John Mauldin Tax Hikes Will Kill the Recovery Which Isn’t Real Anyway

The economic recovery currently underway is a statistical mirage, based on easy year-over-year comparisons and inventory rebuilding, John Mauldin, president of Millennium Wave Securities, tells Henry in the accompanying video.The unemployment rate is closer to 12% when you include people who’ve been dropped from the survey and the “underemployment” rate – people working part-time vs. full time – is 17% to 18%, “and rising,” Mauldin says. “That doesn’t feel like recovery.”Mauldin, who writes the popular Thoughts from the Frontline e-letter, predicts the U.S. economy will be back in recession next year because of higher taxes, both new and with the expiration of the Bush tax cuts.”The Obama administration [and] the Democrats aren’t going to be able to help themselves,” he says. “The deficits are going to be running so high they’ll feel – politically — the need to do something. The way they want to solve it — instead of cutting spending is to increase the revenue. That’s going to suck a lot of air out of the room.”As for the long-term, Mauldin worries America could repeat Japan’s experience of a lost decade (or two), if not the Great Depression itself, citing the risk of policy errors such as trying to solve a debt crisis by issuing more debt.

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