Opinion: Lack of Clarity Threatens Economic Recovery

(Feb. 1) -- In his budget proposal released today, President Barack Obama offers several specific proposals designed to boost jobs and the economy -- among them, tax cuts targeted at small businesses, an extension of the "Making Work Pay" tax credit and a break on small-business capital gains taxes.

While these programs might help, I'm worried that other actions and rhetoric from elected officials in Washington are undermining the recovery and jeopardizing what I feel could be a period of robust performance for equity markets and our economy.

It seems that each day brings a new set of criticism and blame directed at Wall Street and "big business." And a new set of plans and proposals. There's the bank tax plan to recoup TARP funds, which serves to punish and constrain the same institutions we need to participate in getting Main Street back on its feet. There's the continuing debate on health care. There's the cap and trade plan. The financial reform plan.

But what the economy needs right now isn't more fixes. It needs clarity -- in the form of targeted and effective regulatory, fiscal and economic policy that will allow American business to play its crucial role in the economic recovery.

As a small-business owner myself, in a highly regulated industry, I am hesitant to make long-range decisions as long as the following questions remain unanswered.

• Will my taxes rise significantly going forward?
• Will I be able to afford health care costs for my employees?
• Will government impose further regulation on my business, and how will it affect my ability to operate profitably?

Businesspeople must have the ground rules clearly defined, and know that impending reform will be constructive and beneficial without crippling their ability to grow, profit and, most importantly, hire. American ingenuity and risk-taking have always been the engine of American economic growth, and new rules must be developed within this framework instead of stifling it.

I truly believe there is a broad-based crisis of confidence among the private sector and all American people. And it is this crisis of confidence that is the biggest hurdle for our economy and financial markets.

Faith in our elected officials is non-existent. No longer does the public (all of whom are investors in some form or another) trust that those they have put in office have their best interest at heart, but rather only the simple, short-term goal of re-election.

As a nation, I feel we are drifting.

What we desperately need from Washington is a resolution of the health care debate in a way that does not impose unreasonable costs on small businesses.

We need regulatory reform that eliminates redundancies and shortfalls without hampering our nation's banks from contributing to economic growth.

And we need fiscal policy that is targeted, effective and limited.

I know that industry will lead economic recovery, as it has always done. The only question remaining is when Washington will stop playing political games, and instead take a supporting, constructive role, allowing economic recovery to happen.
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Neil Hennessy is president and chief investment officer of Hennessy Funds.