The Obama Administration is visibly perplexed by the failure of the U.S. economy to be duly stimulated. It shouldn’t be. After frittering away political capital and taxpayer dollars on an ineffectual fiscal stimulus, Obama’s policies share the singular characteristic of draining the economy of the most important ingredient needed for a strong recovery – confidence.
Nowhere is this made clearer than in an Environmental Protection Agency (EPA) “endangerment” ruling on Monday. This ruling gives the EPA broad authority to impose a massive new regulatory regime on such businesses as electric utilities and transmission and on the broader industrial sector that emits carbon dioxide and five other greenhouse gases.
Add the uncertainty associated with this ruling to the mountain of Obama’s Washington-based uncertainties about tax policy, health care policy, and cap and trade, and add in the dangers of persistent, wildly unsustainable deficit spending and businesses have every reason to be doubtful of the future and leery of taking risks on new investments.
Neither consumer spending nor government spending can trigger a strong recovery. Only a resumption of strong, sustained business investment can bring about the kind of recovery needed to create the jobs that will bring the unemployment rate down. Businesses invest today to prepare for the future, for the opportunities and competitive pressures of tomorrow. They more confident they are in the future and Washington’s attitude toward growth, the more businesses are willing to take the risks associated with new investment.
Uncertainty about the future is always a factor when businesses invest. However, when government policies ramp up uncertainty, then government is actively ramping down current investment. When government policies threaten to increase regulations, increase taxes, and generally diminish the prospects for future prosperity, businesses have little choice but to hunker down and hope to survive a hostile government.
We can be confident in one point, however. Whatever growth and jobs the economy manages to create in the next few years, they will arise despite a vigorous campaign from Washington to the contrary.