In today's fiscal debate, doubt about the future is the elephant in the room.

• Author: Farrell, Lawrence P., Jr.
• Position: President's Perspective

The prevailing incertitude in the defense industry about what to expect in the coming downturn speaks to the larger financial and regulatory problems facing the nation's economy at large.

The latest spate of gloomy economic news has produced the usual orgy of analysis, hand wringing and finger pointing. The focus has been on the puny job growth number for May--58,000 jobs added--and the anemic 1.8 percent first-quarter GDP number. In The Wall Street Journal, Martin Feldstein pointed out that two-thirds of that growth went into inventories rather than sales. That means that real sales growth is only 0.6 percent annually or 0.15 percent quarterly--essentially no growth at all. This unhappy news is further underscored by an increase in unemployment to 9.1 percent, a drop in manufacturing, weak sales reports and lowered consumer confidence.

The situation was not helped when the chairman of the Federal Reserve admitted that monetary policy has its limitations, and held out no hope of a third round of "quantitative easing."

Some analysts have pointed out the large financial reserves of businesses, estimated at $2 trillion, and wonder why corporations aren't hiring and expanding.

Much of the media's analysis has been pretty much on target. But many pundits have continued to ignore the elephant in the room. Why isn't the private sector showing signs that it is preparing for an economic upturn? More specifically, why aren't small businesses, which create seven of every 10 jobs, hiring? The entrepreneurs who create and innovate seem nowhere to be found.

The basic problem is that a business today looks at an uncertain future, especially when it comes to taxes and regulations. No business or individual today knows what the corporate and personal tax will be come 2013. Added to that is the apprehension surrounding the implementation of the latest healthcare legislation. The Wall Street Journal cited a recent survey by McKinsey & Co. in which 505 employers said they are likely to pursue alternatives to their current health insurance plan once the Patient Protection & Affordable Care Act takes effect in 2014. About 78 million people would be affected. This contradicts the president's assurance that "if you like your healthcare, you can keep it."

This only adds to the sense of uncertainty about the future.

Another regulatory overhang concerns the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This massive legislation is...