Allan Meltzer has an opinion piece in the Wall Street Journal explaining the failures of Obamanomics. One of the causes he identifies is the high level of uncertainty surrounding tax rates and regulatory policy under this administration. Such uncertainty is the enemy of growth. Robert Higgs first introduced “regime uncertainty” in his 1997 article explaining how government policy extended the Great Depression. According to Meltzer, the Obama administration has so far proven oblivious to this lesson.
Two overarching reasons explain the failure of Obamanomics. First, administration economists and their outside supporters neglected the longer-term costs and consequences of their actions. Second, the administration and Congress have through their deeds and words heightened uncertainty about the economic future. High uncertainty is the enemy of investment and growth.
…Mr. Obama has denied the cost burden on business from his health-care program, but business is aware that it is likely to be large. How large? That’s part of the uncertainty that employers face if they hire additional labor.
The president asks for cap and trade. That’s more cost and more uncertainty. Who will be forced to pay? What will it do to costs here compared to foreign producers? We should not expect businesses to invest in new, export-led growth when uncertainty about future costs is so large.
…Other aspects of the Obama economic program are equally problematic. The auto bailouts ran roughshod over the rule of law. Chrysler bondholders were given short shrift in order to benefit the auto workers union. By weakening the rule of law, the president opened the way to great mischief and increased investors’ and producers’ uncertainty. That’s not the way to get more investment and employment.
Almost daily, Mr. Obama uses his rhetorical skill to castigate businessmen who have the audacity to hope for profitable opportunities. No president since Franklin Roosevelt has taken that route. President Roosevelt slowed recovery in 1938-40 until the war by creating uncertainty about his objectives. It was harmful then, and it’s harmful now.
