Regime uncertainty

This is perhaps the clearest illustration of what Bob Higgs refers to as regime uncertainty. The unintended and perverse consequences of this uncertainty has been analyzed in Higgs' work. To the extent that this type of government action continues, our society will be plagued by bubbles and booms and, more importantly, increased rent seeking by actors attempting to mitigate this regime uncertainty.

The WSJ reports on the current tax code discussions:

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.

"I haven't seen anything like it, and it's hard historically to find anything like" the current and pending negotiations, says Mortimer Caplin, an Internal Revenue Service commissioner in the Kennedy administration who at 94 is just three years younger than the income tax itself. "This Congress has left an awful lot up in the air."