Commitment or its absence is an issue in many contexts. However, there is no situation where this is more the case than our current economy. By any standard, economic growth is profoundly disappointing for where we are relative to the Great Recession.
Whether the indication is unemployment, housing prices, consumer confidence or manufacturing activity, we get the same reading. This means sluggish growth, which is insufficient to restore and maintain the standards of living that Americans have come to expect and earn, and may not even suffice to avoid a double dip recession.
While pundits endlessly debate the causes of the poor growth, to this observer, a corporate attorney who is in frequent contact with executives and entrepreneurs, it is the C word which tells the tale. That is, our public policy and the process associated with its creation is not conducive to the kinds of commitments by businesspeople and consumers which are needed to support required levels of hiring, investment, lending and consumption. Those more eloquent than this writer would refer to this situation as the absence of the 'animal spirits' which have historically driven successful economies.
Let us count some of the ways where this is true:
•Tax policy heads the list ,on account of the pending expiration at the end of 2012 of the Bush era tax rates on ordinary income and investment returns, and the initiation in 2013 of the new taxes funding Obamacare. It is hard to commit to any job-creating or other investment if one does not know how much of the fruits of a successful investment one will be able to keep.
•Lending regulation is keeping pace with tax policy as a source of paralyzing uncertainty. Whether we are talking about the pending $20 billion shakedown of U.S. banks, supposedly allowing them to atone for poor paperwork around foreclosures, endless discussion around national or international bank capital standards, or the efforts of the unaccountable Consumer Financial Product Safety Commission to 'protect' persons from borrowing 'too much' on the' wrong terms', the effect is the same. One cannot make a long term commitment today because it may become uneconomical or unlawful in the near future.
•The uncertain, but clearly adverse effects of new legal requirements are doing their part to hold down economic activity. While the workplace impact of Obamacare is the big kahuna, less prominent but still problematic topics are the efforts of the National Labor Relations Board (NLRB) to force companies to bargain with unions over the traditional management prerogative of moving work from one state to another, if one of the states fails to 'sufficiently' encourage union membership, and pending administration efforts to enhance consumer internet privacy and information security -- in part by imposing new technical and operational requirements on federal contractors.
One can make a plausible argument for any or all of these initiatives in a vacuum, but it is clear from both anecdotal and empirical data that their net effect is highly adverse. Both their specifics and the uncertainty around the absence of specifics make it impossible to commit to the kind of risky economic activity which drives economic growth. Think about the level of commitment which is needed to build new factories or homes or renovate existing ones -- buy new capital equipment or software, enter new markets, develop new products or hire people to do any of these. Then think about whether that commitment can be maintained or created at all in the face of circumstances such as those bulleted above, which can result in economic actors being taxed, demonized or prosecuted for their efforts.
It is time for the administration, and serious challengers to it, to openly acknowledge and repudiate these well-intentioned efforts and explain how and when they will act to allow and encourage the required levels of commitment. These efforts to get us to utopia are having the opposite effect, and policy makers need to acknowledge that this is the case, and stop digging the hole deeper.