Wednesday, April 28, 2010
Factoids That Your Can Use
The latest circulation numbers for the newspaper industry continue the death march toward certain bankruptcy. What makes it newsworthy is that the day is drawing nearer when newspapers will no doubt come to the altar of government subsidy to remain afloat. There simply is no other way for the industry to survive. If that sounds overly pessimistic, consider these numbers from the latest report by the Audit Bureau of Circulations, a non-profit organization that verifies circulation data. Overall, the industry lost 8.7 percent of its readers during the past six months. The litany of losers included the nation's largest newspapers. The San Francisco Chronicle's circulation fell 23 percent. The Washington Post declined 13 percent. The New York Times dipped 8.5 percent. The Chicago Tribune shed 9.7 percent. The Dallas Morning News plummeted 21.4 percent. These latest figures might not be so deflating if it wasn't for the fact that the circulation declines have piled one on top of another for years. Among the nation's largest newspapers, only The Wall Street Journal increased readership, registering a meager 0.5 percent gain. Meanwhile, the industry's top executives are pinning all their hopes for revival on economic recovery and online editions of their same tired, old product, while clinging to an outdated business model. It's a giant miscalculation that spells certain doom for a once thriving industry.
Monday, April 26, 2010
Democrats' Weapon: Immigration Illogic
Arizona's new immigration law has ignited a predictable storm of protest from Mexico to the White House. The heated rhetoric has a familiar ring that threatens to drown out any chance for sensible immigration reform. The blame rests squarely on the Democratic Party, which is spoiling for an issue to reinvigorate its base.
To listen to the vociferous critics of Arizona's law, the measure is unfair. For one thing, it gives police the right to ask about a person's immigration status. The law also makes it a crime to be in the country illegally. People can actually be arrested and fined for breaking that law. Imagine that!
Even before the governor signed the law, special interest groups howled. The Mexican American Legal Defense Education Fund vented. The National Coalition of Latino Clergy and Christian Leaders Legal Defense Fund protested. Even the Senate in Mexico got into the act, unanimously approving a resolution urging a veto of the new law. Never mind that it was interfering in a sovereign nation's affairs.
Never one to waste a crisis, the President weighed in. He called the bill "misguided" and instructed Attorney General Eric Holder to determine if the new law passes muster with the U.S. Constitution. By his comments, Obama signaled that he wants this issue to be about race and human rights. Immigration reform is just the cover on this sordid chapter of politics as usual.
Lost in all the rancor and hand wringing is an issue of national importance. The tide of illegal--underscore that word illegal--immigration from Mexico is swamping state resources, increasing crime and serving as a channel for smuggling both drugs and humans. In Phoenix alone, police reported 357 extortion-related abuctions in
2007. How long must Arizonans wait for the federal government to address the problem? That is the issue. However, do not expect the Administration or Democrats to mention rising crime, porous borders or wanton disregard for U.S. immigration laws.
The Democrats and their media allies will spin this to be about racism, jingoism, fear and the abuse of poor, hard-working Mexicans. They will obfuscate the facts and turn this into a war against the police state tactics of border states, like Arizona, who are paying for decades of federal government ineptness in dealing with the flood of illegal immigrants. Republicans must re-frame the debate in a way that will force Democrats to deal with the facts, instead of playing politics.
Here is what immigration reform should be about:
1. The U.S. has immigration laws for good reasons, chiefly to protect the country from undesirables and to preserve our security. Through decades of neglect, the federal government looked the other way while millions of Mexican migrants crossed illegally into the country. These illegal aliens were embolden because they had no fear of prosecution. What started as a drip has turned into a tidal wave. The country cannot pretend to have immigration laws that apply to all foreign nationals, except those from Mexico. Now is the time to deal with the issue. There should be a national policy that applies to all immigrants equally and without exception.
