Have To Watch Both of Obama's Hands

President Obama and his economic team are performing a similar act, concentrating attention on their macroeconomic policies -- stimulus, deficits, growth rates, unemployment -- to distract attention from their microeconomic regulatory policies. It comes down to this: Borrow and spend to create jobs, regulate to destroy them.

The original $787 billion stimulus package is due for a supplement that will bring the total to around $1 trillion. Spending so far has created or "saved" between 1.7 million and 2 million jobs says Christina Romer, chairman of the President's Council of Economic Advisers, an economist who made her academic reputation by demonstrating that tax cuts rather than spending are the most effective anti-recession device. That was then, on the Berkeley campus; this is now, in her White House office.

Republicans argue that while stimulus dollars are being scattered around the country, the unemployment rate has risen to double digits.

Either because or in spite of stimulus spending, the borrowing, bailouts and overtime use of the printing presses by the Fed, the financial system is back from the brink. And the economy is recovering; witness among other things surprisingly buoyant Christmas sales, the rise in share prices and the recent spurt in mortgage applications.

But the pace of the recovery is not what it has been in the aftermath of past recessions. Blame government-created uncertainty. Small businesses -- the job-creating sector of the economy -- remain hunkered down: little hiring, little new investment.

In part this is because of the unwillingness of banks to lend, but in part it is because of the uncertainty entrepreneurs confront from what the president is doing with the hand he prefers you not to see.

The health care bill will raise the cost of doing business by raising insurance premiums -- and taxes on people in the bracket in which most entrepreneurs find themselves. Not exactly an inducement to risk taking and expansion.

Neither are the plethora of regulations streaming out of the agencies, or being considered with sufficient probability of enactment to give businessmen large and small pause before sinking billions into new projects.

The Federal Communications Commission wants to restrict cable companies' ability to charge heavy users of bandwidth, which makes those capital-intensive, job-creating businesses hold back until the courts decide whether the FCC has the authority to impose such regulations.

The Environmental Protection Agency is proposing tighter regulation of smog-causing pollutants. There is a debate over the likely effect of the new rules on health, but no question that they will prove costly. The EPA puts the cost to manufacturers and local governments at between $19 billion and $90 billion per year by 2020.

Because the Centers for Disease Control and Prevention says "the causes of asthma remain unclear," the EPA is on uncertain ground in claiming the new standards will reduce smog-related ailments and deaths.

The utilities put the cost of compliance at tens of billions of dollars annually. So far, White House regulatory czar Cass Sunstein has delayed the imposition of the new rules, but utilities have to hold back on investments in coal-fired plants until the situation is clarified. Which might just suit Vice President Joe Biden, who announced during the campaign that no coal plants would be built during an Obama administration.

Then there is gasoline at $3-plus per gallon, a drag on economic recovery. The president seeks relief from the Organization of Petroleum Exporting Countries cartel by talking of "energy independence," while Secretary of the Interior Ken Salazar decides to "improve protection for land, water and wildlife" by imposing new regulations that make it more difficult to develop oil and gas resources on 260 million acres of federal land.

In the offing are cap and trade and more emissions regulations that the states say will delay construction projects. Whether these are consistent with the nation's need to dig itself out of the recession and remain competitive in world markets, and whether the benefits are worth the cost -- the ultimate economic test -- are, to put it mildly, unclear.