At National Review, Josh Barro argues that it’s inconsistent to oppose raising the debt ceiling and at the same time criticize the Obama administration for creating policy uncertainty, because hitting the debt ceiling creates a number of uncertainties:
But there are other ways that the debt limit fight certainly creates uncertainty. The biggest unknown is this: if we get to early August without an increase and Treasury starts selectively delaying payment of bills, what will go unpaid?
Will the government shut down infrastructure projects, as happened in California during a 2010 budget impasse? That risk may be discouraging investment in the construction industry. Will national parks shut down? That risk might be discouraging investment in tourism. Will federal workers be paid with IOUs instead of cash? That is a relevant risk for any person considering investment in the federal worker-heavy Washington area. The possibility that Social Security checks could be delayed is a worry for any business that caters to seniors. And so on.
The idea that uncertainty could become a significant economic drag, though, began with the Great Depression historian Robert Higgs and the concept of Regime Uncertainty. Higgs’s argument, crudely, is that in times of crisis it’s possible for businessmen and investors to face enough uncertainty about the overall system of government that they delay or cancel business plans. For example, surveys from the Great Depression indicated that a signifcant number of businessmen feared that the U.S. really was becoming a fascist state.
Higgs’s arguments may not be persuasive or applicable. And many of the current strains of uncertainty-theorizing are simply overblown or irrelevant. But there’s a reason that uncertainty is a conservative concept in the first place.