August 26, 2011

Uncertainty Causing Lackluster Economic Growth

Antony Davies

Senior Affiliated Scholar

The threat of increased regulatory requirements, combined with the threat of increased tax rates, as well as anticipation of the health care overhaul coming into effect in 2013 is causing businesses and consumers to sit on the sidelines.  

Consumers and business owners don’t want to make big ticket purchases or undertake new investments if the future is uncertain. To the extent that we even have growth in the upcoming year, it is going to continue to be lackluster because of uncertainty.

While there is some good news in the latest revisions of the second quarter GDP numbers, with our standard of living improving because the economy grew faster than the population, the bad news is that the growth is much smaller than we would expect coming out of a recession.

In the past three years, the economy has experienced more uncertainty – both due to random natural events, like the earthquake in Japan, and self-inflicted events, such as new fuel standards, new financial regulations and regulatory bodies, new health care taxes – than it has in decades.