Barack Obama, the first teenage President of the United States, continues to inhabit a world frighteningly detached from economic reality.  Today he bemoaned that he loses sleep over the mounting deficit.  Cheeky doesn’t begin to describe this.  The deficit – at least $12 Trillion over the next decade – is entirely his fault, so in one sense it’s appropriate that it’s his sleep getting lost.  Singlehandedly creating an unimaginable and insurmountable $12 Trillion deficit and then whining endlessly like it’s somebody else’s fault, as Mr. Obama has done over the past month, truly puts him squarely in the class of delusion.

Tax increases won’t be necessary, according to Mr. Obama, because “robust economic growth” will obviate them.  Growth that can fully counteract deficits this large must be robust indeed.  But growth needs fuel, and the fuel is  an economic climate where taxes are low, government is reducing rather than increasing the regulatory burden, and there is certainty about the actions of the state.  At the moment our fuel tank is about empty.

Taxes are most assuredly not going anywhere but up.  Businesses are therefore expecting lower future profits, which makes them less likely to invest in new equipment, train new labor, and engage in risk-taking by developing new products.

The regulatory burden, if the left has its way, will become the envy of the former Soviet Union.  The current administration is salivating over the universe of activities over which they can exercise control now that the political time is right.  Companies with concerns in automaking, tobacco, and greenhouse gas emissions (to name only the most prominent) are expecting a tightening noose of regulations.  Regulations always result in lower economic efficiencies due to resources being directed away from their most productive use as determined by the free market.  Hence, increasing regulation always means less growth than would otherwise occur.

Uncertainty about governmental actions is often underestimated as an economic force.  If there was a 50-50 chance that the capital gains on the sale of your home would be taxed, would you put it up for sale or wait until you knew for sure so you could plan accordingly?  This is exactly the situation most business face today.  The Obama administration is like a drowning man, grasping furioiusly for anything that might float.  It is literally impossible to know what outrageous spending plan, bailout plan, tax plan, lending plan, borrowing plan, takeover plan, or any other plan, might surface next week, let alone next year.   In that climate, business decisions are riskier and therefore innovation is stymied.