So the Obama budget has arrived. And the reception has not been too good.
This week, the stock market reached its lowest point since the 1990s.
Think about that: ten years of stock market gains are gone.

This week, one of Obama’s biggest supporters on the internet criticized
his budget.  Andrew Sullivan, a right-of-center blogger who passionately
supported Obama for president, wrote this:

“If you believe, as I do, that withdrawing from Iraq won’t happen as
promised, then there is close to no actual spending restraint anywhere in
sight. We are being presented with what can only be described as a
massive increase in government spending and power with the only fiscal
balance being wringing much more money from the successful. The president
predicted a tight budget and spending control in his non-SOTU, and he
appealed to fiscal conservatives by promising a long-term attack on
entitlement spending. I see nothing here yet that fulfills that promise.”
http://andrewsullivan.theatlantic.com/the_daily_dish/2009/02/obamas-long-ter.html

The reality is, no president can balance the budget without reforming
entitlements.  And Democratic president is going to do that.  There are
too many powerful constituencies in the Democratic Party who won’t allow
it.

And so, as Obama promises more government, he doesn’t promise much in the
way of controlling spending.  In my line of work, that’s a bad business
plan.

-Randy Hill

There is something special going on at the College of Business Administration at Abilene Christian University. And I want to be a part of it.

If there is one word that defines the difference at the business department at ACU it is: entrepreneurship.  ACU now has a full-time entrepreneur-in-residence, Jim Porter.  Jim brings years of business experience, including successfully started two companies and being involved in the merger of 25 others.  As I’ve written before on this blog, innovation is creating or doing something new before there is a market for it.  ACU’s business school has certainly provided a fine example of innovation with its entrepreneur-in-residence concept.

There are even talks around town that Dr. Rick Lytle, the Dean of the College of Business Administration, is exploring the idea of an Entrepreneurial Incubator.  This is a great time for this project since I believe economic downturns are always fertile ground for new innovation and entrepreneurship.

And there are talks that COBA is exploring the possibilities of a Center for Global Ethics and Leadership. That’s a perfect fit since at ACU students are not only taught how to make a profit, but how to make a difference. In fact, students are taught that the two go hand in hand. I was reminded of how special this approach to business education is earlier this year when I was asked to speak at the ACU Leadership Summit:

Randy Hill YouTube Channel:  Hill Speaks on the topic of “Leadership” at ACU Leadership Summit

This is why I’m so proud of my alma mater.  Lots of schools talk about making a difference; my alma mater actually does.

-Randy Hill

The biggest shortcoming of the recently passed stimulus package is that it does little for the most important people in the economy: entrepreneurs.  So says a great article in this week’s Wall Street Journal:

http://online.wsj.com/article/SB123544318435655825.html

As readers of this blog know, I have long believed that entrepreneurs are the key to turning the economy around.  But does anyone around the president know that?

Here is what the Journal article said:

“At its best, the stimulus legislation is an immensely expensive attempt to restore what the U.S. economy has lost in the last few months. But the world is already moving on. The only way the American economy is going to regain its lost health and vitality is to lead the world into the future. Entrepreneurs are the only people who can get us there.”

Amen.  And that’s why so many colleges are beginning to move their business departments more in the direction of entrepreneurship.  My alma mater has an entreneuer-in-residence right now.  He brings his real world know-how into academia.  And the winners are the students who learn how their classroom knowledge can work in the corporate boardroom.

The bottom line is that economic downturns create opportunities for entrepreneurs.  So why not help the entrepreneurs create new ideas? I’ll have more to say on this in a few days when I unveil my first e-book devoted to this very topic.

-Randy Hill

Sometimes nice guys do finish first.  That certainly is the case for Bob Hunter.

http://m.reporternews.com/news/2009/feb/21/family-friends-help-open-hunter-welcome-center/

Most of us only dream about the kind of career Bob has had: college official, state representative, husband, father.  The thread that weaves these different aspects of his life together is his love for God and his love for Abilene Christian University.  And so it’s a perfect tribute that ACU opened a new building in his honor: The Hunter Welcome Center.  This past weekend, more than 700 invited guests, including 57 Hunter family members, were on hand for the festivities.  The new building is a $15.7 million 57,000-square-foot facility.  And as someone who was there for the opening, I can assure you it is a beautiful place.

