Friday, February 28, 2020

The coronavirus economy is real

The political belief system that has, for a few years now, exclaimed that “fake news” is everywhere has been heartily engaged in creating and believing its own in recent weeks.

Over the course of February, Rush Limbaugh, Sean Hannity, Laura Ingraham and hundreds of writers on the internet have claimed that concerns over coronavirus are for the most part unwarranted and that focus on the contagion is a conspiracy by major news outlets and the Democratic Party to weaken the economy and/or Donald Trump’s chances of being reelected in November.

Let that sink in.

We’re expected to believe that the massive downturn in the stock market is solely a creation of partisan fear mongering by Nancy Pelosi and Charles Schumer and has nothing to do with harsh economic circumstances.

Sadly, a lot of people do believe that. Just take a look at social media to see how many people are sharing those thoughts.

It’s unfortunate that so many have been duped because coronavirus and its resulting economy are real. Being in the trenches of the global economy as a manufacturer, and someone who consumes actual “real news”, I saw this coming and have been pondering what the rest of 2020 will look like.   

After watching the disease’s reach and power unfold in international news coverage over the span of a few weeks in early-January I figured there would be economic disruptions galore and the potential for a global pandemic. So, I made the decision six-and-a-half weeks ago to move all of my 401(k) – the balance and all future inputs – into my plan’s guaranteed account until the coronavirus was contained.

I’m glad I did. As we saw last week, Wall Street finally caught on to the fact that things are bad. When I wrote this column, the stock market had lost 10% of its value from its recent peak in only a matter of days and the futures for the day showed even more decline. Where’s the bottom?    

In the weeks following my 401(k) gamble and before the stock market collapse, my economic assumptions proved justified in many ways in my day-to-day business.    

A handful of companies contacted me at the factory to see if we’d be interested in manufacturing their products which are currently made in China. The disruption of their supply chain, coming on the heels of painful tariffs, has them reconsidering how and where they do business. As it stands now, they won’t have the products they expect or need for the foreseeable future.

While that might work for the projects we can manufacture for them, there are many more items that the manufacturing sector in the United States does not have the capabilities to make in the near-term. For example, we produce cabinetry for the spa industry in which some players have expressed concern about what they will or won’t produce later in this season because they can’t or won’t have access to Asian-made LED lights, stereos and more that augment modern hot tubs.

Another customer of ours sells products sold in big box stores. One came to him and asked if he might have something – anything -- they could put on their shelves because they’re fearful their stores, and bottom line, will look bare in the coming months because of their reliance on companies that outsource.          

If someone is all-in with Asian suppliers, what does coronavirus and all of its uncertainty do to their financial viability in 2020 and beyond? If someone has reliance in part on the same, what does that do to their profitability this year?

Are consumers ready to deal with lower and even totally different inventories and selections at stores and e-commerce retailers? Will they pay higher prices for domestic goods?

We’re just one company, a little factory in little Niagara County, seeing the impacts of coronavirus in the great big world. Imagine the hundreds of thousands of bigger players who are involved in international trade: What are they seeing? What are they feeling? What are they planning?

So, yes, there are real reasons behind the real concern on Wall Street and Main Street. It’s not some conspiracy.  

That said, I encourage you to get your news from trusted and various sources, not from commentators who pass themselves off as -- and whom you might believe to be -- news. The Hannitys and Limbaughs of the world are well-paid, (in)famous thought leaders, disconnected from the real world, spearheading horrid discussions and instilling groupthink. They are no different from their counterparts on the other side whom they despise (like those on CNN and MSNBC) who also “report” on things with bias and motive.

We’re all in this coronavirus battle together – not everything needs to be politicized. As with all issues, it needs reasonable, thoughtful analysis, study and coverage. Failure to provide that will inhibit adequate preparedness and action, not only in the economy but also in our communities.  

From the 02 March 2020 Greater Niagara Newspapers and Batavia Daily News

Monday, February 24, 2020

The Boy Scouts will survive bankruptcy

Last week, the Boy Scouts of America filed for bankruptcy. This was not unexpected. Speculation about bankruptcy had been running rampant for over a year now.

