Guest Editorial: The Fiscal Myth …
… And why what's good for c-stores is good for the USA
NEW YORK -- A respected member of our industry recently said that the big winner of the recent fiscal cliff fight was the national deficit--because we did nothing of significance to cut our spending.
I take a different view. There was no "winner" in the sense that the whole episode was a disgraceful way to run a country, and an embarrassment before the rest of the world. But neither were there any real losers.
There could have been losers if the cliffhanger had not been settled. That would have grabbed defeat from the jaws of victory and put the economy into the second half of a double-dip recession.
While the size of our debt is both a concern and a problem, it is not an imminent crisis (more on this later). In fact, the fiscal cliff was a manufactured event, which resulted from two pieces of governmental ineptitude.
The first was a deliberate act of deception. In order to hide the fact that the Bush tax cuts enacted in 2001 were unjustifiably large, an extraordinary expiration date was set for them so that long-term economic projections would not show them to be unsustainable. They were originally to expire at the end of 2010, but were later extended another two years in a deal to avoid a government shutdown
The second was an irresponsible inaction. An across-the-board "sequester" of both domestic and defense budgets was set to go into effect automatically at the beginning of 2013 in the event that the bipartisan super-committee of senators and representatives--formed in 2011 to tackle the growing debt issue--could not reach agreement. It contained expenditure cuts specifically designed to be so repugnant to both parties that they would be forced to come to an agreement on more acceptable debt reduction measures that met the same goals.
As we know, bitter partisan differences trumped over compromise.
Thus, these two unrelated, self-inflicted wounds were set to occur on the same day: Jan. 1, 2013. Together they formed the so-called fiscal cliff (which is why I call it a fiscal myth). Does it mean that the large and growing national debt is not a problem? No. But does it require making cuts right now that go beyond fat into muscle and bone? No again. In fact, that kind of cutting would be counter-productive. It would slow down the fragile growth in the economy and push it back toward recession. In the process, it would slow employment and put less money in people's pockets.
The secret is to make cuts where there is waste and inefficiency, while at the same time stimulating the economy. The aim must be to set the United States on the path to real and sustainable debt reduction by making the rate of growth of the Gross National Product outstrip the rate of growth of the debt. (It is just not possible to cut your way to that result; see what's happening right now in the U.K. and much of Europe, where that approach has failed miserably.).
And the good news is that it is already beginning to happen. In each of the past three years, the size of the federal deficit has been significantly reduced. In fact, the deficit has fallen faster than in any stretch since the demobilization after World War ll.
This doesn't mean that, if we do nothing, the debt problem will go away. What it does mean is that we don't have an immediate crisis requiring drastic action. What we do have is a problem that can be solved over time with a reasonable combination of sensible cuts, stimulus spending and the increased revenues that will result both from business stimulation and tax reform. This will ultimately bring the budget into balance. In the meantime, it will restore our infrastructure, put people to work and put money into their pockets, while making business better for the whole economy and, in the process, make retailing soar.
So I have been wondering why so many convenience retailers are unhappy with the resolution of the so-called fiscal cliff--and thinking about how and why they should think about it more positively. After all, retailing is a unique business. Unlike other large industries, both huge retailing organizations and small single-store operators do their business one customer at a time. The convenience store segment is particularly unique, because the small size of each transaction (averaging $4.18 in 2011) and the universality of its customer base mean the industry can only really thrive when a lot of people are employed and have money in their pockets.
So anything that puts people to work in construction, healthcare, local government, manufacturing--even retailing--is particularly good for c-stores. And it so happens that stimulating these segments is also just what the economy needs.
In short, the needs of c-stores and the needs of the economy are actually in alignment: C-store retailers need a strong economy, with lots of people employed and with money to spend; and the economy needs stimulus to create those jobs, increase the tax base, grow the GNP and rebuild our aging infrastructure. Add to all of this the fact that we are on the verge of a boom that, if we let it, will result from the discovery of huge reserves of natural gas, putting America on the path to energy independence, and the outlook is very good. So please let's not throw obstacles in its path. If we can just stop fighting, we'll all start winning.
A note on the subtitle: When, in 1953, Charles Wilson, the CEO of General Motors, was in a senate hearing to be secretary of defense, he was inaccurately accused of having said "What's good for General Motors is good for America." This was parodied in the 1956 Broadway musical Li'l Abner, as "What's good for General Bullmoose is good for the USA."
Do you agree or disagree with Gerald Lewis? What most concerned you about the fiscal cliff? Post your comments below.
Gerald Lewis provides transformational retailing guidance and execution to convenience store operators. Do you agree or disagree? Email your thoughts to [email protected] or (646) 215-7741. For more information go to www.geraldlewisteam.com