[image: Tel Meggido,wikipedia.org]

Is a Perfect Storm Forming for 2016 and Beyond?

The U.S. economy is in its 6th year of sustained growth, making this business cycle one of the longest in our history. But the index of leading economic indicators and capacity utilization numbers are now pointing down. If these trends continue, we could be in a recession by 2016. And recessions during presidential elections are almost always bad news for the political party in the White House as well as for both houses of Congress. Suffice to say, should the Republicans capture all three, the U.S. and the world could be in for one hell of a ride—by virtually every measure of human activity.

Voters tend to give credit or blame for the health of the economy to the party that occupies the White House. Recall “It’s the economy, stupid!” was the focal point for the Democrats in 1992 and in 2008. Now the tables could be turning.

The revised data for the first quarter 2015 show the U.S. economy barely grew, posting a gain of just 0.2 percent. By itself, that growth rate indicates very little. But the index of leading economic indicators has fallen each month since last July. This indicator portends economic activity 6 to 9 months down the road. In addition, U.S. capacity utilization appears to have peaked in November and has now fallen by more than 1 percent. Both of these indicators are good predictors of where the economy is heading. And because we have the largest economy, world economies follow.

Now, let’s say this scenario plays itself out: By this time next year, the U.S. economy is in recession. The stock markets are down 10 to 50 percent. Unemployment is up and rising. Republicans sweep the elections across the country. Pick any one of the 16 candidates for President, it won’t matter. Their agenda has been and will continue to be putting into place a set of policies that will make all conditions worse. Falling tax revenues will cause a rising budget deficit. They will attack the budget deficit with tax cuts to the wealthy on the pretext that the wealthy will put that money to work in helping the economy grow. That will not happen. The wealthy do not spend, they save. The economy will get worse. So the Republicans will cut government spending on the pretext that government is the problem. Programs such as unemployment insurance, food stamps, aid to dependent children, Medicare, Medicaid, and others will be cut. But cuts in government spending always mean less economic growth and more hardships among the citizenry. Unemployment will get worse, mortgage foreclosures will rise, bankruptcies and homelessness will surge, and the recession will sink into a depression. Misery will spread here and around the world as other economies fall like dominos.

If Jeb Bush is elected President, he will have installed a host of his brother’s old cronies in most of the key positions at the federal level. More likely than not, they will advise him that the way out of a depression is via a war, with an increase in military spending and war-related jobs. And Jeb is the most benign of all the Republican candidates. Imagine Ted Cruz at the helm, with his hand close to the red telephone and with Iran in focus. Whammo! An attack on Iran will have slapped Russia and China in the face. Both are bigger and stronger than ever. It could be Armageddon time.

I am not in the business of fear mongering. The entire group of Republican candidates has done a much better job than I, and most haven’t yet announced their candidacies. On the economic side, the Federal Reserve will try but will be hard pressed to keep the economy afloat during the coming year. Moreover, they have already signaled their desire to begin raising short-term interest rates—a precursor to slowing down an economy that is already slowing down. And neither falling dominos nor human disasters are inevitable. Still, it’s better to hear about both now than to be in the center of a perfect storm and wonder—how did all this happen?