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.