This week the House of Representatives approved what I call the Un-Stimulus Package.  Revealingly, not one Republican member of the House voted in favor of it. Granted, many of these same Republicans voted for Bush budgets that were too big, too.  But better late than never.  I’m glad someone is standing up for common sense in federal spending.

My main objection continues to be this bill will not do enough to create new jobs.  In Thursday’s Washington Post, Martin Feldstein, a former economic advisor to President Reagan, made the same point:

http://www.washingtonpost.com/wp-dyn/content/article/2009/01/28/AR2009012802938.html?hpid=opinionsbox1

Here is how Feldstein put it:

“On the spending side, the stimulus package is full of well-intended items that, unfortunately, are not likely to do much for employment. Computerizing the medical records of every American over the next five years is desirable, but it is not a cost-effective way to create jobs. Has anyone gone through the (long) list of proposed appropriations and asked how many jobs each would create per dollar of increased national debt?”

I have.  And the answer is: not many.  Or at least: not enough.

I’m all for investments in infrastructure that will create jobs.  But that’s not what this bill is.

This is not change we can believe in…this is Washington politics as usual.

-Randy Hill

This week the stimulus package moves closer to becoming law.  As previously stated on this blog, Congress should start over.  But the attitude of Congressional leaders seems to be: “Don’t bother me with the facts!”  I’m not sure they even know what’s in the bill.  Fortunately, some members of the media have looked inside it.  And what they saw wasn’t pretty:

http://online.wsj.com/article/SB123310466514522309.html

In business, I’ve learned the difference between spending and investment.  Spending you pay for; investment pays for itself.  But the package being considered in Congress is almost entirely spending.  Here’s how the Wall Street Journal described it:

“Some $30 billion, or less than 5% of the spending in the bill, is for fixing bridges or other highway projects. There’s another $40 billion for broadband and electric grid development, airports and clean water projects that are arguably worthwhile priorities.  Add the roughly $20 billion for business tax cuts, and by our estimate only $90 billion out of $825 billion, or about 12 cents of every $1, is for something that can plausibly be considered a growth stimulus.”

In short, this bill is too much spending and too little investment.

Can Congress come up with a better plan?

Yes they can.

-Randy Hill

The good news is that Nancy Pelosi and Congressional Democrats seem to be reconsidering their plans to fund contraception services in the stimulus package.  Apparently, they couldn’t quite make the case that this would create new jobs:

http://www.cbsnews.com/blogs/2009/01/27/politics/politicalhotsheet/entry4756202.shtml

However, the bad news is that there is still a lot of pork getting cooked in this stimulus package.  More than $800 billion in new spending.  And yet so much of it will be wasted on programs that won’t create jobs.  In this present economic crisis, the test should be: will it create new jobs? Take a look at the list below of pork items that are currently in the stimulus package.  And ask yourself if any of these will create new jobs:

• $6.7 billion to renovate and improve energy efficiency at federal buildings
• $2.5 billion to upgrade low-income housing
• $1.1 billion to Amtrax
• $1.8 billion to repair National Park Service facilities
• $800 million to clean up Superfund sites
• $600 million for General Services Administration to replace older vehicles with alternative fuel vehicles
• $426 million to construct facilities at the Centers for Disease Control and Prevention
• $400 million for NASA scientists to conduct climate change research
• $400 million to replace the Social Security Administration’s 30-year-old National Computer Center
• $360 million for new child care centers at military bases
• $276 million to update technology at the State Department
• $200 million to rehabilitate the National Mall
• $150 million for the Coast Guard to repair or remove bridges deemed a hazard to navigation
• $50 million for the Endowment for the Arts
• $44 million for repairs at the Agriculture Department headquarters in Washington

-Randy Hill

This week Congress will vote on a stimulus package that, as I have previously written, is more package than stimulus.

