Alex Carrick: Bracing for Triskaidekaphobia in 2013
The fresh New Year is upon us. Are you superstitious? We’re at the 13th year of this century and some people think that number is unlucky.
The technical term for being afraid of “13” is triskaidekaphobia; the word itself a mouthful and reason enough to cause apprehension.
So maybe we should be a little wary of what 2013 will bring. If the last several years are anything to go by, there’s simply no way to prepare for all the knocks ahead. They’ll be too diverse and some will come from out of left field.
Nevertheless, the following are my observations on at least some of the events that I think will dominate the headlines this year.
1. It’s in the nature of presidential politics that Barack Obama has only two years left during which to enact his signature or legacy policies. After the next mid-term elections in November 2014, he will become largely a figurehead, more so in the domestic arena than in foreign affairs. Attention will switch to who will be running for the nation’s highest office in the 2016 contest. The news shows on CNN are already rife with speculation about whether or not Hillary Clinton will throw her hat into the ring for the Democrats.
2. Unions will continue to be under attack. The Republican governor in Michigan is considering introducing “right-to-work” legislation in his state. This will make it harder for workers to organize. Its adoption in southern U.S. states has proven to be highly effective in attracting auto sector investments. Lately, the practice has been shifting north. Indiana has approved “right-to-work” legislation. Ontario Conservative Party leader Tim Hudak has stated he will introduce such a measure if elected Premier of the province.
3. Some outsourced jobs in China are being repatriated to North America. While still relatively cheap, the cost of Chinese labour has increased by a factor of five over the past decade. Apple, Caterpillar Inc. and General Electric Co. are the most prominent firms to have declared they will bring some production home or locate new facilities here versus overseas. Mexico will be the main beneficiary. When servicing customers in the U.S. and Canada, Mexican manufacturing plants cut down on transportation costs and delivery times. Drug cartel violence is obscuring the fact that Mexico’s economy is flourishing.
4. Government expenditures will be under assault. Ground zero for this debate will continue to be the United States. Fixing America’s finances will require action on three fronts –spending cuts, tax increases and the debt ceiling. While the so-called “fiscal cliff” has recently focused attention on points one and two, it was the failure to deal adequately and in a timely manner with point three (i.e., the “ceiling”) that brought about a U.S. debt downgrade from Standard & Poor’s on Aug. 2, 2011. To be serious about saving money, the U.S. will be required to pare sharply from four major spending envelopes – the three entitlement programs (Medicare, Medicaid and social security) and the military. A national sales tax or value-added tax would go a long way towards fixing Washington’s budgetary problems, but neither (so far) is even being considered.
5. The middle class will be under assault. Either through a marginal tax rate increase or a loss of deductions, the super-rich in the U.S. will be carrying more of the financial burden once compromise has been reached to avoid the “fiscal cliff”. But it’s the middle class that will eventually carry more of the load. The extent of the financing shortfall is simply too severe. There are proposals to increase the age of eligibility for some social programs and/or to remove popular tax deductions such as for homeowner mortgage payments.
6. In Canada, the government expenditure debate has found its strongest expression in the F-35 fighter plane contract. An initial lifetime cost estimate of $9 billion has ballooned to $40 billion and the political baggage for the governing Conservatives is too heavy. The original decision to accept Lockheed Martin as the single source bidder has proven to be a liability. There are 65 planes in the order, plus several spares for parts, and they have projected lifetimes of 36 years. A new set of procurement criteria will be established based on what was adopted for the navy’s shipbuilding contracts. Besides the F-35, other aircraft expected to have their tires kicked are Boeing’s Super-Hornet and the Eurofighter Typhoon. A decision may be delayed until after the next federal election in 2015.
7. Federal politics currently seems to be dominated by the question of who will lead the Liberal Party, with Justin Trudeau and Marc Garneau as the frontrunners. Just as interesting a question, however, is who will succeed Stephen Harper. As has been seen on numerous occasions at both the federal and provincial levels, there is a stale date beyond which even the most stalwart of leaders finds it hard to escape the wrath or boredom of electors. Mr. Harper has an artful and possibly unique ability to rein in some of the more right-wing elements of his own party in order to keep a hold on the Canadian centre. This was most recently demonstrated when a Conservative Party sub-committee reviewing firearms regulations came back with free-wheeling recommendations that Mr. Harper felt necessary to nip in the bud. There is no obvious successor with the same kind of finesse.
8. There are also some stories that will slip into the “remainder bin”. The hot condo market in Canada is one such gem. The Bank of Canada has been warning for some time that Canada’s housing market may have become overheated. In a recent report, the BOC took specific aim at supercharged condo construction in Toronto. Recent news that purchasers in some “hot” condo properties are not seeing the capital appreciation they had been expecting is also throwing cold water on the fire. I should add that I’ve been saying the condo market is too strong for some time and I keep being surprised by its resilience.
9. Speaking of the Bank of Canada, there are also the celebrities we’ll all be watching. Can it be true that the BOC’s Governor has star power? Yes, but in large part because he’s followed the time-honored Canadian tradition of finding fame outside the country. On June 30th, Mark Carney will become the first foreign-born Governor of the Bank of England in its 300-plus year history. He’ll be moving to a country immersed in what will be a royal celebration. During much of 2013, the world’s media will have cameras trained on Prince William and his wife, Kate Middleton (Duchess of Cambridge), during the countdown to not only another royal birth, but a direct-line heir to the throne.
10. That’s not the end of the U.K. connection. In 2014, Scotland will be deciding whether or not to sever some of its ties with England. Who knows how this may play back in Canada where a separatist-leaning party is now in power in Quebec? In Spain, the Catalan province recently took a step back from independence. A vote seeking enough seats (68) to call a referendum resulted in the ruling party actually losing ground (from 62 to 50).
I know this is a sketchy list and doesn’t include many other possible attention grabbers. In municipal politics, there is the ongoing carnival show that is Rob Ford’s tenure as Mayor of Toronto.
In high-tech, it will be fascinating to see if Apple Inc. can maintain its track record of one successful product launch after another.
In geopolitics, there are the perennial crises that flare up and alarm in the Middle East, with the revolution in Syria and Iran’s nuclear weapons aspirations currently on the front burner.
And finally, there are sure to be new hurricane or other weather-related disasters possibly, although not always definitively, brought on by global warming.
Alex Carrick is Chief Economist with CanaData, a division of Reed Construction Data (RCD). CanaData is the leading supplier of statistics and forecasting information for the Canadian construction industry. RCD is a division of the global publishing firm, Reed Elsevier. For more economic insight from RCD, please visit www.dailycommercialnews.com/features/economy. Mr. Carrick’s lifestyle blog is at
www.alexcarrick.com and he would welcome a follow on Twitter (Alex_Carrick) or Facebook.