Which is at it should be since Bob and his wife Shirley are beautiful people. As a college administrator, he helped transform his alma mater from a small college into a major university and was the driving force behind innovative ideas like Sing Song. As a state representative, he coordinated passage of the Texas Tuition Equalization Grant program, which has provided more than $1 billion to students to help them attend private colleges in Texas. And as a man, he simply has no equal.  His grace is matched only by his compassion.

This past weekend, I was proud to see Bob honored by the university he has honored so long and so well.

As a young student in the late 1980s, I was always impressed with the little man with such a possitive attitude that I often met as I crossed the campus heading to classes. Soon his optimistic personality began to rub off on me. When I graduated I took with me many things that I had learned durring my time at ACU.  One of those was the possitive attitude that I learned from Bob. Twenty years later, when asked how I am doing, I still tell people: Great! Never good, fine or ok. But great! Why?  Because that’s what Bob always says.

A few years ago I was invited to Austin for a meeting at the Capital with the Govenors office. Before the meeting I decided to stop by Bob’s office and pay him a visit. As I walked in the door I ask if Bob was in. From the back office I heard him say, “I hear a friendly voice.” Aand I thought to myself, “so do I.”

-Randy Hill

Last week, President Obama signed into law several hundred billions of dollars in new stimulus spending.  This week, we’re going to learn how he proposes to pay for it.  And as I have long predicted, the bill is coming due…and you and me are going to be asked to pick it up.

Obama plans to raise taxes.

http://www.washingtonpost.com/wp-dyn/content/article/2009/02/21/AR2009022100911_pf.html

Here is how the Washington Post described it:

“Obama also seeks to increase tax collections, mainly by making good on his promise to eliminate some of the temporary tax cuts enacted in 2001 and 2003. While the budget would keep the breaks that benefit middle-income families, it would eliminate them for wealthy taxpayers, defined as families earning more than $250,000 a year. Those tax breaks would be permitted to expire on schedule in 2011. That means the top tax rate would rise from 35 percent to 39.6 percent, the tax on capital gains would jump to 20 percent from 15 percent for wealthy filers and the tax on estates worth more than $3..5 million would be maintained at the current rate of 45 percent.”

My question is: does Obama really believe his own rhetoric about how bad this economy is?  If so, then why is planning to raise taxes? In times of economic stress, we need economic incentives to get businesses moving again.  Raising the capital gains tax, for example, does just the opposite since it says to a business owner that he will have to pay a higher rate for any capital gains he he gets for that year.

I’m all in favor of tax reform.  But this is not it.  We need tax policy that encourages growth, not one that discourages growth.

-Randy Hill

Longtime readers of this blog will know that I have long believed the price of oil could eventually reach $20 a barrel.  This week brings more evidence that it just might happen:

http://economictimes..indiatimes.com/News/Economy/Sliding_demand_pushes_oil_price_below_35/articleshow/4146420.cms

Right now, the price of oil has dropped to $35 a barrel.  Last summer the price reached $147 a barrel.  What explains this drop?  Now that we are in winter, less driving goes on and that creates lower demand.  Plus, the recession is impacting everyone’s willingness to buy.  So with demand down, the price has gone down, too.

Then why haven’t prices at the pump gone down?  You may have read a recent article about this very topic:

http://www.reporternews.com/news/2009/feb/15/crude-oil-is-getting-cheaper-but-gas-is-not/

The article confusingly claims that:

“A severe economic downturn has left U.S. storage facilities brimming with it, sending prices for the premium crude to five-year lows….So prices at the pump will probably keep going up no matter what happens to the benchmark price of crude oil.”

Huh?  The fact is the worldwide recession is impacting demand everywhere, not just here.  So eventually, the price of foreign oil will also come down, and with it, prices at the pump.

It’s the law of supply and demand.  And I still believe we are heading toward even an even lower price of oil.

-Randy Hill

I guess my “major” complaint about the sanctions leveled by the NCAA against ACU is the adjective “major.”

How can the NCAA look at the facts and decide these were “major” violations?  A Christmas party for international students?  Letting an athlete borrow a pair of running shoes? Someone getting a pair of socks as a gift at a church party?

This is “major”? No, this is absurd.

Let’s keep some perspective on this:

First, ACU is a Christian institution.  As such, it has close affiliations with many local churches.

