October 17, 2008
NRF Wants Congress to Pass New Stimulus Pact
The National Retail Federation (NRF) has called on Congress to hold a lame duck session following the November elections so that it can draft and pass a new economic stimulus package.
“The United States is in the midst of a national crisis,” said Tracy Mullin, president and chief executive officer of the NRF. “Extraordinary measures are needed to address this profound economic emergency that has affected every American.”
Ms. Mullin said, “There is hard evidence that the first round of economic stimulus checks were used for good purposes: to pay down debt, to help fund ordinary household expenses, and to purchase necessities. But we believe a second round of economic stimulus is needed and must include relief for the consumer. Increased consumer spending would create demand throughout all sectors of the nation’s economy, from manufacturing to transportation to construction.”?
House Speaker Nancy Pelosi (D-Calif.) recently suggested that Congress should consider a special session to consider a new economic stimulus plan.
The NRF’s call for an economic stimulus comes on the heels of a report by the association predicting retail sales this year will grow at the slowest rate since 2002. The association is expecting holiday sales to increase by 1.9 percent this year.
Discussion Questions: Is a new stimulus package what retailers need at this moment? Will businesses, in the long haul, be better served with more Congressional action or by leaving the situation to market forces? What lessons do you think retailers need to learn from the economic challenges faced in recent times?
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My perspective of this whole thing agrees with that of Warren Buffet. To stimulate the economy you need to give money to people who will go out and spend it. We do not have production problems in the United States, most of our manufacturing plants are underutilized. The challenge is that we need to find meaningful work for all our citizens that provides them enough income to support a “reasonable lifestyle.” Putting money in the hands of people who already have enough to invest in businesses or even start their own does nothing to increase demand. When he first implemented the assembly line, Henry Ford realized he needed to pay the workers higher wages so they could purchase the cars they were producing. Our challenges are not supply, but how to increase demand.
The other factor here is the whole timing of this downturn. We need to help retailers get rid of the holiday inventory buildup that had already begun before the crisis. So, I would recommend we do one more stimulus but make it clear that this is the last.
I don’t know whether we need a new stimulus package or not, though right now I would lean not.
What I feel more strongly about is that I think, along with all the other bubbles of the last few years, there was a store expansion bubble, brought on by generally strong overall economic growth but also, I am sure, the same cheap credit that is causing all the other financial woes. Retailers and developers could throw up stores for years with very cheap money, and damned if they didn’t in crazy numbers.
We have too many retail outlets, which leads to problems of cannibalization, slow/negative same store sales growth, and ruthless price cutting.
While I am sure retailers would love to see their top lines goosed with more government checks–and maybe they should–the best medicine for the bottom line will be the inevitable reduction in store locations that individually and collectively they really need.
The NRF may feel that a well-timed stimulus check will put goodies instead of coal into retailers’ stockings for the holidays. But there is little evidence that the last stimulus did anything other than help people buy food and gas, and perhaps to retire some debt or save the money.
I personally think the government has taken on so much debt to address the credit crunch (justifiably) that this is not the right time for another costly initiative. Keep in mind that $2.79 gas is more beneficial to consumers’ disposable income than a stimulus check.
I think the government should pass on another stimulus package. The last one only handed out a few dollars and only to low income taxpayers. Seems all those government rescue packages only reward those who should not be rewarded. They want to bail out homeowners and banks that were involved in irresponsible loans. Banks and home buyers who did it the right way, 20% or more down, fixed rate mortgage, make their payments on time, etc, they get no bailout. The last stimulus package only rewarded low income tax payers making under $100k. Higher income tax payers got no reward for their contributions to the economy. Seems the more government gets involved in the economy, the worse it gets.
Consumers are a little numb right now. After the government has spent hundreds of millions here and a couple billion there to bail out various institutions, any check the individual consumer may get will look awfully paltry in comparison. This could turn to anger rather than a desire to shop.