2. There are an estimated 10.8 million illegal immigrants living in the United States, the overwhelming majority from Mexico. An estimated 460,000 reside in Arizona alone. The Democrats would like nothing more than to make the debate about the illegals here now. They see the millions as captive voters for a lifetime. Democrats, joined by the churches, will wail about the unwelcoming nature of those who want to keep illegals out of the country. They will raise the spectre of mass deportations. Fear mongering will reach new heights. But these arguments should be non-starters. The fact is that the United States accepts more LEGAL immigrants every year than any country on earth. We were built by immigrants. We are a nation of immigrants. Americans' willingness to welcome others is unquestioned. For example, Mexico's immigration policies are much more restrictive than the United States. If the Democrats want to make this about fairness, then it is only fair for everyone to obey the law.
3. There would be no problem of illegal immigration were it not for the sorry condition of Mexico. Corruption pervades every segment of business, society, unions, the government, the justice system and the police. A few powerful families control most of industry. Opportunity suffers. Is it any wonder its citizens are fleeing? Some have the gall to blame the lure of U.S. jobs as too great for Mexicans to pass up. Apparently, the country on our northern border has no such issue. Canadians are not illegally scrambling across the border to snap up American jobs. This is a Mexico problem that U.S. law enforcement and American taxpayers have inherited. That's why a one-country solution to illegal immigration will not work. Mexico must be forced to do its part.
Expect the immigration debate to rage throughout the summer. It is in the best interests of the President and his party to keep fanning the flames of discontent. They desperately need an issue for the November elections. Right now everything seems stacked against the party, including a tepid economy, persistent unemployment, towering federal deficits, unpopular Health Care reform and a sour public mood. Illegal immigration offers Democrats the political liferaft they need.
However, it is a serious miscalculation on their part. The President's rhetoric, notwithstanding, the issue is a powderkeg that is likely to explode in the faces of the Democratic Party. As demostrations unfurl across the U.S., it will become abundantly clear to many outside the party that Democrats care more about people who have broken the law than they do about those who are forced to live with the consequencies of the government's incompetence.
To listen to the vociferous critics of Arizona's law, the measure is unfair. For one thing, it gives police the right to ask about a person's immigration status. The law also makes it a crime to be in the country illegally. People can actually be arrested and fined for breaking that law. Imagine that!
Even before the governor signed the law, special interest groups howled. The Mexican American Legal Defense Education Fund vented. The National Coalition of Latino Clergy and Christian Leaders Legal Defense Fund protested. Even the Senate in Mexico got into the act, unanimously approving a resolution urging a veto of the new law. Never mind that it was interfering in a sovereign nation's affairs.
Never one to waste a crisis, the President weighed in. He called the bill "misguided" and instructed Attorney General Eric Holder to determine if the new law passes muster with the U.S. Constitution. By his comments, Obama signaled that he wants this issue to be about race and human rights. Immigration reform is just the cover on this sordid chapter of politics as usual.
Lost in all the rancor and hand wringing is an issue of national importance. The tide of illegal--underscore that word illegal--immigration from Mexico is swamping state resources, increasing crime and serving as a channel for smuggling both drugs and humans. In Phoenix alone, police reported 357 extortion-related abuctions in
2007. How long must Arizonans wait for the federal government to address the problem? That is the issue. However, do not expect the Administration or Democrats to mention rising crime, porous borders or wanton disregard for U.S. immigration laws.
The Democrats and their media allies will spin this to be about racism, jingoism, fear and the abuse of poor, hard-working Mexicans. They will obfuscate the facts and turn this into a war against the police state tactics of border states, like Arizona, who are paying for decades of federal government ineptness in dealing with the flood of illegal immigrants. Republicans must re-frame the debate in a way that will force Democrats to deal with the facts, instead of playing politics.
Here is what immigration reform should be about:
1. The U.S. has immigration laws for good reasons, chiefly to protect the country from undesirables and to preserve our security. Through decades of neglect, the federal government looked the other way while millions of Mexican migrants crossed illegally into the country. These illegal aliens were embolden because they had no fear of prosecution. What started as a drip has turned into a tidal wave. The country cannot pretend to have immigration laws that apply to all foreign nationals, except those from Mexico. Now is the time to deal with the issue. There should be a national policy that applies to all immigrants equally and without exception.
