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Dallas Fed: ‘Uncertainty is corrosive’

By Joel Gehrke
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Richard Fisher, president and CEO of the Dallas Federal Reserve, defended Texas’ economic record in a speech yesterday while blaming the poor national economy on “fiscal malfeasance in Washington.” Fisher implicitly responded to critics of presidential candidate Gov. Rick Perry, R-Texas, and took aim at President Obama and Congress for causing uncertainty among business owners and investors.

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Fisher contradicted three general arguments made by skeptics of the Texas economy. He explained that the oil industry does not prop up the state economy, noting that the education and health industries added the most jobs of any sector in Texas. The mining sector added the third greatest number of jobs to the state. Mining sector employees comprise a mere 2.1% of the Texas workforce; education and health industries account for 26% the jobs in the state.

“These are the facts, “Fisher said. You may select whichever metric you wish. Regardless, it is reasonable to assume Texas has accounted for a significant amount of the nation’s employment growth both over the past 20 years and since the recession officially ended.”

Even while adding jobs in such high-paying sectors, Fisher did acknowledge that 9.5% of Texan hourly employees “earned at or below the federal minimum wage,” but he used the statistic to identify the actual catalyst for the Texas economic boom:

“Jobs have been created for American workers in Texas in several different sectors, not just in the oil and gas and mining sectors. People have taken those jobs of their own free will, even though the jobs may not measure up to the compensation levels everyone would like . . . From this, I draw the conclusion that private sector capital and jobs will go to where taxes and spending and regulatory policy are most conducive to growth.”


Fisher rejected the position, prevalent at the Federal Reserve, that monetary policies would stimulate the economy by making it easier to get money in the market. Instead, he blamed government policies for stultifying the economy:

“Those with the capacity to hire American workers―small businesses as well as large, publicly traded or private―are immobilized. Not because they lack entrepreneurial zeal or do not wish to grow; not because they can’t access cheap and available credit. Rather, they simply cannot budget or manage for the uncertainty of fiscal and regulatory policy . . . It will be devilishly difficult for businesses to commit to adding significantly to their head count or to meaningful capital expansion in the United States until clarity is achieved on the particulars of how Congress will bend the curve of deficit and debt expansion.”

To conclude, Fisher called for the Obama and Congress to overhaul regulatory and taxation policies that he says discourage investment:

“The Committee of 12 and the president have an awesome task. Essentially, they must reboot our entire system of economic incentives and come forward with an updated tax and spending and regulatory regime that incentivizes businesses to invest in the United States and create jobs for American workers rather than gravitate to foreign shores . . . The sooner they get on it, the better. Uncertainty is corrosive; it is hurting job creation and capital expansion when we need it most.”

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