The Spectacle Blog

The Cost of Uncertainty

By on 10.6.11 | 2:31PM

In Bloomberg View, the economists Scott R. Baker, Nicholas Bloom, and Steven J. Davis provide some intellectual backing for one of the GOP's most frequently repeated talking points: that policy uncertainty is harming the economy. Specifically, they believe that if there were as only as much uncertainty about future government policies today as there was in 2006, the economy would add 2.5 million jobs over 18 months. 

They measure policy uncertainty using three factors: "the frequency of newspaper articles that refer to economic uncertainty and the role of policy, the number of federal tax code provisions set to expire in coming years, and the extent of disagreement among forecasters about future inflation and government spending."

Here's the graph of uncertainty, as measured by that index: 

The authors don't claim that policy uncertainty is the only cause of the weakness of the recovery, nor do they say that reducing uncertainty will solve all our problems. But their article does point to the conclusion that getting rid of uncertainty would be low-hanging fruit for Congress. 

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