Tuesday, October 23, 2012

CHARTS: ‘Uncertainty’ Is Not Holding Back The Economy

Congressional Republicans love to blame “uncertainty” — ostensibly caused by the Obama administration’s tax and regulatory policies — for the country’s still too slow job growth. “By pursuing a steady repeal of job-destroying regulations, we can help lift the cloud of uncertainty hanging over small and large employers alike, empowering them to hire more workers,” said House Majority Leader Eric Cantor (R-VA), in one example.

However, two economists from Goldman Sachs took a look at the evidence and found that “uncertainty” is just something that comes along with a weak economy, not something that causes the economy to be weak:


In fact, the U.S. is right on pace for a recovery that takes place in the wake of a financial crisis:


However, the economists did find other events that cause “uncertainty” can hurt the economy: “The only real exception is the 2011 debt ceiling crisis, which did cause a large rise even in the purged policy uncertainty index.” So a debt ceiling standoff initiated by House Republicans caused more harm than any Obama administration proposal to raise taxes on the rich.

This jibes with the findings of other economists. “In my opinion, regulatory uncertainty is a canard invented by Republicans that allows them to use current economic problems to pursue an agenda supported by the business community year in and year out. In other words, it is a simple case of political opportunism, not a serious effort to deal with high unemployment,” said Bruce Bartlett, a conservative economist who worked for both the Reagan and H.W. Bush administrations. The Economic Policy Institute found that “a simple review of investment and employment trends — what businesses are actually doing — reveals that employers are not behaving according to the narrative described in the uncertainty story.”

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