u. s. newspapers ( including the nation ’ s premier paper, the dallas morning news ) ; ( 2 ) a weighted count of tax - code provisions that are scheduled to expire ; and ( 3 ) the extent to which professional forecasters disagree with one another about future levels of inflation and government purchases. the baker - bloom - davis index begins in january 1985 and runs through the present. high values of the index signal an elevated level of economic policy uncertainty. from 1985 through 2007 – prior to the 2008 – 09 recession – the index has a mean of 94, and it exceeds 150 only 2 percent of the time ( one month in 50 ; just six times in over 23 years ). the index rose to above - average levels in the fall of 2007 and stayed at or above 94 – but below 150 – through the summer of 2008. then, between august and september 2008, the index nearly doubled, rising from 96 to 188. since september 2008, the index has at no time dropped below 100, and it has exceeded 150 on 31 occasions – more than half the time. it has soared above 200 twice : for two months in 2011, coincident with that year ’ s debt - ceiling debate, and in december 2012, when a compromise implementation of sequestration was being hammered out. it ’ ll be interesting to see what happens with the index in the wake of the past week ’ s developments ( or lack thereof ) in washington. the point is that starting with the collapse of lehman brothers in september 2008, economic policy uncertainty has been consistently high, and half the time it has been extraordinarily high. it ’ s difficult to prove “ beyond a reasonable doubt ” that this elevated uncertainty is causally related to the weak recovery we ’ ve experienced. but the hypothesis is surely sensible, the timing is certainly auspicious, and enough careful confirming analysis has been done to say that the preponderance of evidence favors the proposition that not just recent policy decisions, but also the manner in which those decisions were arrived at, have been a significant hindrance to economic expansion. the kinky stuff : monetary policy as to monetary policy, i would submit there are several links between monetary policy and economic uncertainty. first, though, some background. ordinarily, monetary policy works by influencing the current and expected near - term levels of short - term interest rates. once short - term interest rates hit zero, however, the fed turned to unconventional policies. by using massive purchases of

spending and keeping the monuments open to tourists. but in the u. s. we have another obstacle, the debt ceiling. this ritual battle, which we have fought at least 87 times since the end of world war ii, does not address the underlying imbalances at the root of our fiscal situation. nevertheless, we revisit it regularly and did so in february when congress actually approved raising the debt ceiling without a big fight. last time, you may recall, things did not go so smoothly. the stock markets wobbled, the international monetary fund ( imf ) issued warnings, and one of the credit rating agencies downgraded u. s. government debt. the debt ceiling may be well - intentioned and put in place to protect our children from our own and prior generations ’ excesses, but it has been completely ineffectual in stopping rising debt and may be contributing to the uncertainty that is holding up the recovery. u. s. debt held by the public has ballooned to 76 percent of gdp, up from 36 percent in 2007. the u. s. is nearing debt - to - gdp ratios not seen since the aftermath of world war ii. in contrast, mexico ’ s debt is relatively small, about 30 percent of gdp, although it too has increased, and is up from 20 percent in 2007. here in mexico as in the u. s., the recession worsened the fiscal situation by depressing tax revenues while spending rose. that said, the nations ’ trajectories are quite different. while the growth of u. s. government debt has temporarily slowed, longer - term factors are expected to push the debt - to - gdp ratio to 100 percent by 2038 from where it will likely continue rising. mexico ’ s debt - to - gdp ratio is projected to fall once the recently passed fiscal reform is fully implemented. this era of unprecedented liquidity and low interest rates has presented the u. s. with at least three great opportunities : one was to address the long - term fiscal outlook by reforming entitlement programs such as social security and medicare. we must create a balanced system that will prevent future liabilities from spiraling out of control. bis central bankers ’ speeches a second was to pass regulatory reforms to lessen the risk of future financial - market crises and ensure too - big - to - fail entities never again place the u. s. in a position where taxpayer funds must be used to bail out bad private - sector actors.