Second, churches do charity.  All the time.  If an international student visits a local church, he/she is going to receive some hospitality.
Third, the NCAA rules covering recruiting are not as simple as some might think.  Here is how ACU Athletic Director Jared Mosley described it:

“The one thing I can say, and I’ve said this multiple times and been consistent, it’s a very complex issue, NCAA compliance. So there are opportunities to misinterpret or just not enough steps in your research to find out the exact approach or method in moving forward in certain situations.”
http://www.reporternews.com/news/2009/feb/15/qa-with-jared-mosley-acu-athletic-director/

So the combination of well-intentioned hospitality with confusing guidelines led to some “major” violations, according to the NCAA.

Here is what is a major violation: when your star quarterback is getting paid by a local backer’s car dealership for a job he doesn’t even do.  That was Rhett Bomar and OU.  And that was a major violation.  Giving out socks at a church Christmas party is anything but major.

Someone at the NCAA needs to learn the difference.

-Randy Hill

I’ve always agreed with Martin Luther King’s statement that the measure of a man is found not in times of comfort but in times of challenge.  I believe that’s true of organizations as well.

Take my alma mater: Abilene Christian University.  Few places mean more to me than ACU.  It’s where I went to school, met friends for life and found the girl of my dreams.  But that’s not to say it’s perfect.  You may have recently read about some problems in the athletic department:

http://www.iht.com/articles/ap/2009/02/13/sports/Abilene-Christian-NCAA.php

What’s interesting to me about this story is that ACU comes across in a good light, not a bad one.  ACU investigated itself, turned itself in and even disciplined itself.  And if you look at some of the violations, they certainly don’t seem so bad.  A Christmas party for international athletes who couldn’t return home? Come on.  On some of these violations, the NCAA should be saluting ACU, not sanctioning it.

Even in this challenge, my alma later looks like what it really is: a school that does things right and does the right thing.

-Randy Hill

So Senator Gregg decided not to become Secretary Gregg:
http://online.wsj.com/article/SB123447333424979131.html?mod=djemalertNEWS

I realize some will see this as another mistake by the Obama administration.  But I blame Senator Judd Gregg.  As a three-term senator who is well-versed on the issues, why is he just now discovering how bad the stimulus plan is?  If only he had been reading my blog the last few weeks, he would have known! It’s absurd for Gregg to use the stimulus as the reason he no longer wants to be Commerce Secretary.  The stimulus plan was just as bad a few days ago when he first signed on to join the Obama cabinet.

Here is what Gregg said in withdrawing his name from consideration:

“The bottom line is this was simply a bridge too far for me….The president asked me to do it. I said yes. That was my mistake, not his….I should have focused sooner…on the implications of being in the cabinet.”

In other words, Gregg wanted to be a cabinet secretary so bad that he didn’t bother to think about the philosophical differences he might have with a liberal president. That’s ridiculous.

But then, so is the number of Obama nominee’s who haven’t figured out how to pay taxes!

-Randy Hill

I believe free market enterprise is the best economic system in the world.

In fact, I believe it’s the only system.  But to work effectively, the free market depends on rational people making rational decisions and rational conclusions.  Being humans, we sometimes manage to mess with the effectiveness of the market by thinking and reacting emotionally rather than rationally.

I’ve previously written about the salmonella scare in the peanut industry.  The fact is more than 99% of all peanut products are perfectly safe. But some people continue to think emotionally.  Yesterday I was told of a man in Allendale, South Carolina, who went in a local convenience store to pick up a quick snack. When he presented his handful of items, which included a package of peanut butter crackers, the cashier immediately seemed alarmed and told the man “don’t eat that, it’s got peanuts in it.”  This is a perfect example of the public perception being influenced by emotions. I am not saying every small town convenience store in the country has cleared its shelves of products that could be on the list; I am saying 99% of all the products in all of the convenience stores across America containing peanut butter is safe.

Another example is the oil industry.  As I’ve been predicting, the price of oil continues to go down:
http://www.theaustralian.news.com.au/story/0,25197,25043297-12377,00.html

Today, a barrel of oil costs $35.  Yet gas prices at the pump have risen to about $1.80 This violates the law of supply and demand.  With inventories high and demand low, the price of gas should better reflect the price of oil.  What explains this discrepancy?  Emotional thinking.  Daily I have people comment that they think a barrel of oil will soon be back over $100 and many say they think it will happen this summer. What is the basis or economic indicator for these conclusions? Nothing! It’s all emotions and right now with all that’s going on in America: we’re letting our emotions get the best of us.

I encourage each one of you to go out today to your local Wal-Mart and buy some peanut butter. As you are driving look at the prices of gas and think back a year ago and realize that our country and economy will survive and we still may see gas prices below $1.00. And I think its going to stay cheap for a long time.

