Or, call me at: Fortune published a great article recently that highlights how important it is to the economy – and job growth – for the government to provide a consistent and predictable operating environment for business. From the article:
Dick Kelly wishes he knew what his industry should do. “If we had a national policy and knew what the rules were, we could take action,” says Kelly, CEO of Xcel Energy and chairman of the Edison Electric Institute, the association of shareholder-owned electric utilities. But Kelly’s industry knows only that momentous changes in the federal laws governing it are probably on the way; what those changes might be, and when they might happen, managers have no idea. So they “are holding up decisions,” Kelly says, on multibillion-dollar investments to convert old coal-fired power plants to natural gas. “Is there going to be a price on carbon?” he asks. “Will there be a timeline? Will we have to use a certain percentage of renewables?” No one knows, so nothing is happening.
Multiply the utilities’ experience across the economy, and we begin to see an important reason why growth is getting slower rather than faster as the recovery creeps along. When people aren’t sure what’s going to happen, they freeze. We all know it, and if you require validation of your instincts, check the scientific literature on “uncertainty paralysis.” When we’re unsure, we turn especially cautious.
Government has the power to change the rules in the middle of the game, businesses can only play by the rules they are given.
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For businesses to thrive and grow, and for entrepreneurs to feel comfortable about risking their capital on new investments, they need to know with reasonable certainty what the rules of the game are now and in the future. Sweeping new laws lead to myriad new regulations, any of which can be a game changer for a particular business. Fortune gives the example of the new Frank-Dodd financial services law passed recently. Not only does it contain 2300 pages of new laws, but now that it is “enacted, government agencies must write new rules to implement [it]“. Unelected bureaucrats, who can be highly unpredictable according to the article, can significantly add to the regulatory burden of a new law. This uncertainty has a negative impact on business:When I asked AT&T (T, Fortune 500) chief Randall Stephenson whether the new health care law might cause him to drop medical coverage for his employees, he did not say anything to reassure workers. “We don’t know exactly what we’ve got here yet,” he said. “But something will change.” McDonald’s (MCD, Fortune 500) recently said it might drop medical coverage for 30,000 employees because of a rule buried in the new law. Such surprises are only beginning.
The bottom line is, business is going to pull the money off the table until they know what rules they are playing by now and in the future – and the consequences until then will be slower economic and job growth. We aren’t saying that government shouldn’t regulate business, only that it should interfere only when necessary and do it as lightly as possible. If we want entrepreneurs to start new businesses and existing ones to invest in new initiatives that create jobs, we need to make sure the business climate is favorable and predictable.
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