Knock it off.
Your comment about Obama ignores the point that both parties have used the claim in different situations against any number of white presidents.
Your next post is nothing but a “Pit lite” jab at businesses that gives the strong impression that you don’t know what you are talking about.
Both posts are long on inflammatory language and short of facts or logic.
[ /Moderating ]
Very interesting post Sam. I’ll just point out that, in your example, Government assistance to companies switching from making chairs to making tables may well help boost the economy faster than doing nothing. In the real world, this would mean that well targeted Government spending will help, but as you point out, randomly or badly targeted will either do nothing, or actively hinder recovery.
Uncertainty is one of the single most difficult concepts a human mind can try to grapple with.
This can ignore entirely the possibility of a “black swan” event, an unknown unknown that careens out of nowhere to destroy the entire past relationship our equations were based on.
You’re trying to divide the world into things that have a surface appearance of being statistically tractable (e.g. steel costs) with things that have no such superficial mathematical handle (e.g. EPA regulation or health care reform). But the very broad social/political/economic/environmental undercurrents that cause a demand for massive governmental reform are the very undercurrents that would undermine the supposedly safer equations.
The United States will stay not fiscally solvent without health care reform. You cannot possibly cite with any seriousness the “uncertainty”, the mathematical intractability, that stems from an inability to calculate the costs of a single reform proposal, when you measure it against the other uncertainty that stems from the possible future collapse of our present economic order. A US public debt default, either actual or through extensive inflation, is one of the most uncertain financial events that could possibly happen. There is no way to make a risk calculation from it, not even a naive risk calculation of the sort investment banks are so fond of. The same is likely true of climate change. If the zone of fertile land moves north to Canada, leaving large tracts of America’s bread-basket a desert, that has a genuine cost that can’t be accounted for in any pretty equation. It’s a total unknown. While it’s true that regulation of carbon emissions can’t necessarily be put in a spreadsheet to determine proper investment for the next five years, the same is true for massive desertification or coastal flooding. Steel demand could possibly shoot far outside its cozy confidence intervals, given enough environmental or budget surprises.
Regulation does not have to be some mysterious thing adding to uncertainty in these cases. Quite the opposite, the underlying currents that are causing the push for regulation should be making it clear to all actors that this uncertainty exists, that the big fat tail event is out there and will possibly come to bite us in the ass if we do nothing to stop it. Swans are fucking vicious creatures. The anti-science, anti-math brigade can try to deny the findings of climate scientists and health care wonks, but they can’t do so forever. What they consider to be an unlikely event becomes more and more an inevitability as times goes on.
This is not to argue against statistics, nor against the usefulness of mathematically tractable sets of data. It’s nice when we can make somewhat accurate forecasts of the future. But those proposing regulations are not, necessarily, a source of uncertainty. The uncertainty is already there, in the future budget or in the earth’s climate or wherever, and they are merely acknowledging that fact with their attempt to solve the problem. A change in the regulations would be a return to more certainty, not an abandonment of it.
And yet the other side is more eager to take the “shoot the messenger” approach than turn to face directly the shadow of the future. The problem in this case isn’t certainty. The problem is raw denial.
The graphs also show that quality and cost of labor is of decreasing interest while loss of sales increases. Hiring is part of growth. This inverse relationship supports the idea that businesses cease to worry about labor because sales are impeding growth.
I am confused why the simple economic relationship between a business’ growth and rate of new hires is being so thoroughly ignored for this new and clearly damaging talking point.
Just crank corporate taxes to 40 percent and lock them in for 50 years. Then the dreaded uncertainty will be gone.
Sure. I don’t mean to suggest that government is the only source of uncertainty. And I also agree with you that in certain cases, government regulations can decrease uncertainty and add stability. I would argue that TARP lowered uncertainty. The fed’s willingness to inject money in cases of a collapse of the monetary base can also act to lower uncertainty. Regulations which force transparency or correct market failures can lower uncertainty.
That’s a reasonable debate to have, and I think the only way to have it is to long at specific regulatory proposals. You can’t make sweeping assertions one way or the other.
Except that this particular health care reform is a mess, does not ‘bend the cost curve’, and makes the medicare problem more severe by pulling 500 billion dollars out of it to pay for health insurance for the currently uninsured. So I don’t think this eases long-term uncertainty about the structural stability of Medicare, and it adds a whole lot of new uncertainty due to the various interventions in the market and business taxes that are coming.