The free market system works best when rational people make rational decisions.  Come to think of it, the whole world works better that way, too.

-Randy Hill

Part of the Obama appeal in the Democratic primaries was that he was the anti-Clinton. Not only did he run against a Clinton (Hillary), he essentially promised to be different than another Clinton (Bill). This was a man who was going to “change the way Washington does business.” But this week, Obama showed some Clinton-like wordsmithing on his stimulus package.

Obama has repeatedly assured us this week that “this bill does not have a single earmark in it,” by which he means that specific money was not targeted to specific projects.  Except that there are earmarks in it:

http://apnews.myway.com/article/20090209/D968BMTO0.html

According to the Associated Press, the bill has:

“$2 billion for a clean-coal power plant with specifications matching one in Mattoon, Ill., $10 million for urban canals, $2 billion for manufacturing advanced batteries for hybrid cars, and $255 million for a polar icebreaker and other ‘priority procurements’ by the Coast Guard.”

Now, I’m not sure what to call money for a polar icebreaker.  If that’s not an earmark, then I don’t know what is.  In fact, this week Obama made a stop in Elkhart, Indiana to pitch his stimulus package.  And what did he say to the people of Elkhart? He said his stimulus plan would fund “roads like U.S. 31 here in Indiana that Hoosiers count on…..And I know that a new overpass downtown would make a big difference for businesses and families right here in Elkhart.”

So the people of Indiana will get some money out of the stimulus…just don’t call it an earmark!

-Randy Hill

Having trouble keeping up with what all is in the stimulus package?

Here is a useful comparison between the House and Senate versions of the stimulus legislation from the Associated Press:
http://www.google.com/hostednews/ap/article/ALeqM5j81g2abYnnR730DbzIZpkDsGPAJwD966UPL80

Since I’ve been somewhat critical of this plan, let me take a minute and point out a positive: renewable energy.

According to the AP, here is what the Senate version of the stimulus package proposes on energy:

“Senate — About $40 billion for energy programs, focused chiefly on efficiency and renewable energy, including $2.9 billion to weatherize modest-income homes; $4.6 billion for fossil fuel research and development; $6.4 billion to clean up nuclear weapons production sites; $11 billion toward a so-called “smart electricity grid” to reduce waste; $8.5 billion to subsidize loans for renewable energy projects; and $2 billion for advanced battery systems.”

I believe that now is the time to get serious about renewable energy. For both economic and national security reasons, we must find ways to create affordable, renewable energy right here in the United States.  The $8.5 billion in subsidized loans is a great way to generate interest and development in renewable energy.  I encourage Congress to keep this provision in the final bill.

Renewable energy is a great way to not only stimulate the economy, but build the future.

-Randy Hill

A funny thing happened on the way to passing the stimulus package. Congress can’t convince itself to pass it:

http://www.cnn.com/2009/POLITICS/02/08/congress.economy/index.html

It seems that the more people keep looking at this bill, the less they like it.  As previously stated on this blog, I support passing a stimulus bill.  Just not this one. The problem with this stimulus bill is that it doesn’t have enough stimulus but it leaves a big bill for our kids and grandkids to pay.  Here is how John McCain described it:

“We need to spend money on infrastructure and on other programs that will immediately put people to work. But this is not it.”

No, it’s not. What’s worse, it may end up hurting our economy more than it helps.  According to the nonpartisan Congressional Budget Office:

“…the long-term effect of that much government spending over the next decade could ‘crowd out’ private investment, lowering long-term economic growth forecasts by 0.1 percent to 0.3 percent by 2019.”

It’s not too late for Washington to do the right: scrap this bill and start over. We need a bill that will mean dollars for our economy and will make sense for our future.

-Randy Hill

These are tough times for our nation’s economy.  I know first hand.  This week, my company, Advanced Trailer & Equipment, announced a one-month pause of trailer production.  This pause will allow us to determine expected demand and have a better understanding of our customers needs for the year.

In other words, what we are doing reflects our company’s strength, not weakness.  We have plenty of trailers to meet our customers’ needs.  But now we can use this time of plenty to plan ahead for the rest of the year.

That’s what’s so great about the free market.  People ask: how will things turn around in our economy?  They already are turning around.  Businesses are adjusting; the markets are responding.  For example, housing prices are down.  So guess what’s starting to happen?  People are buying houses.  Wal-Mart cut prices.  And guess what happened?  Wal-Mart recently announced huge sales numbers.  The free market works.

