Krugman's chart from here
Krugman posted a chart on the index of business indices. It shows the ups and down of business comfidence. What are businesses looking at? Oil risk. They are confident when oil imports are fairly stable, and oil prices change smoothly. They liked the stimulus up until the point that the stimulus spiked oil imports and drove oil rices near $100 in March 2010. Then businesses begin shutting down and we had the mini-collapse. The next round of indices will show this lowered confidence, and the Ceridian is picking it up early. The business indices are coincident indicators it seems.
Oil prices are the main driver in producer gains, prices paid over prices received. I thought this latest oil spike was the wake up call for the stimulators but they still hang in there. John Taylor focuses on the future deficit problem as the restraint on business, it is a secondary but important restraint. He is right that investment sensitivity to interest rates is biased upward because ot the ongoing struggle with long term debt in Congress. That problem is fairly obvious considering Congress is operating on a two week budget cycle at the moment.
The contradiction of our times is then demonstrated by this Thoma post, in two parts. Part one makes the correct claim that tax reductions do not reduce the deficit. But that backs John Taylor, though he doesn't admit it. Business know they are due for future taxes, very soon the chicken is coming home to roost on the issue. The realization is part of his lowered business confidence theory. Like most economists, one has to read John between the lines, economists are not really scientists. The second part of the Toma post is a repeat of Krugman, which demonstrates the Congress is scaring business with high oil imports, and Krugman hides this fact. That goes along with Menzie in using approximate math to demonstrate higher government multipliers. All sides in the debate are doing the same, running a hidden agenda.
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