Worse, I fear that this short term plan could do long term damage to the economy. And I’m not alone in this. In a recent edition of Forbes, economist Bruce Bartlett warns:

“Thus the argument really boils down to a question of timing. In the short run, the case for stimulus is overwhelming. But in the longer run, we can’t enrich ourselves by borrowing and printing money. That just causes inflation.”

http://www.forbes.com/2009/01/22/stimulus-keynes-taxes-oped-cx_bb_0123bartlett.html <http://www.forbes.com/2009/01/22/stimulus-keynes-taxes-oped-cx_bb_0123bartlett.html>

By pouring nearly a trillion dollars into the economy, we are almost certainly risking a rise in inflation. Why worry about inflation? Because inflation taxes everyone. When the price of goods goes up, we all pay for it.

That’s just another reason for President Obama to think through the stimulus plan before signing it. We don’t need a cure that’s worse than the illness.

-Randy Hill

“The question we ask today is not whether our government is too big or too small, but whether it works….”  With these words in his inaugural, President Obama spoke of a new post-partisan era in politics.  He vowed to judge programs on effectiveness, not ideology.

It turns out, he’ll soon get a chance to prove he meant those words.  Congress is making quick work of a stimulus package.  Let’s hope the president spends more time reviewing it than Congress did creating it:

http://www.nytimes.com/2009/01/23/opinion/23brooks.html

The stimulus plan is a grab bag of pork spending on everything from home weatherization to contraceptives.  And even the good parts of the spending aren’t that great.  According to David Brooks in today’s New York Times:

“…of the $30 billion devoted to highway spending, only $4 billion will be spent in the next two years. Less than $3 billion of the $18.5 billion for renewable energy and less than half the financing for school construction will be spent by 2011.”

I don’t see how the president can sign this bill if he meant what he said on Tuesday.  His test is effectiveness.  And this stimulus plan fails the test.  He should veto it and tell Congress to start over.  Now that would be real change!

-Randy Hill

As a business owner in the peanut industry, I share the concerns
about the recent salmonella scare.  The good news is the FDA is
fully investigating the scare and has already traced the salmonella
to one company: the Peanut Corporation of America.

I support the FDA’s actions on the PCA.  However, it’s important to
note that virtually all other peanut goods are perfectly healthy.

Here is a list of some brands that are safe and healthy for you and
your family:

ConAgra Foods (Peter Pan Peanut Butter)
The J. M. Smucker Company (including Jif)
Kraft Foods, Inc.
Mars Snackfoods US
American Blanching Company
Clasen Quality Coatings (CQC)
Confectionery coatings
Clements Foods Company, Inc.
Flavors “R” Specialty, Inc.
Girl Scouts of the USA (Girl Scout Cookies)
Golden Peanut Company
Hampton Farms
Harvest Manor Farms
Hearts&Minds LLC
Hubbard Peanut Company
Jimbo’s Jumbos
John B. Sanfilippo and Son, Inc
Peanut Butter & Co.
Producers Peanut Company, Inc.
Smart Balance
Superior Nut Company, Inc.
Universal Blanchers/Seabrook Ingredients
Virginia Diner

So don’t get overly concerned.  Peanuts and peanut products are good for you.

-Randy Hill

Yesterday was so unique in our country’s history. Everyone celebrated the inauguration of our first African-American president. And rightly so. An African-American man now resides in the White House–a building constructed with years ago with slave labor. But watching the press coverage, I could not help but notice something much more than that. There was something bigger than Obama.

I noticed that the voice of a nation was being heard loudly. But it was a particular voice that was heard. I was moved every time I saw an African-American interviewed about the meaning of the moment. We saw veterans, including some Tuskogee Airmen, talk about fighting for their freedom and for their nation. And we saw them overjoyed at the remarkable journey that took Barack Obama from Hawaii to Illinois to the White House.

In fact, yesterday wasn’t really about Obama; it was about America. This truly is the universal nation, where anybody can become somebody. And yesterday we showed that even the racism of our past can be overcome. Today, America is stronger than it was yesterday.

Obama represents more than our nation’s first African-American president. He represents the truth that America can accomplish anything. The keys to the door of freedom are always open to all here in America, this greatest of nations.

