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A View from the Altar / How government uncertainty kills the economy year after year
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How government uncertainty kills the economy year after year

True story

Some friends of mine, I’ll call them the Joneses, got notified that the highway in front of their house was about to be widened. They wanted to do some home improvements, but they didn’t know whether their house would be condemned, so they waited.

After a few years, the guys from the highway department finally came and performed a survey for the new roadbed, and the stakes with orange tapes came within less than twenty feet of the Jones’ front door. “You can’t do this to our home,” the Joneses said. “Yes, we can,” said the man from DOT. It turned out that regulations allowed the highway department to bring the right of way to within a certain distance of a structure. He was outside that distance, so yes, the highway guy was right. They can do that to you if they want.

The Joneses protested. The distance to the right of way was ridiculously too short (which is true; I saw it.), and their house was at the outside of a major curve in the road. If a driver straightened out the curve, the car would come right through their house. The highway department said they’d think it over. Meanwhile, the little orange flags fluttered a few feet from their door and heavy equipment was clearing the right-of-way all up and down U.S. Highway 1.

My friends needed an answer. Their house was soon to be worthless.  They couldn’t live in it after the highway was widened.  They couldn’t sell it because the unknown future of the property made it off limits to the banks.  And they didn’t know whether they’d be paid for it.  They were stuck waiting on the government.

DOT continued thinking about it for a couple of years more. You can’t rush these things, I guess. Happy ending: Georgia DOT finally ruled in favor of the home owner. The highway department paid them for their unusable house. They built a new one on the back of their acreage and live somewhat less happily ever after.

This is a true story about personal friends. A simple yes/no decision took years. Even though they eventually got a favorable outcome, the delays interrupted their lives for — again — years.

Government-created uncertainty killing off American industry

Suppose you’ve got a business installing gasoline tanks for new gas stations. You could position your business well if you could buy a few tanks ahead of time and have them ready to go. However, suppose the EPA is considering new rules for leakage detection systems. The old system required double-walled steel tanks with float switches installed in the space between the tank walls to detect fluids leaking in. Now suppose they’re considering a change that would add a special coating on the inner liner. If you bought tanks now, the EPA might actually outlaw your inventory. So you send them a comment in the Federal Register saying that tanks bought to existing standards should be grandfathered in. The EPA says they’ll do that only for tanks that are already installed. Not knowing whether you can actually use the tanks, you decide not to buy at this time.

The tank builder sees his orders stop.  The gas stations can’t get built because the owners can’t comply with laws until they know what they are.  Then the guy selling steel sees his orders drop off. Then the tank builder lays off his machine operators and welders. Then the guy selling the float switches goes out of business. The whole economy around gasoline tanks comes to a total halt awaiting a decision from the EPA.  A little squad of bureaucrats at the EPA is holding up millions of dollars of commerce costing Americans thousands of job, but they neither know nor care.

I pick on the EPA because they’re an easy target.  But it’s not just the EPA. It’s taxation, safety regulation, license requirements, inspections, permits of every description, requirements for public hearings, zoning rules, laws about where you can post a sign… the list is without end. Businessmen can’t hire new workers because the money may or may not be needed to pay new taxes if the so-called Bush tax cuts aren’t extended. Even then, they’ll be extended for only two years, and there’s no guarantee after that.  Who would bet on a new business not knowing what his tax bill is going to be?

Energy

This climate of never-ceasing, government-caused uncertainty is inflicting severe damage on your local power company. You haven’t seen it yet because your lights are still on, but the day when things might go dark is getting closer.  Suppose your utility sees power demand slowly rising and existing power plants aging.   Before things get out of hand, they determine a new plant or two must be built.

Now consider the uncertainty:  They can’t build a coal-fired plant because they don’t know whether the EPA will provide the necessary permits, and even if they will, they can’t know for sure what the future environmental requirements might be. The utility might have to buy special, low-sulfur coal which might or might not be available at the price mandated by the Public Service Commission.  They might have to install scrubbers that require a lot of water, and the local water authority might or might not grant the water permits.  They might have to discharge water, and they don’t know if they can get discharge permits.  They might have to fill in a piece of swamp, and they don’t know if they can get the property to replace the “wetlands” somewhere else.  The uncertainties go on, and on, and on. Even if they do get one started, they might end up like the John Turk power plant in Arkansas, being sued until it’s unclear, even if the plant gets built, whether they’ll be able to operate it.

The list goes on.  They can’t build nuclear because they can’t be certain the NRC will license it.  They can’t be certain the government will honor its pledge to receive spent fuel. They can’t build hydroelectric dams because of environmental restrictions. They can’t build natural gas plants because they don’t know if they can get licensed to install the gas pipelines.  They can’t even put in the transmission lines to the plant because the lines might cut across the corner of a swamp.  They can’t build a plant burning garbage because the NIMBY people file a blizzard of lawsuits and claim the trash might someday contain dioxin which would poison everyone. And how do they convince a court that it won’t?

And just as with the gasoline tank example, power plant construction impacts much more than electricity supply. People who make and install motors, pumps, pipe, steel, wire, glass, concrete, erect buildings, operate cranes and forklifts are all affected.  Mechanics, technicians, electricians, engineers, admin people — they’re all out of luck and out of work. And then each of these has secondary effects. In an area where power plant construction is needed but cannot proceed, local economies suffer very real, very large losses.

Please get the point here: This is not uncertainty caused by business factors that businessmen can and should manage.  This is uncertainty that is 100 percent the fault of government meddling.

It’s everywhere

Multiply this uncertainty all across the entire economy in virtually every field of human activity. Every real-world business faces risks great and small. That comes with the territory of  entrepreneurship. Good entrepreneurs are the ones who can identify the risks, quantify them, engineer a way to overcome them, and build businesses that manage the problems economically. Free enterprise then rewards the bright, the diligent, and the brave with success and profit.  It’s how America is supposed to work.

But there is no way to quantify the threat posed by government. Any bureaucrat at any time may write a new rule that completely destroys your business, and you have no practical recourse.

If good business involves identifying and quantifying risks, and if there are risks which cannot be identified and measured, then what does a good businessman do?

He sits on the sidelines until conditions change.

And that’s what’s happening all over this country.

And that’s why we still have Great Depression-era levels of unemployment. The government is the biggest financial risk every businessman faces. The risk cannot be measured and cannot be managed. So the smart money either waits in a bank account somewhere, or it goes to China.

And if you’re looking for a job, this is the primary reason why you don’t have one.

And finally, if you vote for politicians that create more government rather than less, you deserve it.

otherbrothersteve@gmail.com

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