Over at Bloomberg, Caroline Baum adds to the efforts of those who would point out that all the constant cable news talk over "uncertainty" cramping economic growth is a hot wad of nonsense, in that it doesn't actually describe a real-live set of toxic economic conditions. Rather, it's newspeak shorthand for "lets give CEOs more tax breaks, because otherwise they won't create jobs fast enough." It's pretty to think that "jobs" are commodities created out of the good vibes that CEOs are extracting from the universe, but that's not actually how these things work.
Baum points out a number of interesting data points. Apparently while we were supposed to be dreading all this "uncertainty" -- and surveys bore out the fact that people were, in fact, dreading it tremendously -- the economy was, in the 4th quarter of last year, actually ticking along. It improved "specifically in the three areas -- hiring, capital spending and sales."
Baum concludes that "we got snookered by a euphemism that was more an excuse to prevent an undesirable political outcome (tax increases) than a reflection of intent."
Uncertainty is omnipresent. No one speaks of uncertainty during good times. There was lots of uncertainty in March 2000, when the Nasdaq Composite Index breached 5,000 as investors bought shares of Internet companies with no revenue, no profits and, in at least one case, no known business. No uncertainty back then; just a case of irrational exuberance.
In good times, the word uncertainty rarely appears in policy discussions. In bad times, it’s the default setting. Why not call it by what it really is, which is pessimism? When businesses say they aren’t going to invest because of uncertainty, what they mean is, they don’t think their investments will produce a substantial profit.
Back in 2011, during the debate over how Congress would continue to pay for the ongoing payroll tax holiday, congressional Republicans railed against their Democratic counterparts' proposal to finance the demand-stimulating payroll tax break by levying a surtax on people making $1 million or more. At the time, Sen. John Thune (R-S.D.) said it was a matter of uncertainty. "It's just intuitive that, you know, if you're somebody who's in business and you get hit with a tax increase, it's going to be that much harder, I think, to make investments that are going to lead to job creation."
Funny thing, though! As it turns out, the larger uncertainty was whether or not there actually were any business owners who would be affected in this manner. So National Public Radio endeavored to find some. They engineered a hard-target search, and here's what happened:
We wanted to talk to business owners who would be affected. So, NPR requested help from numerous Republican congressional offices, including House and Senate leadership. They were unable to produce a single millionaire job creator for us to interview.
So we went to the business groups that have been lobbying against the surtax. Again, three days after putting in a request, none of them was able to find someone for us to talk to. A group called the Tax Relief Coalition said the problem was finding someone willing to talk about their personal taxes on national radio.
So next we put a query on Facebook. And several business owners who said they would be affected by the "millionaires surtax" responded.
But they didn't respond in the way that John Thune suggested they would. "It's not in the top 20 things that we think about when we're making a business hire," said one. Said another, "That has nothing to do with what my business does. What my business does is based on the contracts that it wins and the demand for its services."
Now, in the months since, especially in the days leading up to the 2012 election, several business owners made waves by flamboyantly insisting that Obama's reelection would mean certain doom for their employees. But this frustrated demagogic yawp could basically be translated as a distant early warning to workers: "I am a terrible businessperson." After all, as The New York Times reported, "United States corporate profits reached a record high in the third quarter" of 2012. And, as far as the Obama White House's ministrations were concerned, Chris Lehmann summed it up best by pointing out that the "top 1 percent of income earners have taken in fully 93 percent of economic gains since the Great Recession." So lots of people were thriving just fine during this prolonged period of "uncertainty."
I have to say that I've always found the worry about "uncertainty" to be an odd construction, given the fact that a major ingredient of a robust capitalist economy is the willingness of entrepreneurs and investors to dive headlong into risk. That is, I feel, the point of capitalism, and the constancy of competition, obsolescence and innovation naturally creates an ever-present cloud of what could be called "the uncertain." Baum's summation of the concept as "default setting" is a good corrective.
But the larger point is this, the period of time that led up to the 2008 financial crisis can best be seen as a time when the Lords of Finance tried to game all of the uncertainty out of the system -- by placing their faith in quantitative models that were never supposed to fail, and backstopping their investments with a daisy chain of credit derivatives that eventually imploded, nearly taking the entire economy down with it. Much has been said about this notion of "uncertainty" being a new, super-deleterious thing for the economy, but I think Barry Ritholtz said it best: "Kiss your assets goodbye when certainty reigns."
READ THE WHOLE THING:
How a Nation Got Snookered by a Phony Narrative [Bloomberg]
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