After Fiscal Cliff Deal, 'Uncertainty' Still Bedevils Business

There's no knowing what Congress might do next, meaning a murky economic outlook.

President Barack Obama gestures as he talks about the fiscal cliff negotiations during a news conference in the briefing room of the White House on Wednesday, Dec. 19, 2012, in Washington.

President Barack Obama gestures as he talks about the fiscal cliff negotiations at the White House in December.

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Even with all of these challenges in the future, one might argue that businesses just need to, in technical terms, suck it up. Isn't making investments that may not be profitable an essential facet of capitalism? Exactly how much "certainty" do companies want?

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Coming up with an objective measure of exactly when the landscape will be solid enough for businesses to ramp up investing again may be impossible. Rather, says one expert, the risk environment for any investment must simply slip below a certain unnamed threshold.

"There's different types of uncertainty," says Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management. In recent months, he explains, businesses and investors have mostly only seen negative uncertainty. "It's not the good uncertainty where there's the equal possibility of a pleasant surprise. It just seems like it could be OK or bad. It's no longer the case that it could be good or bad."

The deficit is one example of this. Jacobsen explains that, according to one economic theory, governments running deficits essentially "signal" future tax increases, as all of that excess spending has to be paid for at some point. The expectation of higher taxes can cause businesses and individuals to pull back. Coleman agrees that constant deficits have made manufacturers leery of investing.

"Companies don't make investment decisions on a dime. So if they see an unstable fiscal situation continuing ad infinitum, it's going to be a concern to them," says Coleman.

Still, there is no set threshold for when the deficit will be low enough to make businesses empty their coffers a bit.

It's also important to remember that Washington is not the only force acting upon business sentiment. If the economy were growing at 4 percent, the fiscal cliff discussion would likely have been much less panicked, as the threat to a more resilient economy would have been smaller. Likewise, says Jacobsen, regardless of how conciliatory lawmakers are feeling this year, businesses will look to their balance sheets in deciding their next moves.

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"What I think will get businesses to spend money is when they see revenues increasing," he says. "It's only when there's that prospective growth that it's going to actually entice them to put that money to work."

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