-Randy Hill

Today, our country and our world celebrate the inauguration of a
new president. Barack Obama’s journey’s to the White House is
remarkable. All Americans should be proud. But undoubtedly there is
a special pride for African-Americans.
http://www.politico.com/news/stories/0109/17680.html

Throughout our nation’s history, African-Americans have made enormous
contributions to politics, culture and business. Indeed, I own and
operate a business today that would not be possible without the
inventions of George Washington Carver more than a century ago.
Carver wanted to find a product other than cotton for the South to
produce. To encourage the production of peanuts, he invented more
than 105 recipes for the product. As a result, the peanut industry
took off. And years later, people like me are still reaping the
benefit of his investment.

So on this day, let’s celebrate America’s past and it’s future.
This truly is the greatest nation in history.

-Randy Hill

In recent days, reports have surfaced about peanut butter products having salmonella contamination:
http://admin.peanutsusa.com/documents/Document_Library/January%2017%20APC%20release%20update%20-%20final.pdf

As with any public health issue, people are rightfully feeling concerned about what they should and shouldn’t eat.  The cure for uncertainty is fact. So, as someone associated with the peanut industry, let me give you the facts.

First, 99.9% of peanut butter products are safe. And none of the affected peanut butter was sold at retail.  So if you see peanut butter on the shelf at your store, it’s safe. Besides, peanut butter is regulated and must pass FDA standards.  And the industry has a long track record of success.

Second, the recent salmonella scare has already been traced to one company in one part of the country.  A few products from the Blakely, Georgia plant of Peanut Corp of America have been linked to salmonella in three states.  PCA has already issued a recall of all its products produced at this plant in recent months.  And the FDA is investigating and has promised to release a list of safe peanut products.

What does all that mean for you?  It means you should not be worried. Retail peanut butter on grocery shelves is safe.  And the FDA will soon issue its list of safe products.  I call on both the FDA and the PCA to get to the bottom of this and release the results of the investigation as soon possible.

-Randy Hill

There’s an old saying, “the bigger the man, the smaller theoffice.”  I thought of that this week as I was touring the Wal-Mart Headquarters in Bentonville, Arkansas.  I glimpsed into retiring CEO Lee Scott’s office and was amazed at the simplicity and humble furnishings of it. This is, after all, the world’s largest and most successful company.  And yet the CEO’s office looks similar to the manager’s office at an old Gibsons store.  But then, if you know much about Lee Scott, this shouldn’t surprise you.

During Katrina, Lee sent out a message to all his store managers in the New Orleans area.  “A lot of you are going to have to make decisions above your level,” he advised. “Make the best decision that you can with the information that’s available to you at the time, and above all, do the right thing.”

In the face of a challenge, Lee chose to empower his employees.  What did they do with it?

They reached out to the community,  including a famous case where an employee took a forklift and smashed into a Wal-Mart warehouse to get water supplies for a nearby nursing home. “If government would have responded like Wal-Mart has responded,” said a local official during the Katrina aftermath,
“we wouldn’t be in this crisis.”

This is the Wal-Mart way: taking care of business by taking care of people.  I learned that again this week on my tour.  While I was there, Wal-Mart announced pay raises for its employees in a distrubition center.  Incredible.  Here we are in the midst of a recession and yet Wal-Mart has found a way to pay employees even more.

And did you know that Wal-Mart has special pharmacy trailers that are dispatched to fill prescriptions for people in need?  Some times at no charge.  This is a company that does well by doing good.

How do they do all this?  Through an unprecedented distribution system and through effective management.

Lee Scott may be leaving.  But his legacy will remain.  Wal-Mart will continue to be an organization that not only does things right, but does the right thing.

-Randy Hill

As Congress continues to consider a stimulus package for the economy, we now learn that that tax cut portion is down to $275 billion.
http://www.reuters.com/article/politicsNews/idUSTRE50E4P020090115?feedType=RSS&feedName=politicsNews&rpc=22&sp=true

As I have written before, we need more tax cuts, not less.  But we might want to think about some new ways of cutting taxes.  Consider this: Income inequality has grown in the past few years. For example, even though the economy grew from 2001 to 2006, the income of the median American did not rise at all. Even worse, the number of people in poverty rose by 5.4 million.

