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Thursday, February 07, 2013

'How a Nation Got Snookered by a Phony Narrative'

The title of this column by Caroline Baum implies that the entire nation was "snookered" about uncertainty holding back the economy, but some of us tried to warn that the uncertainty argument was bogus. In any case, good to see people coming to this realization (see also "Things Serious People Believe"):

How a Nation Got Snookered by a Phony Narrative, by Caroline Baum, Commentary, Bloomberg: ... My interest is in a ... narrative ... created by the political class and business leaders, then dutifully promulgated by the news media, on the effect that “uncertainty” was having on the U.S. economy in the months leading up to the fiscal cliff.
Republicans in Congress claimed that businesses were sitting on cash, unwilling to invest until they knew what their tax rate would be next year... What’s more, raising taxes on “job creators” would bring the U.S. economy to its knees. Business leaders were only too happy to adopt the Republican talking points as their own. ...
Both business- and consumer-sentiment surveys bore out the depressed mood. The Business Roundtable’s CEO Economic Outlook Survey for the third quarter, released on Sept. 26, showed a plunge in expectations for sales, capital expenditures and hiring over the next six months. ...
Look at what happened in the fourth quarter, specifically in the three areas -- hiring, capital spending and sales -- covered by the CEO survey: ... The private sector added 675,000 jobs, making it the second-best quarter since the recession ended in June 2009. Business spending on equipment and software rose 12.4 percent annualized, the biggest increase since the third quarter of 2011. Business sales rose an annualized 4.2 percent (assuming no change for December), the strongest quarter of 2012. ... The same holds true for consumers. ...
Which brings me to the subject of uncertainty... Why not call it by what it really is, which is pessimism? When businesses say they aren’t going to invest because of uncertainty, what they mean is, they don’t think their investments will produce a substantial profit.
Uncertainty didn’t carry much weight in the fourth quarter. In fact, it looks like we got snookered by a euphemism that was ... an excuse to prevent an undesirable political outcome (tax increases)...

    Posted by on Thursday, February 7, 2013 at 01:11 AM in Economics | Permalink  Comments (39)


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