“Uncertainty” is often cited as a reason for the lack of hiring and investment by the private sector, to which cynics often reply: But isn’t there always uncertainty?
Yes, “but there more or less [uncertainty] and right now there’s more,” says Allan Meltzer, a Carnegie Mellon professor and visiting scholar at the American Enterprise Institute.
According to Meltzer, new regulations such as Obama’s healthcare bill and Dodd-Frank financial reform have “exacerbated enormously” the uncertain feeling gripping corporate leaders. “How else are you going explain why there’s all this cash and so little investment?,” he asks. “The reason is they don’t know what the rate of return on that investment is going to be.”
In the accompanying video, my co-host Henry Blodget, who is also the CEO of The Business Insider, challenges the notion that uncertainty over Washington policy is really a top-tier concern for small business owners.
“We’re beset by uncertainty, it sucks; but the uncertainty is over what the economy is going to do over the long haul,” Henry says. “We don’t give a moments thought to what the administration is going to do.”
But Meltzer says he hears a very different tune from other CEOs and some politicians, arguing “investment and productivity wilt under heightened uncertainty about future returns,” as he wrote in a recent WSJ op-ed.
To resolve this alleged crisis of C-level confidence, the Obama Administration should “declare a five-year moratorium on new regulations and new tax increases,” Meltzer says. “If the President did that…that would really free up a lot of resources.”
As you might imagine, Meltzer also supports steep cuts in government spending — “we need to take the hit,” he says — and enact permanent vs. temporary tax cuts, lauding the pro-growth policies of the Kennedy and Reagan administrations.
As this point, the economist and Fed historian believes America faces a stark choice between “a brighter future for our descendants” vs. paying more taxes and having “a welfare state like the Europeans.”
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