Gas Coupon

How's that " hopey/changey" thing working out for you ?

Fixing the economy....

This gentleman from California pretty much sums it up. He has a bit of an advantage over others as he will be eligible for some pensions and union membership gives them access to affordable healthcare. In many respects, the issue he describes is the key issue of why things are off track.

Workers who have a job haven't seen a decent raise in years, the costs of everything has gone up and the uncertainty of the whole system makes one not want to spend or increase your debt load. Until this aspect of things change, the POLs in Washington can bleat on about things but things won't get better.

What we need is for businesses to get people back to work and go back to giving people a decent increase in pay for the hard work & effort they provide the businesses. Many companies have seen record profits but the workforce who provides that is not given their share as workers who complain can be replaced by others very easily. Companies have been hording cash for the past few years and not enough has been given back to the workforce in lower costs for healthcare and raises.

Until this paradigm shifts back to normal, consumers will be hesitant to spend their meager incomes and the economy will remain morbid. The answer is a simple one if the businesses will listen as they need consumers otherwise who will buy their products?


Why we quit spending ...
Postcards from the recession
... and how our cautious consumption, and that of many others, creates a drag on the country's economy.

Cautious spending by consumers slows down the economy.
October 23, 2011By Scott Martelle - LA TIMES

I may owe the nation an apology. It turns out I'm a prime reason why the U.S. economy can't regain its footing. Because as a wage-earner, and as a consumer, I'm not what I used to be.

My full-time newspaper job was cut in September 2008, and since then I have worked as a freelance journalist, the author of history books, a part-time university instructor and an occasional writer-for-hire for various non-journalistic projects. My wife, an elementary school teacher, has faced furloughs and stagnant wages, but (thanks to her union) we have healthcare coverage we can afford.

It's how we and others in our situation are living now that helps explain the persistence of the economic crisis, and hints at the troubles of the future.

Our household income is less than two-thirds what it was when I had a full-time staff job, and at my age — 53 — I'm unlikely to land another job with wages and benefits similar to the one I had (ageism in this jobs marketplace is pervasive, but that's another issue).

With one son in college and another in his senior year of high school, we're treading financial water in the short term. Better off than others, yes; we're not at risk of losing our home (we bought in 1997, far ahead of the bubble). Yet we're spending significantly less than we once did, forming an incremental drag on the economic recovery. Ironically, we have more money salted away in our savings account now than before my job was cut. That's what financial fear does; it makes you hoard cash.

So we patronize fewer restaurants, buy fewer books (a painful cutback for an author; if I'm not buying their books, are they not buying mine?), and rarely contemplate a weekend train getaway to Santa Barbara or San Diego. Take in a professional hockey or baseball game with the family? Um, no.

But a recovery needs us to spend. So we're not helping. And that's why the future is worrisome. We never were high-debt spenders (at the moment, mortgage, car payments and a small credit card balance are our only outstanding debts), but it's highly unlikely our household spending will ever again be what it was.

Part of that is a personal refocus on frugality — that financial fear thing again. Part of it is financial reality. Less money coming in necessitates less money going out. And looking ahead, what once promised to be a comfortable retirement is now a big question mark. I will get checks from Social Security (if it, and I, are still alive), small pensions from two former jobs (nine years' credit in each) and the proceeds from a 401(k) that, unfortunately, mirrors the economy, and to which we're no longer adding money at exactly the point in our lives when we should be.

My wife will also qualify for a pension as a teacher, but if she works until age 65, she will have 28 years in the California system where we live. Because of state laws, she will not be able to collect Social Security from her previous jobs. Given the ongoing assault on public employees — and on Medicare — we don't know what shape our medical coverage will take then. Our house will be paid for, but we'll still be on the hook for property taxes.

What all this means is that we both probably will need to work until we are closer to age 70, taking up slots that younger workers — like our sons — will be anxious to fill. And in the interim, our impulse will be to save rather than spend.

Three years ago we were part of the consuming class that helped drive the economy, thinking nothing of spending a couple of hundred bucks on a new piece of stereo equipment, dining out a couple of times a week, throwing patio parties for our friends or going to concerts. And we made regular investments in a 401(k) that both put money in Wall Street and offered the promise that we would be able to continue spending in retirement.

Now, we're an anchor on the economy, adding little to the national investment pool and quicker to save a buck than to spend one — personal patterns that are likely to continue for years, if not decades.

We're just one little choke point in the national recovery. But extrapolate our spending decisions across the millions of others who have lost their jobs, many of whom have had less luck managing these doldrums than we have. Add in a generation — our sons, having witnessed this at an impressionable age, are not likely to become profligate — and the macro problem comes into focus.