2. There are an estimated 10.8 million illegal immigrants living in the United States, the overwhelming majority from Mexico. An estimated 460,000 reside in Arizona alone. The Democrats would like nothing more than to make the debate about the illegals here now. They see the millions as captive voters for a lifetime. Democrats, joined by the churches, will wail about the unwelcoming nature of those who want to keep illegals out of the country. They will raise the spectre of mass deportations. Fear mongering will reach new heights. But these arguments should be non-starters. The fact is that the United States accepts more LEGAL immigrants every year than any country on earth. We were built by immigrants. We are a nation of immigrants. Americans' willingness to welcome others is unquestioned. For example, Mexico's immigration policies are much more restrictive than the United States. If the Democrats want to make this about fairness, then it is only fair for everyone to obey the law.
3. There would be no problem of illegal immigration were it not for the sorry condition of Mexico. Corruption pervades every segment of business, society, unions, the government, the justice system and the police. A few powerful families control most of industry. Opportunity suffers. Is it any wonder its citizens are fleeing? Some have the gall to blame the lure of U.S. jobs as too great for Mexicans to pass up. Apparently, the country on our northern border has no such issue. Canadians are not illegally scrambling across the border to snap up American jobs. This is a Mexico problem that U.S. law enforcement and American taxpayers have inherited. That's why a one-country solution to illegal immigration will not work. Mexico must be forced to do its part.
Expect the immigration debate to rage throughout the summer. It is in the best interests of the President and his party to keep fanning the flames of discontent. They desperately need an issue for the November elections. Right now everything seems stacked against the party, including a tepid economy, persistent unemployment, towering federal deficits, unpopular Health Care reform and a sour public mood. Illegal immigration offers Democrats the political liferaft they need.
However, it is a serious miscalculation on their part. The President's rhetoric, notwithstanding, the issue is a powderkeg that is likely to explode in the faces of the Democratic Party. As demostrations unfurl across the U.S., it will become abundantly clear to many outside the party that Democrats care more about people who have broken the law than they do about those who are forced to live with the consequencies of the government's incompetence.
Thursday, April 22, 2010
Earnings Offer False Hope Of Economic Recovery
It's the earnings season when businesses report their first quarter results. News media headlines have trumpeted the growth in net income or profits at most firms. However, don't be deceived by the dunderhead news reporting. Upon closer examination, most of America's bellwether companies are improving profits by reducing head count, cutting operations and selling off under performing assets. That's hardly a prescription for growth. In fact, its a further sign that economic recovery is a long way off.
If you look beyond the profits, there are troubling signs at many firms. Revenues have fallen or remained flat when compared to the first quarter of last year. Considering that 2009 was an economic disaster, that's not a healthy indicator. When businesses expand, revenues rise along with payrolls and investment. The lack of growth underscores what many already suspect: the economic recovery has stalled.
Another sure way to assess the health of businesses is to look at investment. Are these companies plowing money into their operations to increase output for the future? The answer is a resounding "NO!" A quick check of most big publicly traded firms shows these businesses are hoarding cash. This indicates that these firms have no faith in a strong economic recovery anytime soon. If they believed that recovery was just around the corner, they would be pouring money into things like research, development, infrastructure and new equipment. It's not happening.
To be sure, there are exceptions to the first quarter trend. Apple, Inc. and Goggle both reported strong revenue growth of 49 percent and 23 percent, respectively. But neither is considered a bellwether company that accurately reflects the overall economy. They are high-tech players with proprietary products. A closer look at companies who depend heavily on consumer spending for growth reveals another story.
For example, Emerson Electric's sales were down seven percent. Jack in the Box sales fell 11.1 percent. Coca Cola's sales gained a paltry three percent, but all of the revenue growth came from overseas. AT&T's revenues were flat. KB Homes sales plummeted 14 percent. The list goes on and on. Firms that sell directly to businesses have suffered the same fate. For example, John Deere & Company revenues were down six percent. Caterpillar sales plunged 11 percent. IBM reported a five percent gain in revenues, but when adjusted for the impact of foreign currency, sales were flat. FedEx revenues dove 20 percent.
