Is Reduced Policy Uncertainty Responsible for Improved US Economic Fortunes?

Since economic policies materially affect the economy, uncertainty about future policy changes also affects the economy, since actors in the economy are uncertain about the outcomes of their current behavior and wish to avoid making costly mistakes. This can result in reduced economic output as key actors wait to make decisions as they await final policy decisions. Four months ago, Scott Baker and Nicholas Bloom determined that policy uncertainty was hurting the US economy, since so many policies were in doubt. These included the budget ceiling debates and regulatory and tax reforms. Now, they argue that public attention has moved from pending legislation onto the Republican presidential primaries, and this shift in attention away from pending policy changes is largely responsible for the increase in United States economic fortunes.

While I certainly agree with Baker and Bloom that economic policy uncertainty can be very detrimental to economic success, I am not sure that I entirely agree with their method of measurement for 'economic policy uncertainty'. Baker and Bloom rely on a formula in which half of 'economic uncertainty' is determined by the headlines in the popular press. Logically, the headlines have changed from 'economic uncertainty' to 'Republican presidential nominations', but I am not so sure that this shift signals increased certainty, rather it showcases the political showcase du jour. I feel as though they are stretching their hypothesis when tying the increased economic success in the past few months to increased certainty. Regardless of the current cause and effect, Baker and Bloom present an interesting graph showing declines of economic production in times of uncertainty.