A consumer economy without consumers does not make for a robust future.

Scott Martelle, an author and former Los Angeles Times staff writer, lives in Irvine. http://www.scottmartelle.com

The Law of Unintended Consequences and how the American Consumer is getting hurt while Washington DC fiddles & diddles

Robert Norton writes about the "Law of Unintended Consequences" - "The law of unintended consequences, often cited but rarely defined, is that actions of people—and especially of government—always have effects that are unanticipated or unintended. Economists and other social scientists have heeded its power for centuries; for just as long, politicians and popular opinion have largely ignored it."

Any layman can understand this is in full play presently as the cost of Food, Clothing, Fuel and all staples have risen dramatically over the past two years. It is no coincidence that the alleged " Smartest people" who have been in control of Congress and the White House during this same period have done little to slow this down. They fiddle and diddle while the American consumer takes it in the neck.

People have suffered under the recession for since late in 2008 with no gains in wages while the cost of everything pushes them backwards....And the guy in the White House thinks he stands a chance of getting reelected????

The problem is the GOP is acting like the Keystone Cops.....they will "enable" the "Community Organizer" to maintain a foothold on the White House if they don't stop acting like a bunch of clowns.....Meanwhile, you & your family get to pay more and get less....HOPE & CHANGE ?? No HOPE for things getting better and only CHANGE for the worse.


It's Getting Harder to Bring Home the Bacon
C. Larry Pope, CEO of the world's largest pork producer, explains why food prices are rising and why they are likely to stay high for a long time.

By MARY KISSEL - Wall Street Journal
New York

Bobbie Jean Pope, the 81-year-old mother of C. Larry Pope of Newport News, Va., can't afford her bacon.

"I said, 'Mom, I'll get you some bacon.' And she goes, 'I can't afford y'all's meat anymore! Why is y'all's meat so expensive?' And I said, 'Mom, you ought to understand why it's expensive—it's 'cause our costs are so expensive.'"

Mr. Pope is the chief executive officer of Smithfield Foods Inc., the world's largest pork processor and hog producer by volume. He doesn't mince words when it comes to rapidly rising food prices. The 56-year-old accountant by training has been in the business for more than three decades, and he warns that the higher costs may be here to stay.

Courtesy of? "I'm not going to say, 'a political policy,'" he tells me. (His senior vice president, a lawyer by training, sits close by, ready to "kick his leg" if his garrulous boss speaks too plainly.) But politics indeed plays a large role, as Congress subsidizes favorite industries and the Federal Reserve pursues an expansive monetary policy.

Ours is a timely chat, given the burst of food inflation the world is living through. Mr. Pope is running a multibillion-dollar business in the midst of economic turmoil, and he has strong views about why prices are rising and what can be done about it.

The Southerner is an old hand when it comes to food. He graduated from William and Mary in 1975, spent a few years at an accountancy, then joined Smithfield and worked his way up the ranks. He's something of an evangelist about his trade: He boasts that Smithfield employs some 50,000 people, many of whom are high-school graduates and immigrants others would consider "hard to hire." It's a "good business" that "gives people a good start."

It's also a business under enormous strain. Some "60 to 70% of the cost of raising a hog is tied up in the grains," Mr. Pope explains. "The major ingredient is corn, and the secondary ingredient is soybean meal." Over the last several years, "the cost of corn has gone from a base of $2.40 a bushel to today at $7.40 a bushel, nearly triple what it was just a few years ago." Which means every product that uses corn has risen, too—including everything from "cereal to soft drinks" and more.

President George W. Bush "came forward with—what do you call?—the edict that we were going to mandate 36 billion gallons of alternative fuels" by 2022, of which corn-based ethanol is "a substantial part." Companies that blend ethanol into fuel get a $5 billion annual tax credit, and there's a tariff to keep foreign producers out of the U.S. market. Now 40% of the corn crop is "directed to ethanol, which equals the amount that's going into livestock food," Mr. Pope calculates.

The rapidly depreciating dollar is also sparking inflation, although Mr. Pope says that's a "hard" topic for him to discuss, trying to be diplomatic. But he doesn't deny that money is cheap. Investment bankers are throwing cash at the firm—a turnaround from 2008, when money was scarce—even though Mr. Pope doesn't need it right now.

Rising prices are already squeezing food producers' "two to three percent" earnings margins. "Many of us had our costs hedged in the commodity markets and we all took on strident measures to control our cost structures," Mr. Pope says. "In the case of Smithfield, we closed six processing plants and one slaughter plant. We also closed 15% of all our live production business." But "once those measures are done, we have no choice but to pass those prices down" to consumers.

