The Liberty School

The effects of uncertainty

Today the Wall Street Journal has a great piece highlighting the absurdity of short-term fiscal policies:

Now Congress, taking up a deal worked out between the Obama administration and Republican leaders, is poised to turn the whole personal income-tax system into something of a temporary structure. The plan embraces a broad range of provisions—an extension of Bush-era rates, a new estate-tax formula—but for only two years. A payroll-tax cut in the bill is for a single year.

This means that if the compromise passes largely intact, the U.S. will have no permanent regime governing levies on salaries, capital gains and dividends, the Social Security tax, as well as a slew of targeted breaks for families, students and other groups. This on top of dozens of corporate-tax provisions that already were subject to annual renewal.

The level of uncertainty, unusual for developed nations, complicates planning and discourages hiring and investment, many economists and corporate executives say.

Couple that with the Washington Post reporting that businesses are squatting on $1.8 trillion in cash and you get a perfect example of the effects of economic uncertainty. Asinine government policies, both fiscal and monetary (and then some), are leaving companies extremely unsure of the economic climate to come. With portions of ObamaCare not set to take effect until as late as 2018 and bipartisan control of Congress coming in 2011, I wouldn’t expect any degree of assurance any time soon.

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Filed under: Economics, Politics,

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