Uncertainty Principle

What John Boehner offers in place of an economic plan.

To get businesses hiring, House Republican leader John Boehner wants firings. First, he wants the president to sack his economic team. Then he’d like the voters to retire or replace 39 or more Democrats so that Republicans can take control of the House.

Boehner made his pitch in a much touted speech denouncing the Obama administration’s economic policies. The president’s economic team just doesn’t get it, he argued (a key theme in this election). They’ve never owned a small business or run a company. They don’t understand the uncertainty the president’s policies are creating in the private sector. “America’s employers are afraid to invest in an economy stalled by stimulus spending and hamstrung by uncertainty,” he said in one of nine uses of the word. “The prospect of higher taxes, stricter rules, and more regulations has employers sitting on their hands.”

The argument is not new, but it’s one that GOP aides say you’re going to hear a lot between now and November. It’s founded in economic reality—of course people are uncertain—but frames the economic situation such that the most effective solution is not one specific policy but simply the removal of the party in power.

Boehner says businesses are worried about the legislation that has passed and that’s likely to come. Health care and financial regulatory reform were enormous bills (more than 2,000 pages each). Much of their impact is still being figured out by the regulatory agencies. The health care law will create more than 100 new regulations, says the Chamber of Commerce, whose president focused on uncertainty in his “State of American Business” speech in January. Financial reform will require 520 new rulemakings, 81 studies, and 93 reports. Executives have to wait to hire or invest while all of this is figured out so they’ll know how much to spend on benefits and paperwork.

The future is also a vast mystery. Only some portion of the Bush tax cuts may expire, but no one knows the exact shape of the new tax code. President Obama has promised to push comprehensive energy legislation founded on putting a price on carbon. His deficit plans, if they’re serious, will almost certainly require a rewriting of the tax code and cuts in federal spending.

Uncertainty as the cause of all woe resonates with voters even if they don’t own businesses, because, broadly speaking, there are jitters in the country. Every day, there seems to be a reminder of the fragile state of things. Tuesday it was reported that home sales dropped 27 percent in July. Almost 60 percent of Americans think the country is headed in the wrong direction. Obama’s frenetic activity (“You never want a serious crisis to go to waste,” said his chief of staff Rahm Emanuel) contributes to the sense of unpredictability. Today energy legislation, tomorrow we switch to the metric system!

So stop the madness, Boehner argues. That alone will unleash economic growth. If business can be certain that Obama won’t have a congressional majority to put his schemes into legislation, they’ll come out from under the desk and start spending all that cash they’ve been hoarding while they wait for certainty.

This advantage of this ballot-box-rescue argument is that it allows Republicans to stay light on specifics about what they would do if all of this firing took place and they had control. Boehner promised there would be a GOP agenda sometime next month, a strategy that gives Democrats limited time before the election to pick apart what’s offered (which is likely to be pretty vague, anyway). He did call for spending cuts, but not enough to tackle the deficit, especially if the Bush tax cuts are extended—which the the Congressional Budget Office says will give the economy an initial boost but then cause “daunting long-term fiscal challenges” and “reduce long-term economic growth.” Never mind all that. If the big problem can be solved by electing Republicans, those smaller details can be worked out.

The uncertainty argument also helps the GOP get out of a debate about the past. If Obama’s actions of the moment and future are to blame, then there’s no reason to talk about the policies of the previous administration and GOP Congress that may have created the current economic conditions. In response to Boehner, Vice President Joe Biden mockingly thanked him for his advice about the firings and repeated the administration charge that the GOP merely wants to return to the “exact same agenda” of the Bush years.

If you really want certainty, say Democrats—or at least incremental change that breeds less uncertainty—then voters should not want to give the GOP control. Republicans have promised to repeal financial regulatory reform and health care reform. If that actually happened, businesses would have to wait for the enormous battle while Republicans tried to push through their replacement legislation. Then executives, accountants, and lawyers would have to plow through yet another pile of regulations to figure out how these repeals worked. Democrats in control with smaller margins would inevitably limit Barack Obama’s ambitions. Senate Republican leader Mitch McConnell actually made that argument recently.

Democrats also challenge the economics of Boehner’s claim. “This is an argument that only CEOs make,” says Robert Shapiro, chairman of Sonecon, an economic advisory firm and a former Clinton-administration official. “No reputable economist has ever been able to find evidence that business has a sense of uncertainty independent of the economic factors in the real world that businessmen take account of.”

Uncertainty is at the heart of business activity, say administration officials. There is more after a recession, and there is particular uncertainty now because the economy is struggling to emerge from a crisis unlike anything seen since the Great Depression. What Boehner is trying to do is blame the Democrats who are handing out umbrellas for the rain that’s falling.

The uncertainty that people feel, say White House aides, is the result of an economic system that got out of control during the Bush administration. (An administration that was stocked with businessmen from the real world, they add.) Only if the Obama administration’s proposals are put in place can natural uncertainty be mitigated, an argument that got a little boost on the day Boehner spoke. The Congressional Budget Office reported that the Recovery Act increased real GDP by up to 4.5 percent in the second quarter of 2010 and put up to 3.3 million people to work possibly preventing the economy from contracting in that period. But the report also said the act’s impact on the end of the year will diminish. The future, then, is still uncertain.

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