Kevin Drum bucks the trend

The uncertainty meme is just mind boggling. Businesses always have a certain amount of regulatory uncertainty to deal with, and there’s simply no evidence that this uncertainty is any greater now than it usually is. (It is, of course, entirely believable that business owners who spend too much time watching Fox or reading the Wall Street Journal editorial page might believe otherwise, but that’s a whole different problem — and one that Imrohoroglu should spend his time debunking, not promoting.) The only significant real uncertainty that American businesses face right now is financial uncertainty: that is, whether there will be enough consumer demand next year to justify hiring more workers and buying more equipment today. PPACA and carbon taxes rank very far down the list.

Kevin is pretty much correct here and allow me to illustrate. Here are few sources of uncertainty over the years and their effect on the ability of business to sell stuff.


In the early 90s we had some uncertainty. Indeed, we had a health care proposal on the table though not signed into law. We also significant tax increase, though it was designed to pay down the deficit. Maybe that uncertainty didn’t count because it was Rubinomic uncertainty.

I was a big Rubin supporter. He projected a lot of confidence, not to mention good looks. Handsome men can do wonders for economic certainty, you know.

However, show of hands – how many people think that the collapse of the World Trade Center promoted uncertainty. Anyone? Anyone?

Indeed, it looks like we even might be able to discern something in retail sales around that time. Though this was of course in the wake of the Dot-Com bubble burst, the end of years of government surplus, the initiation of two wars and of course massive corporate finance scandals. So, its to know exactly how much was 9/11.

Now compare that to what we just experienced. Osama bin Laden is not even close – not even close – to credit collapse we just experienced. I want to keep going with this because I think it has failed to sink in on so many levels.

There were many people who in the wake of 9/11 thought America might be besieged with all manner of attacks. There was an anthrax scare. There was talk of dirty bombs. There was even speculation of attacks using full scale chemical or nuclear weapons. 

In terms of its affect on the economy, however, all of that was miniscule compared to massive contraction in credit we saw after the fall of Lehman.

If people felt rattled after the events of 2001 – 2002, then you can understand how businesses might feel rattled after the historic collapse in consumer spending they just experienced.

I’d also like to point out how devastating the previous period has been in nominal terms, the terms that you debt is denominated in, that your leases are paid in and in the very short term at least, your employees are paid in.


When you look at the actual cash flow that businesses are facing, it didn’t turn negative year-over-year even in the face of everything that happened from 2000 to 2003.

This was the first period in the history of many companies when cash-flow took this type of hit.

Taxes, Health Care, indeed War and Terrorism, just don’t approach that in severity.