In short Obama's undermining of property rights is creating tremendous uncertainty. Ok we know tax increases, government spending and superseding bankruptcy laws on a whim is bad policy but what should he be doing?
The contrast with President Reagan's antirecession and pro-growth measures in 1981 is striking. Reagan reduced marginal and corporate tax rates and slowed the growth of nondefense spending. Recovery began about a year later. After 18 months, the economy grew more than 9% and it continued to expand above trend rates.
Cut spending and taxes is simple concept but tough to implement when your campaign was heavily funded and promoted by the public sector unions. So the substance is unlikely to change but even the rhetoric is wrong.
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.
This uncertainty comes from Obamacare and Cap & Trade.
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.
Let's hope after November Obama changes course.
