Kevin Drum: The Uncertainty Meme

[flpoljunkie]

The Uncertainty Meme
— By Kevin Drum

Sun Nov. 14, 2010

Why does the economy continue to suck? The LA Times is hosting a symposium on the topic today, and USC business professor Ayse Imrohoroglu says the answer is uncertainty:

Businesses don't know what will happen to interest rates. They have trouble calculating what new workers will cost in light of potential new healthcare mandates and costs. They don't know what will happen to tax rates, which could rise dramatically. They are uncertain about increasing financial regulation and the possibility of a carbon tax. And as if that isn't enough, the soaring deficits and national debt raise very real questions about the federal government's long-term ability to meet its debt obligations.

OK, let's take these one by one:

Interest rates will remain very low for a very long time. The Fed has made this as clear as any central bank possibly could.

PPACA has no impact on small businesses and only a minuscule impact on large businesses. Medium-sized businesses face a modest penalty if their workers use federal subsidies to enroll in private insurance programs via the exchange. In other words, the overall financial impact on the business community is pretty modest. What's more, there's really not much uncertainty here. The broad impact of PPACA's rules is already clear, and they don't take effect until 2014 anyway. This is not having a significant impact on business investment decisions in 2010.

There's no excuse for Congress leaving tax policy up in the air for as long as it has. But even with that said, the Bush tax cuts affected personal tax rates, not business rates. And despite demagoguing to the contrary, even if the Bush tax cuts expire completely the effect on small businesses would be close to zero.

Financial reform was a fairly modest affair, and in any case its effect is almost entirely restricted to the financial sector. Its effect on the rest of the business community is slight.

There is no possibility in the near future of a carbon tax.

There is no question about the federal government's long-term ability to meet its debt obligations, and even if there were this would have very little effect on short-term investment decisions by American businesses.

more...

http://motherjones.com/kevin-drum/2010/11/uncertainty-meme

[Marsala]

1. Translation: Businesses won't hire so long as there is a Democrat in the White House

Or so Republicans would have us believe.

[flpoljunkie]

2. They want it all, and think they can get it with Republicans.

[Dr.Phool]

3. I always figured, prepare for the worst.

Anything better is gravy.