The Obama White House has created an uncertainty surplus as investors and corporations wonder what kinds of anti-business regulation the president might end up supporting.
This uncertainty is why we hear so much speculation about the economy moving toward recovery but not fast enough to create new jobs. Job creation requires investment and investment requires confidence. Even Wall Street adores certainty, and uncertainty over Obama's intentions is causing businesses to sit on their cash instead of plowing it back into the economy.
As of the end of March, non-financial companies in the U.S. were holding on to $1.84 trillion in cash, a staggering 26 percent increase from a year earlier. Even companies with good earnings are reluctant to convert those earnings into capital investment and hiring until they get a clear sense of the regulatory climate that's going to take root under Obama. And companies looking for signs of a pro-growth regulatory regime won't find any comfort in the president's apparent fondness for net neutrality regulation of the broadband Internet. Call it rent control for the Internet.
Like rent control, the changes being pushed like net neutrality by FCC Chairman Julius Genachowski with White House backing are almost confiscatory when it comes to broadband networks that are the backbone of the Internet in America.
Mr. Genachowski's "Third Way" plan for net neutrality regulation would force broadband operators to sell capacity on their networks to other companies, including rivals, at prices and conditions dictated by government regulators. You know where that leads: innovation is killed; stagnation and capacity shortages ensue.
By reclassifying broadband from an information service to a telecom service, the FCC would give itself sweeping powers to micro-manage America's broadband networks. Unlike the Bell telephone networks of yesteryear, these broadband networks were not built with government subsidies in the form of monopoly markets and guaranteed returns. They were built and financed by their entrepreneurial owners, at their own risk.
Interestingly enough, it was the last Democratic appointee as FCC chairman prior to Genachowski who cautioned against this very mistake. William Kennard warned a decade ago that reclassifying broadband as a telecom service would drag broadband into the "whole morass" of telecom regulation.
That morass runs deep. It's filled with regulations created in the 1930s that could only impede the light-speed broadband technology of the 21st century. Those regulations shaped the clunky, government controlled marketplace once known as "the Bell System."
In that world prices and service offerings had to be approved by the FCC and 50 state regulatory commissions. The system forced business and long distance callers to pay inflated rates that subsidized basic home phone service, just as urban and suburban customers are still forced to subsidize rural customers.
Recently, Verizon and Google put their heads together and came up with a substantive proposal for Congress and the FCC to consider that would protect consumers and the open Internet while providing much needed regulatory certainty to the market. While the Verizon-Google proposal is clearly a step in right direction, the chairman's proposal would reverse America's hugely successful and bipartisan approach of minimal regulation of the Internet. Reversing that policy now would be a prescription for scaring off the billions of dollars being invested annually in broadband infrastructure and new applications. This investment has made the U.S. broadband market the most innovative in the world.
Our continuing private investment in broadband is one of the most hopeful aspects of the current economy. Discouraging that investment with net neutrality regulation would be an unforgivable setback for American broadband. It would also confirm the worst fears about the president's intentions towards business.
Steve Forbes is CEO of Forbes Media.
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Steve Forbes is Chairman and Editor-in-Chief of Forbes Media and co-author of Freedom Manifesto: Why Free Markets Are Moral and Big Government Isn’t (Crown Business)