Clifford Asness "Uncertainty is not the problem" says that while economic uncertainty does not create a good business environment, it's Obama's policies themselves that are the primary culprit.
Consider two uncertain situations. In the first, our business is waiting to find out the location decision for a customer's new industrial plant, so we know where to build our new supply facility. Until this is resolved, we will not invest in building nor will we hire staff. In the second situation, we know we are in for some pain, someone is going to make our business less productive and profitable, but we do not yet know how much. Planning is marginally more difficult, but the main reason we will not grow in the second situation is that investment is less attractive regardless of the precise resolution of uncertainty.
In the first case, uncertainty is the obstacle. Once it is resolved, we invest. In the second case, uncertainty is a small part of the problem. The large part is simply that bad things are happening. The day we are told "well, it's exactly a 30% hit to productivity and profits," all uncertainty is resolved—yet we will still not invest or hire. ...
Imagine, right now, we passed a giant additional wasteful stimulus. Imagine all the rules of Dodd-Frank were revealed and are even more stifling than we expected. Imagine we doubled the new health-care entitlement and expanded government control of health care more than previously predicted, but set all the details today. Imagine assorted government agencies passed more burdensome regulations than we anticipated, increasing both the cost of doing business and the drag of crony capitalism. But all uncertainty was resolved by passing them today.
Next imagine that the president promised, in no "uncertain" terms, to up his hectoring of business in perpetuity. Further, imagine we passed higher taxes going forward on everyone but, again, we settled it for certain right now. Finally, imagine we committed ourselves to no entitlement reform ever. Is all this good or bad? Well, uncertainty has been eliminated, but it sounds pretty darn bad.
On the other hand, if we passed laws reducing the regulartory burden, reducing taxes, promoting a freer economy, uncertainty would increase but the business environment would be better.
Obama has created uncertainty, but it's uncertainty of just how much worse things are going to get, how much regulations will strangle innovation, how much taxes will increase, how many people will be thrown out of work, how much higher the price of gas, electricity and food will go, how much higher the debt and deficit will be. It's the uncertainty that folows a diagnosis of cancer: will it be bad or will it be fatal?
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