Who’s Unleashing the Confidence Fairy?

Larry Mishel has an important, useful report out about the Republican argument that “regulatory uncertainty” is depressing growth and investment. You can boil it down to this point, about the National Association for Business Economics’s survey of 250 members.

The vast majority (80 percent) of those surveyed believe the current regulatory environment is good for American businesses and the overall economy.

The large majority of business economists believe concerns about economic uncertainty are a proxy for generalized concerns about the bad economy. (That is, the concerns do not reflect business worries about regulation.) Few believe economic uncertainty is a major concern that is holding back economic progress.

That’s a non-partisan group, and a pretty clear conclusion. Reading it, I go back to Ezra Klein’s column from today about the possible economic effects of the quarterly government shutdown threats that this Congress keeps careening into.

During the summer’s debt-ceiling debate, the consumer confidence numbers gathered by Reuters and the University of Michigan plummeted. In an effort to figure out what was going on, Goldman Sachs tried to plug the data into a model that looked at the index’s historical relationship to the jobless rate, the change in the rate, real average hourly earnings, the S&P 500-stock index, home prices and consumer lending measures. They found that the economic factors explained “only about half” of the drop. Then they tried the same exercise with data gathered from the periods in 1995 and 1996 when the federal government was shut down. Again, consumer confidence “posted poorer readings than economic data alone would have suggested.”

But hang on: Republicans had a reason for forcing the debt limit fight. “If we’re going to get serious about creating jobs in America,” John Boehner said in June, “we have got to reduce some of the uncertainty. Some of that uncertainty is caused by the giant debt that’s facing our country.

We have a few options.

- Uncertainty is caused by regulatory build-up and confusion over taxes.

- Uncertainty is caused by Congress stumbling into crises.

- Uncertainty is caused by investors panicking about debt.

Why can’t all three be right? Eighty percent of business economists may say regulations aren’t a problem, but 20 percent do, and no one who’s been on the campaign trail has evaded business owners who are convinced that regulations are coming down the mountain to throttle them. Long-term investors are worried about debt. One way out of the last problem would be allowing revenue into the discussion, but, well, we know what keeps happening to that.