Wednesday, July 20, 2011

Regime Uncertainty

Robert Higgs has been arguing that regime uncertainty accounts for the length of the Great Depression. It was not FDR policies nor the War that brought the US out of the depression, it was that businesses became certain that what they earned would not be confiscated. Today, regime uncertainty is evident. Steve Wynn, the owner of several casinos in Las Vegas and Macau talks about the regime uncertainty under the Obama Administration.
QE1 and QE2 along with TARP, and the various other stimulus expenditures have done nothing. Why haven't these Keynesian prescriptions worked? Paul Krugman and Alan Blinder claim that the problem is that these programs were not large enough. In contrast, they should know that it is impossible to stimulate an economy when business does not want to invest and create jobs. Facing 36% corporate tax rates, double the rates in most other countries, as well as the huge additional “taxes” of Obama Health Care and the Dodd-Frank legislation, businesses have no incentive to invest in the United States.

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