Even if consumers do spend the checks with retailers, all it would do is turn the retail sales picture from terrible to bad. What sense does that make for the national economy? I agree with a few of those who have already stated the obvious, no stimulus checks will lead to shakeouts and a natural (as in market-made) restructuring of the various retail segments.
A new stimulus package will do nothing but delay the inevitable. American retailers have been benefiting from American consumers living beyond their means for many years now.
Consumers have mortgaged and remortgaged their homes, tapping out all their home equity while banks have lent at unscrupulously low rates.
It is a recipe for disaster and we all knew it. This consumption based economy has been kept afloat through years and years of low inflation, high employment, easy credit and rising real estate values.
American consumers are tapped out; there will be a consolidation in many industries and we are seeing it starting at the top with the banks and financial institutions. Values are falling, confidence is falling and all of it will serve to deflate the economy for some time to come.
Americans need to consolidate and pay off their debt, over valued markets need to be corrected and an artificial stimulus will do little to help in the long run.
This is the problem with the whole economic crises. Let’s look for a short term fix. Sooner or later we are going to have to pay the piper. NRF is not interested in the country, they are interested in their own pockets.
I don’t see how we can afford to do any more bailouts. There’s little doubt that we could use a shot in the arm for the average consumer right now, but at some point we have to quit living beyond our means. I know that nobody wants to hear that and it’s painful compared to the instant gratification that endless credit provides, but it has to end sometime. Why prolong the inevitable? Isn’t it time to pay up and try to set things on the right course?
I expect to see a significant fallout of retailers after this Christmas season with or without a stimulus package. While I doubt that anyone likes to see that happen, I’m guessing that there is not going to be enough Christmas spending this year to support everybody. The ones that survive will be better for the experience and stronger in the future, with less competition.
Americans’ desire to spend without regard for the consequences is one reason that our country is in this crisis. Every sector of our economy took on extraordinary and unsustainable debt, including Main Street households. Instead of succumbing to a desire to goose retail sales for holiday 2008, the Congress should instead take the longer view and encourage shoppers to live within their means for a few months to improve their financial posture.
So many citizens are incensed that their tax dollars are being used to prop up ailing financial institutions; can you imagine telling Americans that we’re using their not-yet-levied tax dollars to encourage them to spend?
In today’s New York Times OpEd page, Nobel Prize winner Paul Krugman stated that under these economic circumstances we have to look to stimulus and not worry about deficit. The government has already committed up to a trillion dollars for various forms of rescue. A trillion is one-thousand billion, so would several hundred billion more make a difference? Not likely in my mind.
Ms. Mullin notes correctly that the stimulus checks from the spring were used for debt service, household expenses and necessities. That was before the economy got really bad. As I stated on Tuesday, “It is fair to say that the consumer’s situation has not changed in the last six months. If anything, discretionary spending has moved lower on the list of priorities well behind food, fuel and debt service. Any gains that the consumer is able to make…will not change the behavior we are seeing now. Those gains will first go to necessities then to debt service and with the scares of the last few months, even into savings. At the grocery stores, food sales will remain basic. Those retailers who depend on discretionary spending will continue to experience trauma in their businesses.”
If I were directing additional monies to consumers, I would do my best to secure the bottom of the economic ladder. My objective would be to keep people out of even greater tragedy. I would opt for additional unemployment insurance. Does that help retailers, especially ones that base their business on discretionary saving? NO! But it is likely a good dollar spent now, to avoid calamity in the future. An execution of a stimulus package similar to the first will have similar results. Dollars will go to debt service, household expenses and necessities.
The challenge to retailers is to honestly assess the situation. Too often companies, when in difficult situations, merely double down on those activities that they previously used to stimulate business, such as more advertising and promotion. At the retail level, more advertising and more promotion may not move one additional sale. Retailers have to look to continue to deliver ROI by limiting labor and inventory to reasonably meet a new, lower demand.
Paying people to shop did not work the first time around nor will it work a second time around. Consumers mostly wisely used their earlier stimulus checks to pay down existing debt. This would certainly still be the case in the event Congress were to authorize a second direct consumer stimulus payment.
