In February 2011, President Obama decried the fact that American companies were holding almost $2 trillion on their balance sheets. If only those companies would spend and invest those trillions in capital, the President argued, they would produce jobs and improve the lives of millions of Americans. Despite this prodding from President Obama to release the capital, it remains hostage.
It is likely that Obama will continue to try to spring the business capital loose, but there are no signs that he will succeed. The cause of the problem — “uncertainty” about taxes and regulation — is cited so often that it almost risks becoming one more political buzzword. In fact, there are very specific sources of uncertainty that Obama’s policies are currently exacerbating.
Businesses today, for example, do not know what the tax rules will be in the near future. A large number of tax provisions are set to expire on New Year’s Eve, with the result of much higher tax rates on individuals and businesses. President Obama has called for a multiplicity of tax code changes, but the only consistent theme is that the “rich should pay more.” How much more should they pay? If Obama is re-elected, it will depend heavily on his reaching a deal with House Republicans — if possible — whose contents are currently unknowable. And who are the rich? Even Obama’s own definition of this has changed.
The same fog of uncertainty clouds the regulatory field. Obama issues an executive order one day suggesting an in-depth review of the regulatory environment, and on another day adds thousands of new pages of regulations to the Federal Register. Even in my field of specialization, tort law, the Obama administration has introduced new and unnecessary uncertainty.
Under President George W. Bush, it was clear that if companies complied with the strict regulatory rules of the Food and Drug Administration and the National Highway Traffic and Safety Administration, they could not be punished in tort law lawsuits. On May 9, 2009, Obama put an end to that certainty with a letter to all federal agencies, dictating that, whenever possibly, their new regulations should be framed so as not to be allowed as defenses in liability cases. Now, even the strictest of regulations can be second guessed by juries in tort suits.
A plethora of uncertainty also exists with respect to labor rules and regulations. For example, there are new, unprecedented demands by the federal Mine Safety and Health Administration that businesses turn over employees’ most personal private health records. There is a new and unprecedented advisory from the Equal Employment Opportunity Commission limiting the ability of businesses to conduct criminal background checks of new persons they may wish to employ, lest they become subject to job discrimination lawsuits.
This panoply of uncertainty has caused many Wall Street Obama donors of 2008 to switch their financial support to Mitt Romney. Companies simply cannot operate effectively if their capital is held hostage to this much uncertainty. Obama wants to free it, but he keeps taking actions and giving speeches that make the uncertainty worse.
In a recent talk to corporate CEOs at the Business Roundtable, Romney said, “Government has to be the partner, the friend, the ally, the supporter of free enterprise.” If Romney’s message gives businesses the feeling of “certainty,” and he wins the presidential election, an incredible freeing of capital could result on January 20, 2013.
Victor E. Schwartz chairs the Public Policy Group at the Washington Office of Shook, Hardy & Bacon LLP. The views expressed are strictly his own and do not reflect the views of his firm or any client of the firm.
