Uncertainty Is Not the Problem

Nice to see a REAL businessman speaking out against our socialist/fascist president's policies - at least to this day, he can still be open with his thoughts, as, after all, Obama's intellectual (sic) predecessors FDR and Woodrow Wilson simply had them imprisoned.

The author (who was an enthusiastic Obama supporter in 2008) makes the compelling and unassailable case that it exactly this president's open war against capital that has depressed our economy and will keep it so until he is consigned to the ash-heap of history.

After all, that is also exactly happened in the 30's and 40's under FDR...T

Many commentators blame our continuing economic woes on "uncertainty." They allege that recent and anticipated dramatic policy changes make business planning difficult, and that this is retarding growth and employment. This view is not wrong—but our main problem is not the uncertainty surrounding new policies. It is the policies.

Consider two uncertain situations. In the first, our business is waiting to find out the location decision for a customer's new industrial plant, so we know where to build our new supply facility. Until this is resolved, we will not invest in building nor will we hire staff. In the second situation, we know we are in for some pain, someone is going to make our business less productive and profitable, but we do not yet know how much. Planning is marginally more difficult, but the main reason we will not grow in the second situation is that investment is less attractive regardless of the precise resolution of uncertainty.

In the first case, uncertainty is the obstacle. Once it is resolved, we invest. In the second case, uncertainty is a small part of the problem. The large part is simply that bad things are happening. The day we are told "well, it's exactly a 30% hit to productivity and profits," all uncertainty is resolved—yet we will still not invest or hire.

The Obama administration's economic policies have defenders. For instance, New York Times columnist Paul Krugman will tell you the stimulus helped, and we didn't have enough. I disagree. I will tell you the stimulus was wasteful and politicized, and the American people, not being idiots, know they will have to pay for it eventually. People adjust their plans to account for the additional debt heaped on them, meaning lower investment and consumption.

I will also tell you Dodd-Frank, with its enshrining of too big to fail and its large regulatory costs, is an albatross. I will add that ObamaCare's gigantic new entitlement has hurt. I will throw in that massive additional regulatory costs being foisted upon business is an extra drain on the economy. I would definitely say that the disregard for law during the auto-company "bankruptcies" has long-lasting negative effects. I'd even throw in that the president's demonization of business has been harmful. Finally, I'd say the expected tax increases, even if only on the "super rich"—defined as anyone still gainfully employed—weigh upon us. So what does all this have to do with uncertainty and whether that's our problem? Consider a hypothetical.

Imagine, right now, we passed a giant additional wasteful stimulus. Imagine all the rules of Dodd-Frank were revealed and are even more stifling than we expected. Imagine we doubled the new health-care entitlement and expanded government control of health care more than previously predicted, but set all the details today. Imagine assorted government agencies passed more burdensome regulations than we anticipated, increasing both the cost of doing business and the drag of crony capitalism. But all uncertainty was resolved by passing them today.

Next imagine that the president promised, in no "uncertain" terms, to up his hectoring of business in perpetuity. Further, imagine we passed higher taxes going forward on everyone but, again, we settled it for certain right now. Finally, imagine we committed ourselves to no entitlement reform ever. Is all this good or bad? Well, uncertainty has been eliminated, but it sounds pretty darn bad.

Now let's go the opposite way and consider good policies surrounded by uncertainty. Imagine we will move from here toward free-market health-care reforms appropriate for a free people. We will reduce government spending and our debt, letting people spend their own money as they see fit. We will lower taxes across the board for individuals and businesses, and we'll reduce and simplify deductions.

Imagine even more that we'll make grown-up decisions and reform entitlements to levels we might possibly afford. Now imagine that while we know the direction of each of these policy changes, alas, we are very uncertain about how far these wonderful ideas will go. Imagine this uncertainty is even higher than it is around today's bad policies. Would these changes, uncertainty and all, make things better or worse? Well, it seems pretty clear that should these changes occur in any nontrivial fashion, you would have to duck to get out of the way of the ensuing economic boom, regardless of the uncertainty.

Focusing on "uncertainty" takes our eyes off the ball. We should not seek clarity about the many new drags on our economy. We should seek to have the administration cease and desist, then reverse them.

Mr. Asness is the managing and founding principal of AQR Capital Management
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