It was done in direct response to New York’s Child Victims Act and similar laws in other states which allow for a temporary lookback for victims of abuse whose claims previously would have been denied by the statute of limitations. Thousands of lawsuits have been filed against churches, schools, clubs and the BSA for transgressions alleged to have been done by leaders and mentors decades ago.

The CVA and its companions are good, as they allow anyone who was abused as a youth in any organization or by any individual to find closure or, in legalese, be made whole after surviving evil and holding dark secrets that are nearly impossible to overcome and/or share as a youth and an adult. Most times, it takes decades to open up about it and these lookbacks recognize that.

The path of bankruptcy isn’t the BSA abandoning its responsibility to anyone who was hurt. Instead, it allows the BSA to reach settlements with these parties in an equitable fashion, otherwise potentially large awards in the first rounds of lawsuits would have decimated BSA finances and prevented monetary awards for those who brought lawsuits later in the cycle. The management of finances and settlements ensures that all who deserve something get something and the BSA can continue its mission.    

Since early-2019 and especially now following the actual filing, I’ve been asked about what bankruptcy and financial reorganization of the BSA means for Scouting; after all, I have long been a champion of Scouting in this column and in the community, having been a scout for 8 years and a volunteer in the organization for the past 26.  

First and foremost, take comfort in knowing local Scouting is financially sound and protected.

The Iroquois Trail Council (which serves eastern Niagara and the GLOW counties) is, like all councils, a corporation separate from the BSA and it maintains its own 501(c)3 status. Business decisions made on bankruptcy by the BSA will not impact the assets of the Iroquois Trail Council – including our camps and donations made to local programs by families, donors and community partners like the United Way. The Council is not on the hook for assisting with the BSA’s reorganization.

It is important to note that the Iroquois Trail Council is governed by local volunteers who provide strong oversight on budget development, fundraising, spending and investment. During the past decade, the Council has routinely balanced its budget, been creative with its staffing model, made substantial capital improvements to Camp Dittmer and Camp Sam Wood, acquired a new centrally-located headquarters in Oakfield and ensured the future of local Scouting through growth in its endowment fund. The Council is also debt-free and has no pending litigation.

Secondly, know that Scouting is safe.

At first glance, driven by headlines on smartphones and hot takes on social media, some would wonder why they’d ever want to put their children in Scouting for fear that they might be abused, thinking that the spate of lawsuits are recent in nature. They aren’t; 90% of those filed against the BSA date back 30 years plus. We can’t let a few bad apples spoil the barrel, nor can we believe that protections aren’t afforded. A system is in place to keep out troubled souls and identify and eliminate adults and youth who may put others at risk. As long as I’ve been in Scouting, there have been detailed and effective Youth Protection Training for all participants, double supervisory control and background checks.

Lastly, know that Scouting is just as meaningful now as it was when the BSA was founded 110 years ago.

My Eagle Scout certificate is beside me in my office every day, a reminder of who I am and who I will be because of Scouting. The organization and its principled lessons and experiences gave me a deeper  understanding of service, leadership, teamwork and humanity and it has helped me greatly at home, work, and in the community. I and my fellow volunteers want to make sure more boys and girls are given such positive experiences in their lives in hopes of making them the very best citizens, spouses and parents they can be. God knows we need that in today’s world.  

Please know that all of us in Scouting cannot and will not let financial restructuring by the national organization distract us from our goals. Scouting will continue to be a guiding light for many children for many decades more -- even amidst the occasional storm that might shake its very foundation. 

From the 24 February 2020 Greater Niagara Newspapers and Batavia Daily News

Monday, February 17, 2020

A wealth tax would punish the American Dream

Despite education spending that exceeds $23,000 per pupil, which is a whopping $10,890 higher than the national average, New York State United Teachers (NYSUT) thinks we should spend more. A lot more.

The teachers’ union launched an ad campaign last week called “Broken Promises” that says New York schools are underfunded by $4 billion. And, of course, it’s the fault of rich people. The 30-second commercial spends most of its time highlighting wage inequality, decadence and the accumulation of wealth.

