Markets like predicatability, Politicians like votes
Jul 03 2009, 01:53 EDT [updated Jul 03 2009, 02:10 EDT]
A short op-ed at CNBC posits that Government spending promises are scaring business into spending inaction. This isn't a hypothetical today or during the Great Depression. Then we had the government making electricity generation [a new thing] a priority which meant private companies put plans on hold because competing with free was a losing plan. Today's stimulus had Harry Reid (D-Nevada) championing a government subsidized maglev train between LA and Vegas which killed the privately funded project to make a standard rail between the two. Energy producers sat on their hands for months because last week's cap-n-trade CO2 bill was still up in the air -- and they're still sitting on their hands because though the bill passed no one has read it [no one who voted on it had read it, for instance] and figured out what it means yet. Hospitals aren't going to build bupkis because a new ward takes decades to pay off and they might all be nationalized by then.
You get the idea - when there is uncertainty people will sit on their hands. Even worse to reduce uncertainty people will spend money now in the form of lobbying and political donations to reduce uncertainty in the future. That is very good for politicians but not so good for the general public.
Because uncertainty is so stifling I would even go against my gut instincts and say that promised stimulus money must be spent. Fully fund whatever programs have already broken ground and dump the rest. Less than 25% of the promised stimulus projects hit the "broken gournd" goal so we can stop digging an uncertainty hole and still save a few hundred billion dollars. Everybody but the politicians win. And by that I mean stop losing.