8/24/2011

Regime Uncertainty continues to stifle growth

Regime Uncertainty is a term first coined by the brilliant economist, Professor Robert Higgs, who introduced it in his paper: Why the Great Depression Lasted So Long and Why Prosperity Resumed after the War.

Essentially what the term means is that the uncertainty or nervousness business people have in regards to pending or potential regulations from the government, result in them being less likely to invest in long-term capital heavy business projects. This obviously has a negative effect on economic growth.

Today the Associated Press released a story titled, "Survey: Employers consider ending health coverage."

Towers Watson's Randall Abbott said the survey results should be seen as a snapshot of how companies are thinking now. They can't be viewed as a final decision because there are still many unresolved variables. No one knows what the exchanges will be like or whether consumers will accept them, and companies may change their thinking once they learn more about the overhaul.
The health care overhaul also faces court challenges, and President Obama is up for re-election next year, two more variables that could shape what happens in 2014.

When the government expands its role in the economy, hosts of unintended, negative side effects occur. One of the most destructive in regards to economic growth is regime uncertainty. It is clearly a factor today, and is one major cause for the continued recession that America is deeply entrenched in and has been for the past 3 years.

More examples indicating that regime uncertainty continues to plague any chances of a recovery can be found here, here, here, and here.

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