Comments on: Is Uncertainty Suppressing Job Creation?

By: Anonymous

Anonymous — Wed, 07 Sep 2011 23:06:00 +0000

Im pretty sure “uncertainty” translates into “having a democratic president”

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Wed, 07 Sep 2011 20:57:20 +0000

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By: Yrro Simyarin

Yrro Simyarin — Wed, 07 Sep 2011 19:42:00 +0000

I don’t really expect anyone to raise corporate taxes by 50%, either. It was a theoretical example for simplification. I don’t really prefer to go into the vagaries of banking and environmental regulatory policy in a one paragraph comment.

By: Larrycharleswilson

Larrycharleswilson — Wed, 07 Sep 2011 18:49:00 +0000

Life is uncertain.. Get over it.

By: Anonymous

Anonymous — Wed, 07 Sep 2011 17:49:00 +0000

Becker pushes uncertainty to the front of the line-up and says not a word about the usual economic suspects – sales, costs, customers, demand. It’s all about the psychology of those in small business, their perceptions and feelings of uncertainty.
Becker’s argument may make more sense in terms of a “classical” recession, but this is not one. A classical recession involves some kind of economic realignment — some industries shrink, others grow. A textbook example here is the postwar recession, caused in large part by the economy transitioning from wartime to peacetime production.

This most recent recession is different. It was sparked by a debt and banking crisis, where debt increases of the past fifteen or so years have finally caught up to the economy. For the first time since the second world war, consumer spending fell over the course of the recession (others had consumer spending flat or edge upward slightly — the fall was in other components of GDP).

Your typical household now has a high debt burden, little to no equity in the home (if they even own one), middling-at-best job prospects, and no confidence that things are going to get better. Of course households are going to cut back and reduce their standard of living, and businesses cannot sell products for which there is no demand.

I suppose in a perverse way, Becker is right — uncertainty is driving this recession. But it’s not uncertainty on the part of businesses[1], it’s uncertainty on the part of wage-earners and consumers. It’s justified uncertainty at that, and the situation isn’t going to be mollified merely by optimistic words. Real intervention on job creation or debt management may help, but I’m not sure what that would look like in this political environment.

[1] — Another way that Becker’s argument here is wrong is in business statements. If businesses really were crippled by uncertainty, they’d be obligated to report that uncertainty at the same time they project earnings over the next couple years. They’re not doing that, and in fact corporations are still expecting large profit margins.

By: Anonymous

Anonymous — Wed, 07 Sep 2011 17:34:00 +0000

I call shenanigans on that. Unlike personal income taxes, corporate taxes are only paid on profits. The mere act of changing a corporate tax rate will not drive a single company to loss. High corporate taxes can reduce willingness to offer venture capital or equity, since those are paid back out of eventual profits. But that is still not the problem that we see. The standard "safe" investment -- US Government bonds -- hovers around historically low yield levels. If investment is not attractive compared to that, then it is because the markets just don't see any worthwhile investments.

By: Yrro Simyarin

Yrro Simyarin — Wed, 07 Sep 2011 17:05:00 +0000

Uncertainty about regulation has much less to do with how much regulation there is currently, and much more to do with uncertainty about what new regulations might be imposed. Even if taxes were say, 50% higher, a business owner would know what to do with that. It’s a much worse situation to hire a bunch of people now and find out six months later that taxes are being raised by 50%… at which point you have to lay all of those people off.

By: Anonymous

Anonymous — Wed, 07 Sep 2011 16:30:00 +0000

Yeah, I think political rhetoric about taxes affects perception. Taxes might be at a low rate now, but small business owners fear them going up not only because theirs might rise, but if taxes rise overall, people will have less disposable income to spend on goods and services.

It would all depend on who you’re selling to, really, and whose taxes go up. Luxury sector, small grocery store that is located in a low-income neighborhood, selling home improvements to middle-class suburban people?