Is Uncertainty Really Holding Back the Economy?
Uncertainty about health-care costs and taxes is the rallying cry of some business leaders who say they’re putting off hiring and expansion till they know what those expenses will be.
Just how much weight that argument carries pitted New Jersey Governor Chris Christie against hedge fund manager James Chanos on CNBC Tuesday.
“Business has complained, ‘we don’t have certainty.’ When does business ever have certainty?” said Chanos, founder of the hedge fund Kynikos Associates. “If we have certainty, you earn T-bill-rates [Treasury bill] of return in the market.”
Christie, a Republican who ousted Democratic incumbent Jon Corzine in November, countered: “You are talking about two different things. In the eight years that we had Ronald Reagan, we had the certainty of principle: He did not want to raise taxes, he was going to look to reduce spending, but he was not going to increase taxes on the people of the country.”
Christie said President Obama’s disposition is to raise taxes, although he maintains that the president isn’t certain of what action he’ll take on taxes either.
The New Jersey governor did acknowledge that the sluggish recovery is also a contributor to that fact that businesses are slow to move forward, hire and expand.
“Nobody could tell us that [exact taxes and costs] before,” said Chanos.
Chanos said that he thought managers were "punting" over the expenses issue. He also said that he doesn’t remember any business person coming on CNBC during the Reagan or Bush years complaining about uncertainty when their taxes were dropping and they were “getting more federal largesse” than anticipated.
“No one said: ‘I just can’t execute my business plan. There’s too much uncertainty.’ ”
Christie called Chanos’ reasoning a “fake argument. Business doesn’t have to worry about having too much money.”
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