Uncertainty remains prevalent despite economy’s recent turn 

Magicians succeed by waving or otherwise moving one hand, thereby distracting you from watching the hand that’s about to perform some trick.

President Barack Obama and his economic team are performing a similar act, concentrating attention on their macroeconomic policies — stimulus, deficits, growth rates, unemployment — to distract attention from their microeconomic regulatory policies. It comes down to this: borrow and spend to create jobs, regulate to destroy them.

The original $787 billion stimulus package is due for a supplement that will bring the total to around $1 trillion. Spending so far has created or “saved” between 1.7 million and 2 million jobs, says Christina Romer, chairman of the president’s Council of Economic Advisers, an economist who made her academic reputation by demonstrating that tax cuts rather than spending are the most effective anti-recession device. That was then, on the UC Berkeley campus, and this is now, in her White House office.

Republicans argue that while stimulus dollars are being scattered around the country, the unemployment rate has risen to double digits.

Either because of or in spite of stimulus spending, the borrowing, bailouts and overtime use of the printing presses by the Fed, the financial system is back from the brink. And the economy is recovering — witness among other things surprisingly buoyant Christmas sales, the rise in share prices and the recent spurt in mortgage applications.

But the pace of the recovery is not what it has been in the aftermath of past recessions. Blame government-created uncertainty. Small businesses — the job-creating sector of the economy — remain hunkered down.

In part, this is due to the unwillingness of banks to lend, but also it’s in part due to the uncertainty entrepreneurs confront from what the president is doing with the hand he prefers you not see.

The health care bill will raise the cost of doing business by increasing insurance premiums and taxes on people in the bracket in which most entrepreneurs find themselves.

The Federal Communications Commission wants to restrict cable companies’ ability to charge heavy users of bandwidth.

The Environmental Protection Agency is proposing tighter regulation of smog-causing pollutants. There is a debate about the likely effect of the new rules on health, but no question that they will prove costly.

There’s the battle now being fought about the handling of some 125 million tons of coal waste produced by power plants every year.

Then, there’s gasoline at $3-plus per gallon, a drag on economic recovery.

In the offing are cap-and-trade and more emissions regulations that the states say will delay construction projects. Whether these are consistent with the nation’s need to dig itself out of the recession and remain competitive in world markets, and whether the benefits are worth the cost — the ultimate economic test — are, to put it mildly, unclear.

Examiner columnist Irwin M. Stelzer is a senior fellow and director of the Hudson Institute’s Center for Economic Policy Studies.

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