The Wall Street Journal today provides a snapshot of the many ways that the Obama Administration squelches economic growth and investment, from discouraging new oil exploration to threatening tax hikes to hinting at a new government scheme to meddle in the housing market.
While there’s been lots of discussion about how uncertainty about this economy has been an anchor on recovery, I think its impact is still under-estimated.
Investors, businesses, and would-be consumers are facing not just questions about the economy–will we head into another official recession that leads to greater job loss and contraction?–but also great uncertainty about government policy. This isn’t just the guessing game about what burdensome new regulation will be slapped on businesses, what the health care czars will decree must be covered and at what cost, or even what tax will go up in 2013.
There seems to be a sense that government is pulling the strings of the entire economy, and may artificially inflate one sector or investment vehicle at the expense of another. Investors don’t want to be on the wrong side of that bet.
Ideally, those deciding where to invest money consider the value of the product or service as well as the economic conditions and potential market. Today, it seems that investing is akin to gambling because it’s not primarily the free market that’s going to determine what stocks or any other investment is worth tomorrow. Government has an over-sized influence. A small group of politically-compromised men in Washington are dreaming up ways to pump the stock market back up. They’ll largely decide how much our currency’s value erodes in the coming months; they may make bonds surge in value, or target a specific sector for destruction. Undoubtedly, captains of industry and their lobbyists are madly jockeying to be on the winning side. But who knows how it will all turn out?
No wonder that many companies, and investors large and small, have decided to try as much as possible to sit out this storm and wait for more transparent skies. This isn’t a problem that’s going to be solved by another round of quantitative easing or flood of government spending. Certainy will only come when people can feel assured that government’s influence will be confined to its proper role.