Wall Street is starting to notice. The indices have taken a hit in recent days. Until business revenues start showing signs of life and investment grows, don't expect the markets to rebound sharply. There may be temporary upticks, fueled by excessive optimism, but in the end, the experts will see earnings for what they are: a lot of bread, lettuce and tomato, but hardly any beef.
If you look beyond the profits, there are troubling signs at many firms. Revenues have fallen or remained flat when compared to the first quarter of last year. Considering that 2009 was an economic disaster, that's not a healthy indicator. When businesses expand, revenues rise along with payrolls and investment. The lack of growth underscores what many already suspect: the economic recovery has stalled.
Another sure way to assess the health of businesses is to look at investment. Are these companies plowing money into their operations to increase output for the future? The answer is a resounding "NO!" A quick check of most big publicly traded firms shows these businesses are hoarding cash. This indicates that these firms have no faith in a strong economic recovery anytime soon. If they believed that recovery was just around the corner, they would be pouring money into things like research, development, infrastructure and new equipment. It's not happening.
To be sure, there are exceptions to the first quarter trend. Apple, Inc. and Goggle both reported strong revenue growth of 49 percent and 23 percent, respectively. But neither is considered a bellwether company that accurately reflects the overall economy. They are high-tech players with proprietary products. A closer look at companies who depend heavily on consumer spending for growth reveals another story.
For example, Emerson Electric's sales were down seven percent. Jack in the Box sales fell 11.1 percent. Coca Cola's sales gained a paltry three percent, but all of the revenue growth came from overseas. AT&T's revenues were flat. KB Homes sales plummeted 14 percent. The list goes on and on. Firms that sell directly to businesses have suffered the same fate. For example, John Deere & Company revenues were down six percent. Caterpillar sales plunged 11 percent. IBM reported a five percent gain in revenues, but when adjusted for the impact of foreign currency, sales were flat. FedEx revenues dove 20 percent.
Wall Street is starting to notice. The indices have taken a hit in recent days. Until business revenues start showing signs of life and investment grows, don't expect the markets to rebound sharply. There may be temporary upticks, fueled by excessive optimism, but in the end, the experts will see earnings for what they are: a lot of bread, lettuce and tomato, but hardly any beef.
Friday, April 16, 2010
Old Wines
Seniors like to think they age like fine wines, getting better with each flip of the calendar. Putting that aside for a minute, it sparked an idea. Why not fine wines for seniors? Here are a few suggestions:
1. Port au Potty: hints of prune with a fiber finish.
2. Pinot Moore: acts as a diuretic and pours easily.
3. Bore Dough: a bread like bouquet but not very interesting.
4. Pinot Grease: oils the joints from the first taste.
5. Brut: packed with steroids and won't be bullied by food.
6. Cabernet Frank: a bold wine that will leave you feeling gay.
7. Mall Back: goes best with elevator music with many happy returns.
8. Blanc Stare: soothing finish that leaves you mysteriously sanguine.
9. Champain: leaves an aching feeling that tingles your dormant taste buds.
10. Ries Ling-Ling: wakes up your palate as you reach for the phone.
You could probably add your own contributions to the list. Feel free. They can't be any worse than mine!
1. Port au Potty: hints of prune with a fiber finish.
2. Pinot Moore: acts as a diuretic and pours easily.
3. Bore Dough: a bread like bouquet but not very interesting.
4. Pinot Grease: oils the joints from the first taste.
5. Brut: packed with steroids and won't be bullied by food.
6. Cabernet Frank: a bold wine that will leave you feeling gay.
7. Mall Back: goes best with elevator music with many happy returns.
8. Blanc Stare: soothing finish that leaves you mysteriously sanguine.
9. Champain: leaves an aching feeling that tingles your dormant taste buds.
10. Ries Ling-Ling: wakes up your palate as you reach for the phone.
You could probably add your own contributions to the list. Feel free. They can't be any worse than mine!
The Next Big Thing: Free TV
Emerging firms with names like Crackle, Free TV, Spreety and Hulu are changing the way we watch television. They are offering television programs online for viewing at no cost. This development threatens the business models of the $84 billion cable, satellite and telephone company television access industry.
