It's time to have an honest talk about "uncertainty" -- the B.S. complaint by Wall Street and corporations that they don't know what's going to happening in Washington; don't, therefore, know what to do; and are sitting on their hands and cash rather than (take your pick) expanding, hiring, investing.
Look, for example, at this story by John Melloy at CNBC.com about the latest from David Kostin at Goldman Sachs. In talking about the fiscal cliff, Kostin is quoted as saying, “We believe the uncertainty is greater this year than it was 12 months ago.” Because of that, he urges investors to get out of equities before the fiscal cliff hits, could hit, might be settled, or...well...Kostin/Goldman Sachs doesn't really know, that is, they/it are "uncertain."
There are two money quotes in a column by Betsey Stevenson and Justin Wolfers on Bloomberg about the extreme debt ceiling threat House Speaker John Boehner (R-OH) unilaterally decided to issue a few weeks (ht Mark Thoma):
Uncertainty impedes economic activity, but it's notoriously difficult to quantify those effects. They're just too complicated. In general, individuals and businesses cope with uncertainty by withholding investment, postponing hiring, and by holding more cash. If uncertainty gets really bad, like in a war, destruction of lives and assets is gambled on the chance of victory and a better future as refugees and wealth flee for safety. After the fact, it's impossible to accurately measure how the economy would have behaved without the uncertainty. This year, Congress has heightened economic uncertainty in many ways, some necessary and some unnecessary. Here are the major ones.
Yesterday, Senior Economist David Shulman cited two reasons for a weak forecast with a 9.5% unemployment rate at the end of 2011; 1) the "balance sheet hypothesis" of slow recovery from financial crises; and 2) "an extraordinary increase in policy uncertainty." “At present, business firms can only make the wildest guesses as to what corporate and individual taxes will be next year, and for that matter three years from now, what the cost of healthcare will be, whether or not there will be a revived cap and trade policy with respect to carbon emissions or whether the Environmental Protection Agency will step in with regulations of their own absent a statue and whether it will be easier or more difficult to hedge risks with financial derivatives.” He amplified his findings on his blog. Way to go David.