Friday, August 7, 2009

The economic stimulus that wasn't

From the 10 August 2009 Greater Niagara Newspapers

By Bob Confer

Confer Plastics is doing relatively well right now. Custom molding sales are up. Employment is up. And, we’re buying one of the largest blow molding machines in North America.

If the Obama administration knew this I could only imagine the outcome. Without a doubt, one of their public relations gurus would attribute this growth to the $787 billion stimulus package introduced earlier this year. I’d hate to burst their bubble, but Confer Plastics is succeeding not because of the stimulus. We’re succeeding in spite of it.

The company is healthy because we do what any other business does when the going gets tough (or even when the times are good): You dig in your heels against the economic situation, streamline your operations, develop new products or services and leverage the strengths of your people and assets to attract new customers.

We didn’t sit back and hope that a poorly misguided use of government intervention would make consumers open their pocketbooks. Frankly, we knew that the stimulus would do nothing to excite the average consumer and, truthfully, it hasn’t.

I can say that with confidence by analyzing the various components of our client base. Despite our successes, most all of our pre-existing lines are down in revenues, mirroring the continued decline in the economy. Swimming pool ladders and steps, for example, which have long been a mainstay of our business, are down by almost 30 percent since 2006. It’s a product line that indicates how much discretionary income families do or do not have. Homeowners just don’t have the money available to buy swimming pools anymore. In this recession they’ve been transformed from a relatively common purchase to a luxury item. It’s a change in buying behavior that consumers are applying to countless goods and services. Had they truly been stimulated, they would have abandoned this practice.

We’re not alone in this distrust of the stimulus. Most small businesses like ours have seen no benefit whatsoever from it. Many surveys point to this fact. In July’s Empire State Manufacturing Survey – one of the key economic indicators issued by the Federal Reserve – only 10 percent of respondents said that the stimulus had a positive effect on their revenues. That number is lower in a July survey conducted by the National Small Business Association. Only 3 percent of their participants saw an up tick in business activity because of Obama’s plan. Worse yet, in that very same survey, 42 percent of the respondents have no confidence in their business’ financial future. Surveys like those reflect the harsh reality of the continued decay of the economy (a 3.9 percent shrinkage in the last twelve months) and escalation in unemployment (it’s a smidge under 10 percent nationally).

It’s obvious that the estimated impact of stimulus – that it will create or save 3.5 million jobs – was a pipedream, at least in the business world. Government employment is the only job sector that has seen an increase in activity as numerous teaching, road construction, police and administrative jobs have been created or retained in local and state governments throughout the country, averaging over 10,000 new jobs a month.

It should be noted that there is no good news to be found in that. The government is a drain on the private sector, stifling innovation and consumer and business spending by taking-away usable assets through taxation and decreasing the value of money through inflation while redirecting those funds into the public sector where innovation and advancement of our society and technology does not occur.

This vast transfer of wealth – one that will only grow with government health care and a potential second stimulus package - will only lengthen the recession because it will guarantee that money will not be put to its best use. If vast government spending and a bureaucratic control of the economy were the keys to economic prosperity, the USSR would have become the greatest society this world has ever known. Instead, it flamed out in a hurry and left millions of people in despair.

We can’t follow that same path. We need to stop putting blind faith in our government. It cannot and will not bring us out of the recession. What can and will save us are the same things that took our economy to its great heights and made ours the greatest society ever -- the timeless American values of ingenuity and work ethic being applied in a free marketplace. It’s something called “capitalism”…and it’s the real economic stimulus!

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