Some industry watchers are dismissing the impact because the numbers of viewers remain minuscule. According to Convergence Consulting Group, last year 800,000 households unplugged their cable or other provider's service and decided to use online services to watch television programs. It is a tiny number when compared to the estimated 101 million subscribers who watch "regular" television.
However, it may signal a coming tidal wave as viewers opt out of their current provider and flee to the Internet. At the end of 2011, some analysts expect the number of customers who unplug their provider will double to 1.6 million viewers. But those numbers don't tell the whole story. An estimated 17 percent of today's television audience views at least one program of a full-length TV show every week. As those viewers become come accustomed to getting their television online, more will join the growing ranks of those who unplug their provider.
So what is driving this development? Here is a partial list of reasons:
1. People view the PC as a more personal way of watching video than a television. For one thing, the content is always available on line whenever they want. If you don't have a DVR, you may miss a program and never be able to see it. Also, laptop PC's can be carried wherever you want to watch a program. Viewers aren't tethered to their hard-wired television. In addition, the content can be viewed on a host of other devices, including their cell phones. This portability issue is growing in importance, especially among younger viewers.
2. PC's have improved video capabilities, which is helping to change viewing habits. Screens are near HDTV quality. Sound quality has improved significantly. The real game-changer will be the recently introduced IPad. It offers 720p resolution, which produces a picture that is stunning. The IPad increases portability for viewers who prefer online television over the cable, satellite and telephone solution. The device will fuel more content providers to offer programming online that can be easily downloaded on the IPad. It's coming and sooner than most think.
3. There are more tools online to help viewers navigate the bucket-load of content that exists on "regular" television. You can take online content and move it around to your cell phone, media player or other device. A growing number of search engines are available on the Internet to allow users to find episodes and programming content for delivery. While cable, satellite and telephone companies offer some search capabilities, the solutions pale when compared to what's available on the Internet. What good is 500 channels if you can't find what you want? People get discouraged and reduce their channel packages, which means lost revenue for the providers.
4. Television providers' revenue model is outdated and will lead to its downfall. Cable, satellite and telephone companies push bundles of programming. The more packages, the higher the revenue from subscribers. These same firms have staunchly opposed a la carte pricing. It is not in their economic interest to let subscribers choose only the programs they want to view. The reason is simple: the providers want to spread the cost of content across as a large a base of subscribers as possible. Great for the providers, but not so popular with subscribers. This is one reason why many are fleeing to free television. These viewers can get only the shows they watch and nothing else. Unless the big providers address this issue, their subscriber base will continue to erode.
If the giant television providers choose to fight the wave, instead of riding it, they will drown in their own greed. Those providers who move first to address this online growth will win. Check out what has happened in the music and book industries. They fought "free" online content and lost millions in the process before changing their pricing models. Will television providers choose the same path?
My guess is that most providers will fight rather than change. By doing so, they risk ceding the market to the Internet.
Some industry watchers are dismissing the impact because the numbers of viewers remain minuscule. According to Convergence Consulting Group, last year 800,000 households unplugged their cable or other provider's service and decided to use online services to watch television programs. It is a tiny number when compared to the estimated 101 million subscribers who watch "regular" television.
However, it may signal a coming tidal wave as viewers opt out of their current provider and flee to the Internet. At the end of 2011, some analysts expect the number of customers who unplug their provider will double to 1.6 million viewers. But those numbers don't tell the whole story. An estimated 17 percent of today's television audience views at least one program of a full-length TV show every week. As those viewers become come accustomed to getting their television online, more will join the growing ranks of those who unplug their provider.
So what is driving this development? Here is a partial list of reasons:
1. People view the PC as a more personal way of watching video than a television. For one thing, the content is always available on line whenever they want. If you don't have a DVR, you may miss a program and never be able to see it. Also, laptop PC's can be carried wherever you want to watch a program. Viewers aren't tethered to their hard-wired television. In addition, the content can be viewed on a host of other devices, including their cell phones. This portability issue is growing in importance, especially among younger viewers.