So how can we ensure that the economic recovery program reaches everyone?  How about dealing with payroll taxes. Did you know that today, four out of five taxpayers now pay more in payroll taxes than income taxes?

A tax credit for payroll taxes would put some much needed money into the pockets of all Americans and help fight income inequality.

Can we finally do something about payroll taxes?  Yes we can!

- Randy Hill

I’ve written a lot recently about the price of oil. It’s going down, and I think it’s going to go down even more. But that doesn’t mean oil is the answer to our longterm energy needs. It just means that this is the time to get serious about other energy sources.
http://www.bloomberg.com/apps/news?pid=20601082&sid=a.s66cZPC1jY&refer=canada

Meanwhile, a 2005 Harris survey found that three-quarters of all Americans (including 60% of Republicans) said that the environment must be protected regardless of cost.  Translation: people want cheaper energy and a cleaner environment.  Can we do both?  We can and we should.

But this is not only an energy and environmental issue we’re talking about.  It’s a national security issue, too.  Consider this:

Today, 80 million barrels of oil are consumed per day throughout the world. How much of that does the US produce?  Only 7.5 million. So where does the rest come from?  It comes from tough neighborhoods of the world, like Russia, Iran, and Saudi Arabia.

That’s not who I want to rely on for my energy supply.  And that’s why now is the time to re-think alternative energy.  The answer to our energy future?  It’s blowing in the wind.

-Randy Hill

Here is the problem with President-elect Obama’s spending plans: they add to another problem–the deficit.
http://www.breitbart.com/article.php?id=D95MEMU82&show_article=1

Since 1970, the federal government has run a deficit every year except for 1998-2001. As a result, all those deficits have added up to create a $10.7 trillion national debt.  But here is a stat that will get your attention: this year’s federal budget deficit will likely exceed the amount of the entire federal budget of the year 2000!

So President-elect Obama finds himself trying to wrestle with two difficult issues.  First, how to jumpstart the economy?  He wants to do that with a combination of new spending and tax cuts.  The second issue is how to keep a handle on the budget deficit.  Sadly, his answer to issue number one makes issue number two even harder to solve.  New spending will only increase the debt we will pass onto our children.

Here’s a novel idea: how about running the government like any business or family does?  Live within your means.  Don’t spend more than you have.  And get out of debt as fast as you can.

Now that would be change we could believe in!

- Randy Hill

After a brief increase, the price of oil has again fallen, this time to less than $39 a barrel.
http://apnews.myway.com/article/20090112/D95LIUJ00.html

Traditionally, economists would expect the price of oil to be up at a time like this: tension in the Middle East, talk of OPEC cutting production and the dispute between Russia and Ukraine. These factors often create market pressure that causes the price to rise. So what explains the continuing decline in price?

It’s common sense, really. Higher gas prices last summer reduced demand. People began to find other ways to get to work, maybe by car-pooling or taking the train. And lower demand lowered prices. It’s that simple. Meanwhile, economic uncertainty is effecting what economists call “market psychology” and keeping prices low.

I still believe we could see $20 a barrel before too long. And I repeat my plea: now is the time to think about alternative energy. Why wait until there is an oil crisis to begin thinking about other options?

Today is the time to start building tomorrow.

-Randy Hill

Remember when President Bush and Congress passed a $700 billion bailout package last fall?  Do you know where the money went?  You don’t?  Well, you’re not alone. The government doesn’t know either. Or at least it’s not telling.

The original plan was for the government to provide assistance to financial institutions so that credit would again become available.  But a new report from a government watchdog agency raises questions about how banks are using the money:
http://apnews.myway.com/article/20090109/D95JKCI80.html

Elizabeth Warren, a Harvard professer and the head of the Congressional Oversight Panel, announced that the Treasury Department did not fully cooperate with her investigation of where the money has gone.  When her committee asked specific questions about the money, Treasury “did not provide complete answers to several of the questions….”  Warren added: “For Treasury to advance funds to these institutions without requiring more transparency further erodes the very confidence Treasury seeks to restore.”

But don’t just blame Treasury.  Why didn’t Congress insist on reporting requirements when it loaned the money?  This is basic business.  If you loan someone money, you do so for a specific purpose, and you have guidelines on how and when the loan will work.

