Saturday, March 13, 2010
No Recovery Until America Invests Again
...In this light, we can appreciate that enhanced government spending does not bulk up the economy, nor merely crowd out worthwhile private activity. Instead, it undercuts, penalizes and distorts everything that private parties attempt to do to create wealth. Ham-fisted government regulations and additional taxes are known killers of economic growth.
The investors' famine and the government's feast therefore are not merely coincidental, but causally connected.
Making matters worse, the explosion of the federal government's size, scope and power since mid-2008 has created enormous uncertainties among investors.
New taxes and higher rates of old taxes; potentially large burdens of compliance with new environmental and energy regulations and mandatory health care expenses; new, intrinsically arbitrary government oversight of systemic risks associated with virtually any type of business — all of these unsettling possibilities must give pause to anyone considering a long-term investment.
Investors now face regime uncertainty to an extent that few have experienced. To find anything comparable, one must go back to the 1930s and 1940s, when the menacing clouds of the New Deal and World War II darkened the economic horizon....