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Uncertainty? Uncertainty!

Oct 24, 2011
Carter Wood

Jan Eberly, the U.S. Treasury's new assistant secretary for domestic economic policy, asserts: "[Two] commonly repeated misconceptions are that uncertainty created by proposed regulations is holding back business investment and hiring and that the overall burden of existing regulations is so high that firms have reduced their hiring." Others disagree.

The recently confirmed Eberly argues against overstating the impact of federal regulation on investment and hiring at Treasury's blog, Treasury Notes, today in a post, " Is Regulatory Uncertainty a Major Impediment to Job Growth?"  She begins:

Last week at a Senate hearing Secretary Geithner said, “I'm very sympathetic to the argument you want to be careful to get the rules better and smarter, but I don’t think there's good evidence in support of the proposition that it's regulatory burden or uncertainty that's causing the economy to grow more slowly than any of us would like.”

Economists from across the political spectrum have also weighed into this debate and reached the same conclusion.

Bruce Bartlett is cited (surprise), as is the 65 percent of economists surveyed by The Wall Street Journal in July who identified lack of demand as "the main impediment to increased hiring." But identifying lack of demand as the main impediment is not quite the same thing as dismissing regulatory uncertainty as a negative economic factor. Indeed, a substantial minority did select uncertainty. As the Journal reported: "Of the 51 [economists] who responded to the question, 31 cited lack of demand (65%) and 14 (27%) cited uncertainty about government policy. The others said hiring overseas was more appealing."

Meanwhile, a brief search of recent commentary reveals uncertainty to be a big deal with actual business people (and their representatives):

City Wire, Oct. 18, "Truckers: Economic uncertainty top issue":

The message from a trucking conference held this week in Texas is that national economic certainty remains the biggest issue facing the trucking industry — although the industry’s chief economist says freight demand suggests the nation may avoid entering another recession.

Former GE CEO Jack Welch (also a former BRT member) on Sunday's Meet the Press (transcript) responding to NBC host David Gregory about President Obama's ability to influence the economy:

MR. WELCH:  Oh, he can do a lot about the economy.  He could look at drilling for oil.  He can, by himself, can drive that posture.  He could put a moratorium on regulation until we've got unemployment below a certain level. He could do it.  And he could, most importantly, change the posture. Everything we do in this administration is more punitive than it is incentivized.

Welch cites the example of the President's jobs bill provision which would make make it illegal to discriminate against the unemployed in making hiring decisions.

Business Roundtable President John Engler in remarks to the Blue Dog Research Forum, Oct. 5:

 

Taxes aren’t the only proposals that result in greater uncertainty and end up discouraging investment. There’s no question that the regulatory onslaught, whether it’s in the implementation of Dodd-Frank or the Affordable Care Act, or some of the workplace and environmental issues, or even now the recent activities of the NLRB and the National Mediation Board, where they’ve moved into some unprecedented areas.

And from BRT's Sept. 21 news release, "America’s CEOs Lay Out Comprehensive Strategy for Smarter Regulation To Improve Transparency, Accountability":

America’s employers still face dozens of other complex and costly regulations proposed by numerous federal agencies that threaten U.S. job creation and economic growth.

“America’s CEOs are calling for smarter regulation – the kind that will bolster business growth, encourage investment and speed up hiring,” said Andrew Liveris, Chairman and CEO of The Dow Chemical Company. “Unfortunately, the current U.S. regulatory regime tends to be so complex and inconsistent that regulations often do the exact opposite. We can turn that tide by ensuring pending and new rules are clear, consistent and wise for the long term. The private sector is focused on job creation. It’s time that every federal agency and department – including regulatory agencies – do the same.”

For more on the Achieving Smarter Regulation report go here.

Hat tip to Wall Street Journal's David Wessel for directing us via Twitter (@DavidMWessel) to the blog post by Eberly, Treasury's new chief economist. The Washington Post's Suzy Khimm also took note.

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