I agree. That’s why the markets responded to poorly to the budget deal - not just because of the Tea Party, but because it made clear the fact that the U.S. government is utterly incapable of finding the political will to make any serious structural reforms. The Democrats are looking for a measly 69 billion dollars in new taxes. The Republicans want a measly 1.2 trilion in spending cuts over 10 years. Neither of these ‘fixes’ are even remotely adequate. Not even a ‘balanced’ approach which combines the two. Even the original 4 trillion proposal Boehner was looking for wasn’t enough, and it totally ignored the entitlement problem.
No, Climate Change is not a major source of uncertainty right now, for the simple reason that the effects grow so slowly that any major damages that might accrue are way outside the time frame of reasonable business planning. Businesses aren’t pulling their money out of the market today because the earth might be 2 degrees warmer in 50 years.
You can’t come up with a reasonable policy today that will make any difference. Businesses today aren’t worrying about the seal level rising 20cm in 70 years, but they ARE worried that fear of that outcome will drive government to hit them with punitive taxes in the near future.
In fact, if you take the numbers for the potential damage to the earth in 100 years and apply the kind of discount rates businesses use to determine the value of investments, you’ll find that the net present value of global warming is very small compared to the other problems facing us.
In addition, most of the damage from global warming will occur in equatorial regions where there is little capital investment in the first place.
So instead we’re supposed to rush to support health care plans that don’t actually do anything to solve the health care problem, and to pass punitive climate programs that actually don’t do squat for the climate but instead push demand for oil to China and India while the U.S.'s energy costs go up. This is ‘feel good’ policy, not sound investment and science.
I’m sure you know what happens if one country like the U.S. slaps taxes on a global, fungible resource like oil. Remove American demand from the global balance, and the price of oil will drop, which will stimulate demand elsewhere. A new equilibrium may or may not settle on net lower annual oil consumption. Probably slightly lower, but nowhere near as much as the reduction in the U.S.
Also, consider that the U.S. is among the most energy efficient countries on earth when it comes to manufacturing. Now imagine destroying that comparative advantage through energy taxes, thus pushing the manufacture of products from the relatively efficient U.S. to inefficient China. You could wind up using twice as much energy per dollar of GDP associated with those products, completely eradicating the ‘CO2’ savings from carbon taxes or cap and trade.
It’s a long way from accepting global warming to coming up with a reasonable set of policies that will actually reduce the damage from global warming by more than the cost associated with the reduction. I would argue that we simply don’t have the capacity to do that. You would need a global accord for energy reduction that would require countries to voluntarily lower their GDP growth. Can you think of any such accords that have worked in the past?
Do you have any cites to any businessmen who have said, "I was going to invest in a new factory, but then I thought, “Oh, not with this global warming thing!” For that matter, do you see any evidence of reduction in development of coastal areas? Wouldn’t that be the leading indicator that businesses are actually worried about climate change?
I don’t deny global warming. I believe it’s occurring, and that man is helping to increase it through CO2 emissions. I’m not in denial. But I’ve also looked at the various IPCC projections, the Stern report, and other attempts to assign net-present-value to future warming, and I think there are a lot of questions that need to be answered there. And then once we can come up with a number that we can use to apply Pigouvian taxes to carbon, I’d like to see a credible plan for a global agreement that is enforcable and which includes all the big emitters, including India and China. Until you can do that, anything you do locally is just pissing in the wind with other people’s money, and may actually do more harm than good by destroying the wealth we’ll need to cope with the effects of warming.
And doing everything at once also causes “uncertainty”, by creating potential problems from a comprehensive job instead of taking things piece by piece to see what works.
Pointing out the uncertainty of a piecemeal reform act doesn’t eliminate the uncertainty of a comprehensive all-in-one package. One of your favorite refrains is the law of unintended consequences, but a step-by-step reform is potentially less likely to have strongly negative consequences because you’re not trying to complete it all in one go. This can go either way, depending on which uncertainties you are willing to acknowledge. Political opponents of the president will, naturally, focus on the uncertainty of the president’s plan while skipping over the uncertainty of an alternative plan, or most relevant for our current situation, no plan at all.
This isn’t a Ferrari that can be turned around on a dime.
