The most recent job report appears, on the surface, encouraging news for the U. S. economy. While the Federal Reserve and/or the President may, with support from much of the press, claim credit, the Wall Street Journal provides a more credible explanation, a minor change personnel of the ruling elite has created a “growth opening”. Regime uncertainty has been one of the major factors retarding investment and thus the accompanying employment. As summarized by the Journal, “American business has been hunkered down for years, even with a rising stock market and near-zero interest rates, because CEOs haven’t known what damage Washington might do next.” But now, “for the first time in years Washington may even have a growth bias.”
As Robert Higgs explains, ”Regime uncertainty pertains to more than the government’s laws, regulations, and administrative decisions. For one thing, as the saying goes, “personnel is policy.” Two administrations may administer or enforce identical statutes and regulations quite differently. A business-hostile administration such as Franklin D. Roosevelt’s or Barack Obama’s will provoke more apprehension among investors than a business-friendlier administration such as Dwight D. Eisenhower’s or Ronald Reagan’s, even if the underlying “rules of the game” are identical on paper. Similar differences between judiciaries create uncertainties about how the courts will rule on contested laws and government actions.”
While the change and the data provides some reason for optimism, much sustainable growth and prosperity is still much at risk. Due to the long period of near zero interest rates, many malinvestments from the two previous boom-busts have not been appropriately liquidated. More of a problem, with easy credit and fiscal misdirection of production much of what appears to be new investment is in reality new malinvestment.