Why did Washington think that writing a $700 billion check with no transparency was a good idea?  Has anyone there ever worked in the business world? I guess that question answers itself.
-Randy Hill

Will Barack Obama touch one of the most important economic and most difficult political issues?

President Roosevelt signing Social Security Act of 1935 in the Cabinet Room of the White House.

Anyone serious about balancing the federal budget has to talk about entitlements.  Social Security and Medicare take up more than 40% of the federal budget.  And that percentage will continue to grow as the Baby Boomers retire.  Here is the fundamental challenge: there are not enough young workers to pay for retirees.  Today, there there are 3.9 workers for every retiree receiving Social Security of Medicare.  By 2030, there will be only 2.4 workers for every beneficiary.  I’m not a math expert.  But those numbers don’t seem to add up to me.

But even worse, the return on Social Security for young people is terrible. A worker born after 1970 can expect a return of 1 percent.  A worker born after 1980 can expect even less.

So if we can’t fund these programs for much longer, why don’t we reform them?  Ask George W. Bush.  He tried to create voluntary savings accounts for younger workers.  And the public, especially senior citizens, roundly rejected this idea.

In short, we face a classic Washington problem: we have a challenge, we know the solution, but politics and public opinion stand in the way.  We need some sort of private savings accounts for younger workers.  Let older folks stay in Social Security.  But give young folks a choice.  Even President Clinton generally supported this idea.  Will Washington finally get it right?

The New York Times reports that President-elect Obama wants to address entitlement reform.
http://www.nytimes.com/2009/01/08/us/politics/08obama.html?_r=1&hp

But how he addresses it will be the key? Will he cut benefits and raise taxes?  Or will he empower people with choices?

-Randy Hill

On Monday, I told you the good news about Obama’s stimulus plan: tax cuts.  Today I want to tell you about the bad news: spending.

http://www.realclearpolitics.com/articles/2009/01/fiscal_follies.html

According to reports, the President-elect wants to spend just under $1 trillion in his stimulus package.  To put that in perspective, that’s more than double the entire Defense budget.  Plus, the Congressional Budget Office is likely to soon announce that the current federal budget deficit is $950 billion.  So the President-elect wants to add another $1 trillion onto the $950 billion deficit we already have?

Who will pay for this?  You will and I will.  Eventually, Obama will have to raise taxes to pay for this.  But even worse, Obama seems to be forgetting the important link between interest rates and deficits.  The Federal Reserve Board, which sets interest rates, religiously watches the size of the budget deficit.  In the 1990s, when President Clinton worked with a Republican Congress to balance the budget, the Fed viewed that as a healthy sign for the economy and kept interest rates low.  Today, interest rates remain low, but only because the Fed is trying to breath life into the economy.  Once the economy turns around, the Fed might decide its time to raise interest rates, which will be another tax on you and me.

Obama is right to cut taxes.  And he’s right to spend some money.  But $1 trillion is too much.  We need a stimulus plan that not only spends dollars but makes sense.

-Randy Hill

The year 2009 begins with ominous signs about the economy.

Unemployment is rising; credit is still tight; and the housing market is still in a tailspin. What prescription can be prescribed to heal our ailing economy?

Today brings news that President-elect Obama will base much of his stimulus package on tax cuts. According to reports, Obama plans to offer tax incentives to both individuals and businesses. In fact, the level of tax cuts he’s talking about will be greater than the first two years of the Bush tax cuts that were the largest in history.   http://online.wsj.com/article/SB123111279694652423.html

I think this makes sense economically. Let’s put some more money in the consumer’s pockets and let’s help businesses grow and create jobs. I also think it makes sense politically.  People sometimes forget that John Kennedy cut tax rates in the early 1960s.  He did so largely on Keynesian grounds–that government should cut taxes during a recession.

But since Reagan cut taxes in the 1980s, Democrats have often found themselves on the wrong side of the issue.  That’s why it’s smart for Obama to try and reclaim it for his party.

Cutting taxes won’t heal the economy overnight.  But a good dose of it will start the healing process.

- Randy Hill