By the time we better understand the costs, the momentum of climate change could already be pushing us well into terrible damage with no way to turn the ship around quickly enough to remain in safety. I’m more worried about crops and housing in poor countries than anything else, but there is really no way to know. You can’t do a NPV analysis on a big fat question mark. That’s why dealing with the problem earlier, though more painful now, is less likely to result in the big unpleasant surprise. I’d rather have a system that can deal with the unexpected, than one designed for a kindlier notion of “efficiency” that might break down in a time of serious trouble.
There’s no way for me to come up with a politically feasible plan, but I’m not willing to concede that the limits of politics are the limits of reason.
Yes, the solution must be international.
We could, if we were reasonable, institute a small and growing international carbon tax. If we had the support of, at minimum, the US, the EU, and Japan, we could level the tax on the imports of any other countries that didn’t want to play along. This would make developing countries unhappy, but it would still genuinely make a difference. You know all this. It internalizes the cost of the externality, in such a way that businesses know exactly how much more they’re going to pay. That relates again to certainty, and this is, like Obama’s health care plan, a course of action based on more conservative ideas, basically creating a “property right” for the air and charging a fee for using that property.
The problem is that when the Demmies start to consider market-based reform, the Pubbies start complaining about any reform at all. When market-based ideas are suggested, they simply move the goalposts to total non-intervention. Uncertainty has nothing to do with the political opposition.
The whole point of this problem is that business people (along with everyone else) don’t consider the damage to other people that can stem from their actions.
They don’t consider the millions upon millions of refugees from an underwater Bangladesh. They don’t consider the potential widespread crop failures, and perhaps even famines, from shifting weather patterns. The uprooted lives will not show up in the cost-benefit analysis of worldwide capital equipment. The displaced homes will not show up on the bottom line of a US corporate balance sheet. There are limits to these conventional calculations. Some things that people feel “certain” about, with their very comfortable equations, leave human misery entirely out of consideration.
I really haven’t the slightest idea how bad climate change could be. Maybe it would be the weather equivalent of the Y2K problem, given future technological adaptation. The point is that we don’t know. It’s a big fat unknown, an uncertainty, one that many people of the present have no desire to deal with because they’re too busy blaming Obama for other things.
I don’t disagree.
But it isn’t the flaky leftists with bad ideas blocking a solution. It’s the GOP who have near unanimously signed in blood on Grover’s contract that they’ll never raise taxes. They don’t make distinctions for Pigouvian taxes, or Tobin taxes, or any other kind of market-based reform of that sort. It’s an all or nothing deal, totally inflexible. The EPA would arguably create a counter-productive situation by stepping up on its own initiative, but they claim to have a legal onus to do so because a failure of Congress to act.
It is simply disingenuous for businesses to blame Obama for “uncertainty”, when ignoring these sorts of problems entirely has been their most favored action for years. As I was saying: A move to regulate does not necessarily have to increase uncertainty. It might merely be an acknowledgement, finally, that the uncertainty exists, that the problem must be dealt with. Many of these complaints come from people who would just rather stick their heads in the sand than acknowledge that there are hard problems to face. Theirs is not a reasonable sort of complaint. And though you might like comprehensive packages more, sometimes regulation might just mean a single first step in what is, hopefully, the right direction.
Nonsense! Obama is at the very least the color of the fine leather interior of a Jaguar. Or, at least, that’s how I judge how much cream to put in my coffee – I hold up a picture of the president as I mix it in. How else to be certain of flavor?
Not knowing if the parameters of your income and expenditures will change drastically in the near future, so not producing or consuming because of it. People are afraid to lose their jobs so they don’t spend. Businesses are afraid of another collapse so they don’t invest. etc.
Adding uncertaintly to our competitors somehow reduces our uncertaintly?
I think the goverment should be able to do two things at once. Defend the plan in court AND write the rules.
I am not in any way blaming Obama. I was responding to the contention that the Affordable Care Act did not introduce new uncertainty into the business climate. That is completely at odds with my first hand experience.
OK, let’s just say that all the businesses currently sitting on the two trillion see significant growth, back to where it was at the height of the nineties boom. do they then put the two trillion they took out of the economy back into the economy?
Any chance of you answering the question please?
The condition that needs to be met is demand. But that does not mean they will manufacture anything here or hire American workers.
The rich are sitting on a couple trillion dollars right now.
It is cheaper to make something in China and ship it back. The way to stop that is tariffs and strong inspection.
Th Chinese sold plasterboard that was used in thousands of houses. There are chemicals being released and people are complaining of being sick. Some homes are unable to be occupied. But since it was made in China we can not sue them here. That needs to be changed to help level the playing field.
