The tradition of making end-of-the-year predictions for the new year seems to be dying out. I didn’t see many this year. Partly this is because in the case of the economy, where such predictions still occur, everything depends on what the Federal Reserve decides to do.
Well, here are my predictions for 2023. It is still January, so I hope this is not too late.
Generally speaking, predictions are difficult, especially, as Yogi Berra might have said, about the future.
But 2023 might not be that difficult. This year is likely to be a year of churning, but not much change. A year simply between the arrival of mixed government in Washington with a diminished Donald Trump and the presidential election year of 2024. We are likely to end 2023 about where we are now — with President Joe Biden and Florida Gov. Ron DeSantis the likely nominees of their respective political parties.
We might learn new things, but the underlying situation will not be much different: the yearly equivalent to the second Star Wars movie, The Empire Strikes Back.
Even some particular predictions for 2023 are easy. Philadelphia District Attorney. Larry Krasner will not be removed from office despite his impeachment, even if there is a Senate trial. The required two-thirds vote is just not there, because all Democratic senators will vote against removal.
Similarly, the debt limit will be raised so that the United States does not default on its debt obligations.
There is a small minority in the U.S. House apparently willing, even eager, to risk the economic catastrophe that a U.S. default would bring, both at home and abroad. But the vast majority of Congress understands the stakes and a bipartisan deal is more likely than a veto by a deranged cult.
Last week, I even heard Suzanne Clark, the new chief executive of the U.S. Chamber of Commerce, and thus an important figure in the Republican Party — promise on a radio show that there will be no default.
For all the talk about the deficit, Republicans don’t really care about it any more than Democrats do. When they were in power, Republicans raised the debt limit and even cut taxes, which further unbalanced the budget.
The usual claim that tax cuts pay for themselves proved, as usual, to be false as the 2017 tax cuts ushered in $1 trillion annual deficits before the pandemic.
Because talk about deficits is thus mostly for show, it is not likely to lead to a disaster that might cause bad political fallout for the people provoking it.
On the economy itself, assuming no default, inflation will continue its rapid cooling, thus allowing the Fed to hold interest rates about where they are rather than increase rates much higher. There will even be rate cutting before the end of 2023.
This path should allow for the fabled “soft landing” for the economy with either no, or at worst a short-lived and mild, recession.
That in turn will lead to very high market returns in 2023, maybe all the way back to where the market ended in 2021. That would mean returns of 15% to 20% this year.
The recent rise in the stock market is just a reflection of these same predictions.
Internationally, the dominant event will be the end of the shooting phase of the war in Ukraine. No matter how many weapons the West sends, Moscow will be able to hold enough gains to declare its aims achieved. Before the end of the year, Ukraine will be forced by circumstances and political pressure from its allies to accept a brokered peace.
I hate this prediction, but it seems likely. Ukraine was never going to defeat Russia.
The other fallout from the war will be the creation, for the first time, of a sizable political will to move to sustainable energy. Putin’s weaponization of oil and gas has convinced Europe that sustainable fuels are necessary. That will be a turning point in the world’s effort against climate change. There is no going back.
Politically, Democrats are not going to be happy with 2023 ending with a likely matchup of Biden vs DeSantis. Because of his age, Biden is not going to be an effective presidential candidate in 2024. He was not particularly effective in 2020, after all, and DeSantis will be a much more compelling candidate than Trump was.
Biden will have a good record to run on, but it may not seem to Democrats to be enough to win.
On the other hand, if giving Republicans control of the House leads to chaos and default, or narrowly-avoided default, voters may hesitate to hand the presidency to the Republican Party.
So, at the end of 2023, we still will not know who is likely to win in 2024.
One last word about Krasner’s future. The current confusion over his impeachment trial arose because a majority of the Commonwealth Court judges hearing his constitutional case against impeachment—three of the four judges on the panel—agreed that all of the impeachment counts were legally insufficient to justify removal. The charges did not amount to “misbehavior in office.”
However, only two of the four judges were ultimately willing to intervene to stop the trial in the Senate.
This kind of split may lead to an appeal to the Pennsylvania Supreme Court by some or all of the parties.
And no one can predict what that court might do in this case.
But it is also possible, and maybe more likely, that the Senate vote to postpone Krasner’s impeachment trial indefinitely will prove to be the last word and the whole matter of the Krasner impeachment will just fade away.
There never was much enthusiasm for the trial by Republican senators. The public never seemed that engaged. The political point has been made that crime went up in Philadelphia on Krasner’s watch. And probably most politicians are uncomfortable with a precedent that could come back to haunt everybody in the future.
Harrisburg might conclude that enough is enough.
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