There is one word being mentioned by business leaders and economists more frequently when the conversation turns to why jobs are not returning more quickly to the U.S. economy: uncertainty.
“By reaching into virtually every sector of economic life, government is injecting uncertainty into the marketplace and making it harder to raise capital and create new businesses,” said Verizon CEO Ivan Seidenberg at a speech in Washington in late June.
Federal Reserve Governor Kevin Warsh said in a recent speech in Atlanta: “Owing to a less-than-assured economic outlook and broad uncertainty about public policy, employers appear quite reluctant to add to payrolls.”
Roberton Williams, senior fellow at the Tax Policy Center, said in an interview, “The whole tax situation is very much in flux, very uncertain. It makes it hard to plan.”
“It’s clear that firms are not yet hiring. A lot of them are sitting on big bundles of cash,” Williams said, citing the examples of Google and Apple, which are both hoarding about $30 billion in cash instead of investing it or using it to expand.
Seidenberg’s comments last month were a significant political moment. The Verizon CEO has been one of President Obama’s strongest allies in the business community, and as president of the 170-member Business Roundtable, he had tried to cooperate with the Obama administration on its trademark agenda items – health care, financial reform and energy legislation.
But, Seidenberg said he was “troubled” by Obama’s agenda, so much so that he had “reached a point where the negative effects of these policies are simply too significant to ignore.”
Seidenberg was not the last major business leader and Obama ally to turn on the president in recent days. Jeffrey Immelt, CEO of GE, said in Italy late last week that Obama and the business community did not like one another and are not getting along with each other. Immelt said the U.S. is “a pathetic exporter,” according to the Financial Times.
“We have to become an industrial powerhouse again but you don’t do this when government and entrepreneurs are not in synch,” Immelt was quoted as saying.
The cascading comments have come as the economic recovery has slowed and fears of a double-dip recession have entered the mainstream lexicon.
The essence of the uncertainty argument is that businesses won’t expand or hire because Obama’s policies – particularly the health care bill and the financial regulation bill that is poised to pass – have created too many unknown unknowns, as conservative author Amity Shlaes put it.
“We don’t know what to expect from Washington. That’s essentially what Seidenberg is saying,” said Shlaes, author of the influential book “The Forgotten Man,” which argues that President Franklin Delano Roosevelt’s punitive and unpredictable policies toward business prolonged, rather than solved, the Great Depression.
“And we also don’t like that their law involves a lot of discretion. It doesn’t say, ‘And the rules of bankruptcy are’ … The financial law basically sends the message: we have decided that they will take care of things, and the law gives them the discretion to do that as they see fit,” Shlaes said. “It moves us farther from common law to French-style prosecutorial law – we haul you in if we feel like it.”