WILL A TRULY HAPPY NEW YEAR COME IN 2013?

I’ve wished "Happy New Year" to a great many people.  But for most of us, I doubt it will be.

Unemployment is high and economic growth is sluggish as we enter 2012.  Virtually all forecasters predict that at the end of 2012 unemployment will still be high and economic growth will still be sluggish.

Our economy will be affected by developments in Europe and China, where the outlook ranges from cloudy to bleak.

The European Union is in crisis because some of its members can’t pay their debts. Default by the so-called PIIGS was postponed late last year when EU governments issued more debt.  This transferred risk from the banks holding suspect paper to taxpayers.  But adding more debt to countries which can’t repay existing debt doesn’t solve the problem.  It exacerbates it.  The EU could fall apart this year.

A massive real estate bubble in China is bursting.  Local governments and government owned enterprises have massive amounts of debt.  China isn’t in as bad shape as Europe is, but economic growth there figures to slow sharply this year.

Most of us who don’t work for the government don’t expect pay raises, so we’ll be squeezed more by rising prices.  The cost of food will rise between 2.5 percent and 3.5 percent, the U.S. Department of Agriculture estimated in November.  Gasoline prices could rise to record heights in 2012, experts predict.

Only the national debt is growing rapidly.  As the new year began, it stood at $15.2 trillion, up from $11.9 trillion in fiscal year 2009.

The increase in the national debt has been fueled chiefly by a surge in spending.  In the 2008 fiscal year, the federal government spent $2.508 trillion.  In the last fiscal year, it spent $3.317 trillion.

Economists Carmen Reinhart and Kenneth Rogoff studied financial crises in 66 countries over 800 years before writing their highly acclaimed 2009 book "This Time is Different: Eight Centuries of Financial Folly."

Given the span of time and cultures, the causes of the financial crises they studied were remarkably similar, and so were the consequences.  Usually, these were high (often hyper) inflation as the government devalued the currency; skyrocketing unemployment, and partial or full repudiation of debts by the governments involved.

Their research indicates "danger point" for triggering a financial crisis is reached when debt reaches 90 percent of the gross domestic product (the total value of goods and services produced in a year), Ms. Reinhart and Mr. Rogoff said.

Reaching that ratio of debt to GDP doesn’t automatically trigger a cataclysmic event, but it does clobber economic growth, Ms. Reinhart said.

The government estimates our gross domestic product (the total values of goods and services produced) in the 2012 fiscal year (which ends Sep. 30) is $13.351 trillion.

As the new year began, our national debt stood at $15.174 trillion.  That’s 114 percent of our estimated GDP for 2012.

It’s clear we can’t keep spending as we’ve been if we wish to avoid the sort of financial catastrophe Ms. Reinhart and Mr. Rogoff describe.  But last week President Barack Hussein Obama announced he would seek a $1.2 trillion increase in the debt ceiling, to $16.4 trillion.

No president before him has ever spent so much, to less effect.  Mr. Obama’s $821 billion stimulus bill has proved stimulating only to political cronies.  The United Auto Workers benefited mightily from Mr. Obama’s bailouts of Ford and Chrysler.  Taxpayers have not.  The government lost $1.3 billion on the Chrysler bailout, at least $14 billion on the bailout of GM.  Home prices and home sales both declined in 2011, despite more than $150 billion in government "assistance."

New regulations issued by the Obama administration are destroying tens of thousands of jobs.  The cost of complying with federal regulations is $1.75 trillion, the Small Business Administration estimated.

We’ve harmed ourselves so much with foolish policies that even if we started now to do everything right, we’ll still suffer a lot of pain before the economy gets significantly better.

The good news in the bad news is that since our wounds are mostly self-inflicted, if we stop doing the wrong things, the economy will get significantly better.

We won’t stop doing the wrong things as long as Barack Hussein Obama is president, which is why 2012 figures to be a bummer.  But if we vote him out in November, we could have a Happy New Year in 2013.

Jack Kelly is a former Marine and Green Beret and a former deputy assistant secretary of the Air Force in the Reagan administration. He is national security writer for the Pittsburgh Post-Gazette.