In a lively lunch debate today, at the Fortune Most Powerful Women Conference, Diana Furchtgot -Roth, former chief economist at the U.S. Department of Labor, highlighted the lack of business and consumer confidence as the main impediments to job growth in this still ailing economy. Uncertainty about tax increases and upcoming regulatory changes, including the new health care law, are all factors that discourage businesses from investing and consumers from spending.
Mrs. Roth’s message echoes a CNBC report, earlier this month, from an outlook meeting on the global economy and investment, hosted by Wall Street strategist Byron Wien. Mr. Wien summarized participant sentiment, as follows:
The Obama administration was viewed as hostile to business and that discouraged both hiring and investment. Companies and entrepreneurs were reluctant to add workers because they didn’t know what their healthcare costs or taxes were going to be.
Mrs. Roth was up against Laura Tyson, Former Dean of the University of California at Berkeley Business School, who kept repeating the Keynesian mantra. Aggregate demand is down and government needs to spend more to get the economy going again. Isn’t that what the huge stimulus package was supposed to do? Oh yeah, the stimulus just wasn’t big enough, right?
Actually, the stimulus just didn’t work. Recent research featured in the Wall Street Journal shows that
the government transfers and rebates have not stimulated consumption at all, and that the resilience of the private sector following the fall 2008 panic–not the fiscal stimulus program–deserves the lion’s share of the credit for the impressive growth improvement from the first to the second quarter.
Government doesn’t create economic growth, but it can provide an environment that facilitates or impedes growth. Congress and the Senate should look to what actually works in getting the economy on a track to sustainable recovery. Extending the Bush-era tax cuts, repealing ObamaCare, and letting the Paycheck Fairness Act die in the Senate, would be a good start.