2. PC's have improved video capabilities, which is helping to change viewing habits. Screens are near HDTV quality. Sound quality has improved significantly. The real game-changer will be the recently introduced IPad. It offers 720p resolution, which produces a picture that is stunning. The IPad increases portability for viewers who prefer online television over the cable, satellite and telephone solution. The device will fuel more content providers to offer programming online that can be easily downloaded on the IPad. It's coming and sooner than most think.
3. There are more tools online to help viewers navigate the bucket-load of content that exists on "regular" television. You can take online content and move it around to your cell phone, media player or other device. A growing number of search engines are available on the Internet to allow users to find episodes and programming content for delivery. While cable, satellite and telephone companies offer some search capabilities, the solutions pale when compared to what's available on the Internet. What good is 500 channels if you can't find what you want? People get discouraged and reduce their channel packages, which means lost revenue for the providers.
4. Television providers' revenue model is outdated and will lead to its downfall. Cable, satellite and telephone companies push bundles of programming. The more packages, the higher the revenue from subscribers. These same firms have staunchly opposed a la carte pricing. It is not in their economic interest to let subscribers choose only the programs they want to view. The reason is simple: the providers want to spread the cost of content across as a large a base of subscribers as possible. Great for the providers, but not so popular with subscribers. This is one reason why many are fleeing to free television. These viewers can get only the shows they watch and nothing else. Unless the big providers address this issue, their subscriber base will continue to erode.
If the giant television providers choose to fight the wave, instead of riding it, they will drown in their own greed. Those providers who move first to address this online growth will win. Check out what has happened in the music and book industries. They fought "free" online content and lost millions in the process before changing their pricing models. Will television providers choose the same path?
My guess is that most providers will fight rather than change. By doing so, they risk ceding the market to the Internet.
Factoids That You Can Use
Despite massive efforts by the Obama Administration to head off foreclosures, homeowners are bailing out of their financial obligations at a record level. Figures released by RealtyTrac show that foreclosures rose sharply in March. A total of 367,056 home foreclosures were recorded, a 19 percent jump from February. It is the highest monthly total since RealtyTrac began its reporting. Moreover, nearly 260,000 properties were repossessed by lenders in the first quarter of this year, a whopping 33 percent increase since the same period in 2009. According to government figures, a paltry 6 percent of the 3.39 million homeowners facing foreclosure have participated in the federal bailout program. According to analysts, the problem is the government bailout of homeowners is only a band aid solution. It offers temporary help to people who can no longer afford their mortgage. Once the financial assistance expires, homeowners are forced to accept foreclosure. The much praised federal program has been an utter failure by any standard and it offers a sad commentary on the government's ability to address economic problems.
Thursday, April 15, 2010
Why Sentiment Matters To Economic Recovery
There is a universal truth that often is overlooked by economists. It is this: perception is reality, especially when it comes to consumers and business people. Economists tend to take comfort in numbers. Think of it as their security blanket. They are consoled by things they can understand. That's why many are now predicting economic recovery, albeit at a snail-like pace.
Economists can find many signs to buttress their beliefs. Manufacturing has inched upward. Some businesses are hiring. Consumer spending has tiptoed upward. However, in every poll of consumers and business leaders, the mood is sour. To put it bluntly, they don't believe the economy is improving. Economic statistics won't convince them otherwise. They know what they know, even if it seems out of sync with reality.
I was reminded of this fact recently when the National Federation of Independent Businesses reported that its optimism index had fallen to an eight month low. A noted economist, William Dunkelberg, seemed perplexed. He said the results were "very inconsistent with the notion that the economy is recovering." Spoken like a guy who embraces numbers, but finds sentiment a touchy-feely concept.
Small businesses aren't convinced things are getting better for obvious reasons. Most have experienced shrinking sales and lower consumer demand. Banks are clamping down on loans to businesses. Congress has just passed a massive health care bill that puts new mandates on small businesses. Taxes are likely to head higher as the government grapples with the federal deficit. These business people are hunkering down for the worst.
In the survey by the NFIB, small business people cited poor sales as their top concern. Most said this is not a good time to expand. A majority reported unfavorable credit conditions. Many said it was not the right time to hire. No matter what economists are saying, these business people don't believe the numbers. Their reality is sales haven't improved. No amount of assurances from economists will convince them that good times are right around the corner.
