The national debt and deficit are no doubt part of nearly
every current political news story (outside of gun control). Unfortunately,
because many of our representatives aren’t going be re-elected if they cut as
much as our country needs to cut from the federal budget, congress has been searching
for ways to “raise revenues,” which is the politically neutral way to say that
they would like to raise taxes. Of course, raising taxes comes at the cost of
taking that money away from people and businesses, and, as we have seen, the
effectiveness of such a measure has certainly not gone without debate. However,
what has been missed in the debate about policies that include higher
regulatory burdens is that, regardless as to whether or not they are
implemented they leave countries with a great deal of uncertainty; that
uncertainty does not go without economic consequence.
After
congress began to consider implementing a sales tax on Internet commerce- like sales
on amazon- companies in the Internet sales business faced even more uncertainty
than they were facing in our weak economic environment. Regardless as to
whether this policy is implemented or not, the mere conversation of
economically destructive public policy causes uncertainty for companies, and
encourages them to start planning for the worst. A company who ‘could’ face a
large tax increase is less likely to start large new investment projects, hire
new workers, or take on new risks. In fact, companies are more likely to start
cutting costs in order to protect their earnings from a being hurt by a new
tax.
When our
President and Congress begin debates about creating a sales tax for online
retailers, raising the minimum wage, raising the debt ceiling, or continuing to
fight the Obamacare implementation battle- their policies make companies
uncertain; companies are not likely to invest and expand when they face
regulatory uncertainty.
Not only
are companies facing uncertainty as a result of the left’s talking points on
potential economic policy, but also companies are still facing regulatory
uncertainty from previous government action. Banks continue to be confused
about how exactly Dodd-Frank regulations work, and no one knows what the FED’s
exit strategy is for quantitative easing. Not even congress knows how much Obamacare is
going to cost us.
Merely
mentioning a new policy can have economic consequences. The more debate and
gridlock in Washington there is surrounding economic policy, the more
uncertainty large corporations and small business owners face. Debate, itself,
about economic policy is a headwind to economic growth, even if the policies
are never implemented. Of course, this does not mean that we can never debate
economic policy, that would be impractical and impossible, but given their
adverse effects, we should consider the timeliness of such debates; the midst
of a slow economic recovery isn’t the time.
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