But that’s not the only reason the free market works.  It also works because of the people who work in it.  I found this out again this week when I met with my team to give them the news.  I told them the truth: that we didn’t want to initiate a pause in production but that we needed to since we had so many trailers in stock.  Without exception, each member of my team took it well and promised to “be back” once we open production again.  One man even thanked me for “telling us the truth.”  What great workers!  What great people!  Want to know why we in America have the best economy in the world?  Because we have the best people in the world.

I know the free market isn’t perfect.  But it beats any other system out there. Companies like mine will adjust and adapt.  And we will survive and prevail.  So will our economy…and so will our country.

-Randy Hill

The January car sales numbers are in.  And they’re not pretty:

http://www.foxnews.com/story/0,2933,487748,00.html

Toyota down 34%
Nissan down 30%
Honda down 28%
Chrysler down 55%
GM down 49%
Ford down 40%

Here’s what I don’t get: it’s a 27-year low for the industry and
yet they continue to think that we will buy a $60,000 SUV with
a $12,000 discount? And if your lucky you might catch a one
week special financing of zero % for 36 months.

Who is going to buy a car with a payment of $1,333.00 per month? Last week
100,000 more Americans lost their jobs and now need to be added to the
“non” potential customers list.

How low must it go? Will the auto industry executives go down the
drain holding their invoices in their hands?  Do they realize they are
destroying their own industry?

- Randy Hill

“Tax cheaters cheat us all, and the [Internal Revenue Service] should enforce our laws to the letter.” So said Senator Tom Daschle a few years ago.  This week, he may be regretting those words.  After admitting he failed to pay $140,00.00 in taxes, Daschle has withdrawn his name as the President’s nominee to be Secretary of Health and Human Services:

http://www.ft.com/cms/s/0/3e08a8d8-f234-11dd-9678-0000779fd2ac.html?nclick_check=1

Daschle should have stepped aside.  No one should be rewarded with a plum government job after stiffing the government on that much in taxes.  But in Washington, there’s always more to the story than meets the eye.  There is no way Daschle withdrew on his own.  In fact, as late as Monday night he was fighting back.  So why did he change his mind on Tuesday?

My guess is President Obama told him to step aside.  Obama was the one who promised a break with the old ways of doing business in Washington.  And it was up to him to do the right thing and push Daschle aside.  I’m glad he did.  It was the smart thing to do.  More importantly, it was the right thing to do.

-Randy Hill

This week the so-called stimulus package heads to the Senate.  The House version was bad enough. But it seems the Senate intends to make it even worse:

http://online.wsj.com/article/SB123358404214039275.html

Here is how the Wall Street Journal described what’s going on in the Senate:

“Florida citrus growers, California wine growers and a range of agricultural interests are pushing a tiny change that would allow farmers to more quickly depreciate new fields. High-tech and pharmaceutical companies want to save billions in taxes by including a plan that would allow them to bring overseas profits back home at lower tax rates. Labor unions are pressing Congress to make sure that new government funding for green technology results in jobs with good pay and benefits for workers.”

Again, I raise the simple question: how much of this is going to create jobs? In my opinion, not much.  And notice who is able to get the Senate to include their provisions: big agriculture, the high-tech industry, pharmaceuticals.  These folks have money and that means they have lobbyists.  The rest of us don’t have lobbyists.

Funny, but I thought the new administration was going to be tough on lobbyists.

-Randy Hill

As readers of this blog know, I have long advocated that America reconsider its energy policy, both from an economic and foreign policy standpoint.  In terms of economic policy, we need to find as many sources of energy as we can to help diversify our energy supply and control our price.  In terms of foreign policy, we need to start weaning ourselves off of foreign oil since many our our biggest suppliers are also some of the world’s worst countries.

The good news is changes in the energy industry are already under way…right here in Texas:

http://www.dallasnews.com/sharedcontent/dws/bus/industries/energy/stories/DN-wind_30bus.ART.State.Edition1.470c803.html

According to the Dallas Morning News:

“The Public Utility Commission on Thursday assigned seven utilities to build pieces of a $5 billion transmission line project to bring West Texas wind power to North Texas and Houston.”

This is a great fit for our state since we have so much wind, especially in West Texas.  And it’s a great fit for our nation because it helps us create more energy diversification and independence.

At long last, the winds of change are beginning to blow in energy policy.  And that’s good news for our economy, our security and our future.

-Randy Hill