The NYSUT hopes to use that message to compel lawmakers to reap revenues from that accumulation. Taking a page from the playbooks of presidential candidates Bernie Sanders and Elizabeth Warren, they are calling for a wealth tax.

This is something entirely different than an income tax, which would still be in play. A wealth tax would focus on the holdings of the others. Whoever would be considered “ultra-wealthy” at that time would have to pay a tax on what they own -- a company, properties, stock, cash, anything designated as an economic asset. It’s a tax upon taxes, as those assets had paid taxes already based on their productive nature in the form of corporate income taxes, personal income taxes paid by the owner and the employees, sales taxes, excise taxes, property taxes and more.    

According to a poll of 1,000 New Yorkers commissioned by the NYSUT, 92 percent support a wealth tax on those with more than $1 billion in wealth, a new ultramillionaires tax on those with incomes over $5 million and a pied-à-terre tax (a cute way of saying a tax on second homes) as a means to close off New York’s budget gap.

I guarantee that whoever responded to the survey thinks that the billionaires won’t miss their money and that this is just a temporary and limited fix to a current problem.

They’re wrong on all counts.

If you start penalizing people for accumulating wealth they will leave, no matter if they have more money than you and I could spend in a million lifetimes. As mentioned earlier, those billionaires and their enterprises already pay millions in taxes every year. If you start taxing them on wealth and not just income, whether or not they made good money that year, they will find a state that won’t. They’ll go and they’ll likely take their headquarters, if not all their operations, with them.

Those billionaires made a career, a lifestyle, out of trying to make money and create productive enterprises; they’re not going to throw it away to a new, unusual and destructive tax system, especially when you can be certain it won’t go away: This is New York; the basic law of taxation physics here is that new taxes can be created but they cannot be destroyed.

And, in such a vacuum, said taxes can always be expanded.

The NYSUT proposal might currently call for a wealth tax on billionaires but, after you’ve normalized such behavior, who’s to say it wouldn’t be extended to millionaires ten, twenty years down the road when another alleged budget (read: over-spending) crisis comes to the fore? Once the accumulation of wealth is vilified and people are punished for it, shouldn’t it hold true for all levels of wealth? After all, that’s what we do with income taxes – no one but the very poor can escape having to pay for their exertion of sweat and time.

Once millionaires are pulled into the mix with wealth taxes it would be a lot more people than you’d believe. It’s not those making a million dollars every year. It’s regular people who have accumulated assets in excess of a million dollars.

Millionaires could be those who don’t have a public pension and are planning for 20 to 30 years of blissful retirement. They’ve worked their tails off and saved their whole working lives to get to that point. Because of the forward thinking and sacrifices of such souls there are now more 401(k) and IRA millionaires than ever before in the US – 233,000 and 208,000, respectively. Many more break the millionaire threshold with what they have in the bank, their homes and other retirement accounts like mutual funds and stocks. They have paid and will pay taxes on all of the above, so why should they be taxed for the very act of ownership, too?

Millionaires could also be small business owners who are cash poor but asset rich by the essence of owning a business. Consider farmers, for example. I don’t know any farmer whose personal income would ever be considered wealthy. As a matter of fact, the ag economy has been so bad in recent years that farms are closing left and right, some farm families are using food pantries in winter’s lean months and many farmers have committed suicide because of financial woes. While they and their business may not be making money, a tax on multimillionaires would steal cash from them because they own a business that itself owns millions of dollars in assets in the form of vast acres of land, heads of cattle and equipment (a single John Deere combine costs around $400,000). Who in their right mind would stay in business if a wealth tax added even more to their losses?

Is it right to tax Average Joe retirees and farmers because they’ve accumulated millions in personal value? No. It’s not right to do it to billionaires, either. Wealth taxes should not be introduced now or ever. They punish the American Dream, saving, thrift and investment – all characteristics that were once, and still should be, considered desirable personal and professional traits. 

From the 17 February 2020 Greater Niagara Newspapers and Batavia Daily News