Predictably, there was a lot of head scratching by economists after the poll was published. They argued that the economic data is at odds with perceptions. They were flummoxed that these business people didn't see that. They ignore that perception is reality, not the other way around. Changing perception is often more difficult than changing reality.
That is the crux of the problem the country faces today. Small businesses aren't alone in their perception of the direction of the country. Consumer indices are at or near all time lows. Large business leaders are cautious about the future. People simply aren't buying that things are getting better, despite determined efforts by the media and the Obama Administration to convince them the economic recession is over.
So how do you change sentiment? Think President Ronald Reagan. When he inherited runaway inflation, a weak economy and a nation in the throes of malaise, he spent a considerable amount of time talking up the country. The President took to the airwaves to assure Americans the country could rise above any obstacles.
What is missing today is that President Obama has taken just the opposite tact. He and his allies have been nabobs of negativism. They have told us that unemployment will not come down soon. They preach higher taxes. They trumpet more government programs instead of American initiative. Some have mentioned that America cannot expect to continue to dominate the world economically forever. Does that sound like optimism?
This raises another question: why would the President and his minions deliberately talk down the economy? The answer should be obvious to even his most ardent supporters. President Obama sees the current economic crisis as an opportunity for more government intervention, more government programs, more government control. It is an inescapable conclusion that we ignore at our own peril.
Economists can find many signs to buttress their beliefs. Manufacturing has inched upward. Some businesses are hiring. Consumer spending has tiptoed upward. However, in every poll of consumers and business leaders, the mood is sour. To put it bluntly, they don't believe the economy is improving. Economic statistics won't convince them otherwise. They know what they know, even if it seems out of sync with reality.
I was reminded of this fact recently when the National Federation of Independent Businesses reported that its optimism index had fallen to an eight month low. A noted economist, William Dunkelberg, seemed perplexed. He said the results were "very inconsistent with the notion that the economy is recovering." Spoken like a guy who embraces numbers, but finds sentiment a touchy-feely concept.
Small businesses aren't convinced things are getting better for obvious reasons. Most have experienced shrinking sales and lower consumer demand. Banks are clamping down on loans to businesses. Congress has just passed a massive health care bill that puts new mandates on small businesses. Taxes are likely to head higher as the government grapples with the federal deficit. These business people are hunkering down for the worst.
In the survey by the NFIB, small business people cited poor sales as their top concern. Most said this is not a good time to expand. A majority reported unfavorable credit conditions. Many said it was not the right time to hire. No matter what economists are saying, these business people don't believe the numbers. Their reality is sales haven't improved. No amount of assurances from economists will convince them that good times are right around the corner.
Predictably, there was a lot of head scratching by economists after the poll was published. They argued that the economic data is at odds with perceptions. They were flummoxed that these business people didn't see that. They ignore that perception is reality, not the other way around. Changing perception is often more difficult than changing reality.
That is the crux of the problem the country faces today. Small businesses aren't alone in their perception of the direction of the country. Consumer indices are at or near all time lows. Large business leaders are cautious about the future. People simply aren't buying that things are getting better, despite determined efforts by the media and the Obama Administration to convince them the economic recession is over.
So how do you change sentiment? Think President Ronald Reagan. When he inherited runaway inflation, a weak economy and a nation in the throes of malaise, he spent a considerable amount of time talking up the country. The President took to the airwaves to assure Americans the country could rise above any obstacles.
What is missing today is that President Obama has taken just the opposite tact. He and his allies have been nabobs of negativism. They have told us that unemployment will not come down soon. They preach higher taxes. They trumpet more government programs instead of American initiative. Some have mentioned that America cannot expect to continue to dominate the world economically forever. Does that sound like optimism?
This raises another question: why would the President and his minions deliberately talk down the economy? The answer should be obvious to even his most ardent supporters. President Obama sees the current economic crisis as an opportunity for more government intervention, more government programs, more government control. It is an inescapable conclusion that we ignore at our own peril.
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