Uncertainty, the Enemy of Investment, Jobs and Recovery

More and more, people are identifying government-created uncertainty as an obstacle to business investment, hiring and economic recovery. Intent on the political credit thought to come from action, Congress, the Obama Administration — especially the EPA, churn, shake and fuss with the regulatory and tax environment, discouraging business from taking the real action needed to revive the economy.

Rep. Shelley Moore Capito (R-WV) cites uncertainty in her reaction to Consol Energy announcing 500 layoffs: “[It] is becoming quite clear that the combined impact of litigation and regulatory uncertainty poses a severe threat to the economic climate of our state.”

On Fox News Sunday, Sen. John Cornyn (R-TX) said, “[The] President had a job summit this last week and seemed amazed that the private sector was sitting on the sidelines, when the fact is that there’s great uncertainty in the private sector, people who are the job creators — if I hire a new employee, what additional burden will Congress impose on me in terms of health care costs, higher taxes, more regulation and the like.”

Reuters business columnist Jim Pethokoukis has drawn wide attention with his column on the EPA endangerment finding, “The EPA and Obama’s Uncertainty Tax“:

[In] practice, the only thing certain about the EPA ruling is more regulatory uncertainty leading to less economic growth and fewer jobs. Bad news, to be sure, for American businesses already flummoxed by the mercurial state of healthcare, financial and tax reform. Call it Obama’s Uncertainty Tax.

History is instructive, and it should be especially instructive for those politicians who see Franklin Delano Roosevelt’s response to the Great Depression as a model for government action today.

From Amity Shlaes, author of “The Forgotten Man,” a history of the Great Depression, in an interview in the January 2008 edition of Reason:

One of the important things about the existing argument is that it’s all about Keynesianism, about whether government spending can cure the economy when it’s ill. Scholars have overlooked the cost of uncertainty in an economy, what we would now call the “unknown unknowns.” Both the Hoover and Roo­sevelt administrations (but especially the Roosevelt administration) were so unpredictable. That hurt the economy very much, and when I went back and saw the extent I was astounded. Uncertainty is a factor that I thought needed to be explored. There were lots of people who said, “I will not invest ’til I know what’s going to happen.”

During the Depression, you heard the phrase “bold, persistent experimentation” all the time. We’ve been taught that was good. Somebody had to do something, was what we learned. But what I saw was this enormous cost, especially during the second half of the 1930s.

Such as the Depression of 1937.

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