07/15/2014 03:35 pm ET Updated Sep 14, 2014

The Economy Can Get Its Mojo Back

It has disappointed from the start. This so-called economic recovery has developed too slowly, benefited Wall Street more than Main Street, and done precious little to help the still huge army of unemployed. The sorry experience has engendered a fear that the economy's "new normal" can no longer deliver the prosperity gains to which Americans once accustomed themselves and thought their due. It is frightening, especially for the young. But such a sad fate is far from assured. A return to higher-paced growth is entirely possible, if, that is, two things happen: 1) Corporate America sheds the fears that have gripped it since the 2008-09 "great recession." 2) The country as a whole and its business sector in particular can find clarity in Washington.

The great recession created a lot of lasting harm. Because it brought many firms to the brink of bankruptcy, because many had trouble meeting payroll in 2009 and found no financial support when they went to banks for help, managements to this day, five years after the upturn began, remain extremely risk shy. This is a problem. Though it is fine to minimize risk, a willingness to take it is a crucial part of the growth equation. Timidity has made managements reluctant to hire, especially full-time staff. Instead of payroll growth of 400,000 a month that past recoveries exhibited, this time the Labor Department reports, payrolls have increased at a pace closer to 200,000 a month, so slim that a report of 288,000 new hires for June created excitement when in the past it would have engendered concern. That same stifling caution has kept spending on new capital equipment and facilities similarly stunted. The fear shows, too, in corporate finances. According to the Federal Reserve, non-financial corporations presently hold a whopping $1.5 trillion in cash and cash-like assets on their balance sheets. So afraid are they that they will accept piddling rates on deposits rather than risk the monies on expansion.

Time is the only remedy for this growth retardant. Only when the memories of these traumas fade will managements regain what the great economist John Maynard Keynes called their "animal spirits" sufficiently drive an economic acceleration with new hiring and spending on upgrades as well as new capacity. How much time this will take remains an open question. There is, however, a tentative sign that the turn may have begun. Spending on mergers and acquisitions have risen dramatically. Year to date, according to industry sources, close to $700 billion has changed hands in such endeavors. If managements will risk funds in this way, perhaps in time they will increase rates of hiring and capital spending. In the meantime, the last five years of timidity suggests that the change will come slowly at best.

The other matter blocking a return to more rapid growth is the complex legislation passed by Washington in 2010. It is not so much whether the Affordable Care Act or the Dodd Frank financial reform legislation are good or bad laws. Even if they were brilliant pieces of legislation, and that is debatable, their sweeping nature and complexity have generated enough uncertainty about future labor and credit costs to exaggerate all the debilitating cautions created by the great recession. It is not just because the thousands of pages of either bill are difficult to interpret, although that is a factor, but Washington's regulators have yet to write the hundreds of rules required to implement the laws. According to a recent study, even now almost four years after the Dodd-Frank legislation passed into law, 190 of the 398 rules outlined in its 3,200 pages have yet to be written. The Affordable Care Act looks little different.

And it is the uncertainty that creates the damage. Even if the ultimate impact is increased greatly costs, that certain knowledge would at least allow managers to make their plans on reasonable calculations. They might then do less than they otherwise would, but they would do more than presently, when huge unknowns prompt them to err on the side of caution to an extreme. There was some hope that the scheduled 2014 implementation of the Affordable Care Act would bring welcome clarity, but the postponement of many of its major provisions has delayed that sense for at least another 12-18 months, maybe more.

The economy has born up under these negatives for some time. They have slowed but not stopped growth. At least there is nothing on the horizon that promises to make such matters worse. At the same time, there is little likelihood of that these retarding weights will lift any time soon. The disappointingly slow growth pattern will likely continue.