So, I just pulled up the front page at Bloomberg.com and one of the highlighted articles is an editorial entitled “Republicans Blame Obama For Uncertainty”. The editorial claims that the Republicans are wrong:
There is no doubt that certainty is generally preferable to uncertainty, in the economy as in most aspects of life. A stable currency, for example, makes it easier for businesses to plan ahead, and encourages new investment. But there is no evidence that uncertainty has increased during the Obama presidency, or that, if it has, the president’s policies are responsible for it. Plenty of mystery remains about how health-care reform will turn out, for example, but having a plan — whether it’s a good one or not — surely creates less uncertainty than the intolerable situation employers faced beforehand: a broken system and no plan to fix it.
Well, I suppose that is one way to look at it; a bad plan with unknown consequences is better than no plan with unknown consequences. Or is it? One major problem with the healthcare legislation – and a lot of other legislation produced under this administration – is that the sheer magnitude of the plan has produced a kind of analysis paralysis. Before the legislation, businesses had the uncertainty of rising health insurance costs. How much will hiring a new employee today cost me in terms of future health insurance expenditures? But at least that could be estimated based on past experience. How do you estimate the future cost of that employee when you don’t even know what the heck is really in the bill? I’d say that’s a pretty clear example of how the Obama administration has increased uncertainty for the business community.
Here’s a another one. Another article on the very same page has this headline: Obama To Propose $1.5 Trillion In Taxes. You want to know how President Obama has increased uncertainty? How about through the constant threat of higher taxes? How about by continuing to propose new spending – that will ultimately have to be paid for through higher taxes. Who will pay those taxes? Corporations? Individuals? I don’t know and neither does anyone else. I think that’s called uncertainty. Taxes, in case the editors over at Bloomberg haven’t heard, are a factor in investment decisions. So is the cost of regulation by the way. What investments have utilities put off waiting to learn if they’ll be forced to conform to new ozone rules from the EPA? I don’t know but my guess isn’t zero. Is that an increase in uncertainty?
Uncertainty is always a fact of life for businesses. We don’t know what sales or costs will be in the future. Government economic policy should attempt to create a stable economic environment to minimize the variability of those uncertainties. Too often it does the opposite. As the Bloomberg editorial points out, a stable currency makes it easier to plan ahead and encourages investment. Since 1971 we’ve had the antithesis of a stable currency. Is it any wonder businesses have made lots of mistakes? And if a stable currency (monetary policy) encourages investment, isn’t that equally true of fiscal policy? While there is always some uncertainty concerning fiscal policy can anyone truly say fiscal uncertainty hasn’t increased under the Obama administration?
Uncertainty isn’t the only problem facing the US economy but to believe it hasn’t increased in recent years is just nuts. Of course uncertainty has increased. Who does Bloomberg think is going to get the blame? Sitting in that office with no corners has its perks. It also has its drawbacks. One of those is that when things go bad, the occupant gets the blame. Republicans will surely try and use that for their own benefit, just as Democrats used criticism of Bush as a bludgeon in 2006 and President Obama did in 2008. It has always been thus; politics hasn’t changed.
President Obama may have been dealt a lousy economic hand, but that doesn’t excuse his actions since taking office. He didn’t have to spend his first year in office pushing through a health care reform that no one understands. He didn’t have to agree to a $1 trillion Democratic wish list called stimulus. He didn’t have to turn the EPA loose on the utility industry. He didn’t have to kiss Jeffrey Immelt’s ass. He didn’t have to lend a half billion dollars to a well connected solar company. He didn’t have to get us involved in Libya. But he did. And we are reaping the consequences, part of which is greater uncertainty.
For information on Alhambra Investment Partners’ money management services and global portfolio approach to capital preservation, Joe Calhoun can be reached at firstname.lastname@example.org.