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Whatever Happened To Uncertainty?

With the House passing a two-week funding extension and Harry Reid promising the Senate will do likewise, it looks like we have at least until March 18th before any federal agencies have to shut their doors. But then there’s a shutdown risk. And there’s another one coming as early as April 15th, when the Treasury bumps into the the debt ceiling and needs Congress to lift it in order to avoid default. Federal budget policy over the next few months is going to be like a weekend with Charlie Sheen: A constant effort to avoid blackouts (yes, Wonkbook went there).

Prior to winning the election in November, the GOP spoke often about the pressing need to reduce “uncertainty” in the economy. This was a core principle of their plan to restore economic confidence and create jobs. As Rep. Paul Ryan put it to me in July, “uncertainty is a new economic buzzword, but for good reason: If we can reduce it, we’ll unlock capital.” If businesses and individuals could be confident about what government was doing, what taxes would look like, and what regulators would ask of them, they could start investing again.

So are they succeeding at their own promise of reducing uncertainty? It’s hard to see how. Budget experts on both sides of the aisle have sharply upgraded their estimate of how likely a government shutdown is in the next few months, either over the continuing resolution for 2011 or the debt limit or both. There’s an ongoing effort to starve health-care reform of implementation funds and a promise to “replace” it with some policy that hasn’t yet been written — no one in the health space would say that the shape of health-care policy over the coming years looks more certain now than it did six months ago. The GOP chose a tax deal that lowered all rates for two years rather than a tax deal that lowered most rates permanently, so there’s uncertainty over future tax rates. The tax and health-care policies would both do much more to increase the deficit than anything else on the list would do to reduce it, ensuring that concern continues to loom. So for what definition of “uncertainty” has the GOP succeeded in reducing its prevalence in the economy?

In each case, of course, the GOP has a good argument for the choice it’s made: Lower tax rates on large estates and income over $250,000 were judged more important than tax certainty or deficit reduction. The health-reform law is so unwise that repealing it should be a top priority. The prospect of a government shutdown and/or default provides leverage to extract spending cuts, which are more important right now than assuring the market that there won’t be some sort of shutdown or default. It’s all fair enough, at least on its own terms. But it’s meant that the post-election GOP takes the risk of uncertainty a lot less seriously than the pre-election GOP did. It’s a tension I’d like to hear more of them comment on.

By: Ezra Klein-The Washington Post, March 2, 2011

March 2, 2011 - Posted by | Budget, Deficits, Government Shut Down | , , , , , , , , , , ,

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