spend less time vilifying each other and more time exploring potential areas of cooperation. I predict today’s extreme polarization will persist.

I wish the stock market would have another year like 2021, when the S&P 500 rose 27%, the NASDAQ 21% and the Dow 19%. With the Fed tightening, it’s a safe bet those kinds of gains won’t recur. The market will be lucky to revert to the mean, say a 6% or 7% increase. A decline wouldn’t be shocking.

Finally, I wish 2022 would spare us nasty surprises. Consider, though, that 2020 gave us a pandemic we did not anticipate at the beginning of the year and 2021 gave us an un-forecast inflation surprise. A forecaster would be unwise to bet against a 2022 surprise.

As the Wall Street Journal economic columnist Greg Ip has noted, “A world of existential uncertainty calls for humility and a willingness to revise one’s mental models in response to new information.”

In other words, stand by. Whether we wish it or not, we can safely forecast 2022 will be an interesting year.

Former longtime Wall Street Journal Asia correspondent and editor Urban Lehner is editor emeritus of DTN/The Progressive Farmer. This article, originally published on January 1 by the latter news organization and now republished by Asia Times with permission, is © Copyright 2022 DTN/The Progressive Farmer. All rights reserved.