Undone By Uncertainty

Rich Tucker
Saturday, July 10, 2010

These days, too many Americans are certain about things they should be skeptical about, and uncertain about things they need to be confident in. And our economy isn’t likely to improve unless we can reverse these positions.

First, the uncertainty.

“The Federal Reserve recently reported that America’s 500 largest nonfinancial companies have accumulated an astonishing $1.8 trillion of cash on their balance sheets,” wrote Newsweek columnist Fareed Zakaria recently. That’s the highest amount in decades. “And yet, most corporations are not spending this money on new plants, equipment, or workers,” he added.

Zakaria’s Washington Post colleague Steven Pearlstein has noticed, too. “There’s little doubt that businesses are holding back,” he wrote July 7. “Business investment as a percentage of economic output is at its lowest level in more than 40 years, while hiring continues to lag behind growth in output.”

So why are companies hoarding cash instead of hiring people? Simple. Uncertainty.

President Barack Obama likes to say “let me be clear” in his speeches. Before the State of the Union address, a Washington Post piece mocked Obama by saying that, “the ‘let me be clear’ preface has become a signal that what follows will be anything but.” And that’s true.

It’s not clear what Obama wants to do -- although he seems less than interested in simply enforcing the rule of law. He demanded that BP establish a $20 billion fund to pay claims filed against it by Gulf residents. Well, perhaps BP should have established such a fund on its own. But the president doesn’t have the power to compel it to do so.

And remember the automakers? Last year GM and Chrysler were on the verge of collapse. The administration bypassed the usual bankruptcy proceedings and instead engineered a federal buyout that benefited the United Auto Workers union. American taxpayers are now owners of auto companies, whether we want to be or not.

No doubt other companies were watching nervously. They’re also concerned about the possible effects of cap-and-trade legislation and financial regulation. In each case, legislation that would hurt businesses has passed the House and is being considered by the Senate. It’s impossible to predict what a final bill might look like or what it might cost. Hence, uncertainty. Hence, inaction.

And all this says nothing about immigration. “Laws like Arizona’s put huge pressures on local law enforcement to enforce rules that ultimately are unenforceable,” Obama declared on July 1. Thus the administration insists it cannot enforce the law, but adds it wants a new, “comprehensive” law to enforce. Uncertainty on top of uncertainty.

Meanwhile, one thing the president is clear on is the danger supposedly posed by global warming. “Unchecked, climate change will pose unacceptable risks to our security, our economies and our planet,” Obama declared in Copenhagen in December. “That much we know.”

But how do we “know” this? Scientists have been warning about the supposed dangers of global warming for years. But the planet isn’t getting warmer. It’s getting cooler. As Kevin Trenberth, a climatologist at the National Center for Atmospheric Research, wrote in an e-mail made public after hackers broke into the computers at a British university, “The fact is that we can’t account for the lack of warming at the moment, and it is a travesty that we can’t.”

What else are experts certain about? “The first thing about Social Security is it actually may be solvent forever,” Nobel Prize-winning economist Paul Krugman told PBS last year. “The low-cost case in Social Security always shows the trust fund going on forever, so it’s not even clear that we have a crisis.” Well, “forever” didn’t last as long as it once did.

“This year, the system will pay out more in benefits than it receives in payroll taxes,” The New York Times reported in March. The Congressional Budget Office hadn’t expected that this would happen for at least six more years.

For decades, people have been certain that Social Security would always be there for them. Yet from now on, Social Security can be expected to pay out more than it takes in each year. It will become an ever-growing drain on the already-strained federal budget. Without reform, there’s no reason to be “certain” it will survive to serve another generation of retirees.

Our leaders in Washington are undermining the rule of law in several ways. Meanwhile, they’re dealing with phantom threats (global warming), and ignoring real ones (Social Security’s insecurities).

Until something changes, there’s no reason to expect American companies to invest in our collective future.