Now food price inflation is popping up across the country. A pound of sliced bacon costs $4.54 today versus $3.59 two years ago and $3.16 a decade ago, according to the Bureau of Labor Statistics. Ground beef is $2.72, up from $2.27 in 2009 and $1.74 in 2001. And it's not just Smithfield's products: "You eat eggs, you drink milk, you get a loaf of bread, and you get a pound of meat," he drawls. "Those are the four staples of what Americans eat in their diet. All of those are based on grains."

"Maybe to someone in the upper incomes it doesn't matter what the price of a pound of bacon is, or what the price of a ham, or the price of a pound of pork chops is," he says. "But for many of the customers we sell to, it really does matter." Workers can share cars when the price of oil rises, he quips, but "you can't share your food."

Mr. Pope also worries about the impact on farmers, who are leveraging up operations to afford the ever-rising price of land and fertilizer that has resulted from the increased corn demand. "There are record prices for livestock but farmers are exiting the business!" he exclaims. "Why? Farmers know they won't make money."


Weather is a factor, too. "We've had the luxury for the last three years of extremely good corn crops, with high yields and good growing conditions. We are just one bad weather event away from potentially $10 corn, which once again is another 50% increase in the input cost to our live production."

Mr. Pope says companies are coping by increasing prices "substantially" or shrinking "what's in the package." "That's the alternative way of passing on price increases . . . 'cause we're all trying to reach price points with our customers in terms of what we can sell somethan' for." "You're ultimately going to buy less bacon. . . . We're going to sell pizzas with less pepperoni on 'em." (Mr. Pope's team also laments the effect on beer prices.)

Not all companies will survive this economic whirlwind. Mr. Pope recalls what happened the last time there was a surge in corn prices, in 2008: "The largest chicken processor in the United States, Pilgrim's Pride, filed for bankruptcy." They "couldn't raise prices, so their cost of production went up dramatically." Could it happen again? "It darn well could!" Mr. Pope exclaims.

Food price inflation isn't a problem confined to America's shores. "This ethanol policy has impacted the world price of corn," Mr. Pope says. The Mexican, Canadian and European industries have "shrunk dramatically. . . . We have an unsustainable meat protein production industry," he says. "We're built on a platform of costs, on a policy that doesn't make any sense!"

Nor does the science. The ethanol industry would supply only 4% of the nation's annual energy needs even if it used 100% of the corn crop. The Environmental Protection Agency has found ethanol production has a neutral to negative impact on the environment. "The subsidy has been out there since the 1970s," Mr. Pope says. "If they can't make themselves into a viable economic model in 40 years, haven't we demonstrated that this is an industry that shouldn't exist?"

So what's the solution? First, Mr. Pope says, get rid of the ethanol subsidies and the tariff. "I am in competition with the government and the oil industry," he says. "It's not fair." Smithfield's economists estimate corn prices would fall by a dollar a bushel if ethanol blending wasn't subsidized. "Even the announcement that it is going away would see the price of corn go down, which would translate very quickly into reduced meat prices in the meat case," he says. Imagine what would happen if the mandate and tariff were eliminated, too.

He also advocates lifting regulatory and tax burdens on business. "I fundamentally don't understand the logic of corporate income taxes," he tells me. "If I have a 35% tax, all I do is take that 35% tax and I transfer it into the price of bacon and the price of pork chops."

Then there's the challenge of opening up export markets, which Mr. Pope sees as a long-term opportunity for U.S. agriculture. "This is a land-rich country, with rich soils, with the right kind of temperatures and the right kind of cultivation practices," he says. "We can raise livestock and compete with anybody in the world. That's how we can help the balance of payments." (Smithfield has European operations but has had a hard time cracking Asia, and especially China. "It's easy to invest," Mr. Pope says, but "it's hard to make money" there thanks to rampant intellectual-property rights violations and other hazards.)

While Mr. Pope waits to see how the politics of ethanol and trade play out, he's not standing still. He's assigned one of his senior executives the task of figuring out what else Smithfield could possibly feed hogs, other than corn. Could Mr. Pope have envisioned setting up such an enterprise a few years ago? "Absolutely not" he says. "It's me trying to change our business model to adapt to the realities that I have to live in."

Mr. Pope says the "losers" here "are the consumer, who's going to have to pay more for the product, and the livestock farmer who's going to have to buy high-priced grain that he can't afford because he's stretching his own lines of credit. The hog farmer . . . is in jeopardy of simply going out of business 'cause he doesn't have the cash liquidity to even pay for the corn to pay for the input to raise the hog. It's a dynamic that we can't sustain."

Ms. Kissel is a member of The Journal's editorial board.