The Coming Economic Collapse of 2011

By disposition I mainly ignore doomsday scenarios, both on the Left and the Right. But Arthur Laffer makes a plausible argument in the Wall Street Journal that in the United States the upcoming taxes increases in these difficult economic times will likely lead to an economic collapse in 2011.  Here’s a clip:

Now, if people know tax rates will be higher next year than they are this year, what will those people do this year? They will shift production and income out of next year into this year to the extent possible. As a result, income this year has already been inflated above where it otherwise should be and next year, 2011, income will be lower than it otherwise should be.

Also, the prospect of rising prices, higher interest rates and more regulations next year will further entice demand and supply to be shifted from 2011 into 2010. In my view, this shift of income and demand is a major reason that the economy in 2010 has appeared as strong as it has. When we pass the tax boundary of Jan. 1, 2011, my best guess is that the train goes off the tracks and we get our worst nightmare of a severe “double dip” recession.

…If you thought deficits and unemployment have been bad lately, you ain’t seen nothing yet.

Read the rest.