Is the economy crappy because businesses are nervous and uncertain about just how big President Obama's big government policies will be? Kevin Drum says no, the "uncertainty meme" is total bull.
Drum points to Ayse Imrohoroglu, who argues that businesses don't know whether interest rates and taxes will rise, how much workers will cost given the new health care rules, how much more financial regulation they'll face, and even whether the federal government will be able to meet its debt obligations long-term. That uncertainty makes leaders reluctant to hire and invest.
Writing at Mother Jones, Drum says all of this is bogus. It's clear interest rates will stay low, and the health care law's impact on businesses will be "modest." Congress is fighting about personal tax rates, not business taxes. Carbon tax? Not gonna happen. Financial regulatory reform affected just the financial sector. And of course the government is going to meet its long-term debt obligations, and even if it couldn't, that wouldn't impact short-term business decisions.
- Somebody Kill This Meme, Drum continues. "The only significant real uncertainty that American businesses face right now is financial uncertainty: that is, whether there will be enough consumer demand next year to justify hiring more workers and buying more equipment today," Drum says.
- Where Was the Uncertainty in 1993? Ezra Klein asks at The Washington Post. "President Bill Clinton was pushing a health-care reform bill that was much more ambitious than anything Obama proposed. ... Clinton's 1993 budget raised taxes. The administration was pushing an energy tax that was not only larger than the Waxman-Markey cap-and-trade bill, but also likelier to pass," Klein writes, "That's not just identical to the policy uncertainty that some say is paralyzing businesses now -- it's worse. Taxes were actually going up, health-care reform would actually have upended the existing market and imposed a substantial new burden on American businesses, and an energy tax actually looked likely to pass. And were businesses hiring? They were. The unemployment rate fell from 7.3 percent at the beginning of 1993 to 5.5 percent at the end of 1994. Was the economy growing? It was. GDP grew by 2.9 percent in 1994 and 4.1 percent in 1994."
- There Is Always Uncertainty, The American Prospect's Tim Fernholz writes. "The broader question about 'uncertainty,' though, is this: When has their ever been a consensus that government policy won't change? That is, has there even been a time when businesses had complete certainty, or at least more than they do now? ... It's pretty embarrassing, frankly. These business leaders are supposed to compete in dynamic, global markets, triumphing with strong productivity, sound management and the best workers in the world. But now their entire operation is stopped because they don't know if the personal income tax rate will change by 3 percentage points or they can't read the health-care bill implementation schedule? Please."
- An 'Uncertainty' Diagnosis Calls for a Keynesian Cure, Matt Yglesias writes at Think Progress. "Policymakers can’t make it cease to be the case that the future is uncertain. Policymakers can observe, however, that if economic actors’ level of uncertainty about the future increases that would manifest itself as an increased demand for money. Increased demand for money is a funny beast. Normally if demand for one kind of good or service falls, demand for other goods or services has to rise. But if what people demand is money itself then we find ourselves mired in a general glut, a shortfall of aggregate demand. Which is to say you’d be in just the normal Keynesian situation and you’d want to get out of it in just the normal Keynesian way—looser monetary and fiscal policy to bolster aggregate demand, soak up the excess capacity, and return us to a low-idleness equilibrium. So if for whatever reason businessmen or politicians or media figures or anyone else feels more comfortable expressing the situation as one caused by 'uncertainty' that’s fine. But the name of the game is still fiscal and monetary expansion."
- Scraping the Bottom of the Barrel for Talking Points, Washington Monthly's Steve Benen argues. "In my heart of hearts, I assume that most Republicans know their talking point on this is garbage. They're using it, I suspect, because they can't think of anything else -- they can't blame the economy on tax increases, since taxes have gone down not up, and they can't blame the recession on Bush since they still support his economic policies. They need to figure out a way to blame health care reform, industry regulations, and the rest of the Democratic agenda, so 'uncertainty' becomes a convenient catch-all."
- Of Course Government Is a Factor, Armed Liberal writes at Winds of Change. "Business is moody. Consumers are moody. They're moody for a reason, to be sure...and I get it that the left wants to claim that government has no part in the uncertainty. But that just makes no sense. People don't parse the regulatory environment from the general environment, and they look, above all, to the government for leadership."
- Bloggers Just Dont Get It, writes blogger Dennis the Peasant, who says that Drum wouldn't understand because he's never done "real work in the real economy." If he had, Dennis says, he'd "find that the uncertainty surrounding things like Obamacare is very real. I've already received a letter from one of my companies' health insurance providers informing us that significant changes (and price increases) will be coming in 2011. My wife's employer - a Fortune 100 company - has sent the same to its' employees. A number of my clients have received similar letters. And Kevin, insurance companies aren't doing that for funsies."