As to Cathy’s comment above: Congress taking the long view and encouraging people to live within their means is a noble thought. But, this is Congress we’re talking about–the first of the big spenders and the ultimate role models for excess and pork.
Retailers need all the support they can get. Consumer confidence is low and we need all the help we can get, to get consumers more confident and get out there and spend.
Any government stimulus package should be in jobs! The Op-Ed in the NY times mentioned above said more government spending to create jobs–rebuilding our deteriorating infrastructure. I think that would mean a natural pick up for retail, if more people stay in good-paying jobs.
When you don’t want to cope with market forces today, you look to government for a stimulant. That’s a condition that has evolved over the past seven decades. Some companies with astute and perceptive managements have succeeded under all economic conditions including the Great Depression. (Go to question #1 and look at the existing retailers that lived through that terrible era.) Back then, I’m told, the dominate American mindset judged bailouts as being unacceptable. Since then we seem to have relaxed our self determination and ability to sacrifice, thereby making government our pampering Papa.
My sense is that what the government has done to date to inject liquidity into the banking system is likely to be pretty stimulative, and impact the economy at large just as quickly as any additional package. I do agree that legislation on additional unemployment compensation and measures to help foreclosed and stressed homeowners.
Over the longer term, monetary, fiscal and regulatory policies will need to be focused on creating incentives to gradually unwind all of the accumulated debt in the economy, from individual debt, to corporate debt to the federal debt. After this crisis, until that happens, economic growth and growth at retail are likely to be pretty sluggish.
I’m glad most of us are in general consensus here. We’re all retail people that could benefit by this, but I must agree with those that support not doing this so that we can balance things out a bit. We truly do suffer from an economy that lusts for “too much”–and we’re all to blame. This may simply be a necessary evil.
#1 economic medicine: more jobs. #2 economic medicine: higher wages. The Great Depression ended when World War II started. The unemployed got jobs and employers suffered through labor shortages. Wages rose.
It helps to have solvent banks and it helps when folks pay their mortgages and credit card bills. The unemployed can’t pay mortgages or credit card bills. Banks won’t be profitable if their borrowers (businesses and consumers) default. Doesn’t matter how much government money gets injected into a bank: without solvent borrowers, the bank isn’t sustainable.
The NRF’s political agenda doesn’t include labor shortage creation. They’re against it. But that’s what helps retailers: paying customers. And the NRF is against minimum wage increases. But higher wages are what folks need to shop.
If unemployment gets bad enough, the only profitable nonluxury stores will be supermarkets and drug stores, because they have government subsidies (food stamps, Medicaid, and Medicare).
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My perspective of this whole thing agrees with that of Warren Buffet. To stimulate the economy you need to give money to people who will go out and spend it. We do not have production problems in the United States, most of our manufacturing plants are underutilized. The challenge is that we need to find meaningful work for all our citizens that provides them enough income to support a “reasonable lifestyle.” Putting money in the hands of people who already have enough to invest in businesses or even start their own does nothing to increase demand. When he first implemented the assembly line, Henry Ford realized he needed to pay the workers higher wages so they could purchase the cars they were producing. Our challenges are not supply, but how to increase demand.
The other factor here is the whole timing of this downturn. We need to help retailers get rid of the holiday inventory buildup that had already begun before the crisis. So, I would recommend we do one more stimulus but make it clear that this is the last.
I don’t know whether we need a new stimulus package or not, though right now I would lean not.
What I feel more strongly about is that I think, along with all the other bubbles of the last few years, there was a store expansion bubble, brought on by generally strong overall economic growth but also, I am sure, the same cheap credit that is causing all the other financial woes. Retailers and developers could throw up stores for years with very cheap money, and damned if they didn’t in crazy numbers.
We have too many retail outlets, which leads to problems of cannibalization, slow/negative same store sales growth, and ruthless price cutting.
While I am sure retailers would love to see their top lines goosed with more government checks–and maybe they should–the best medicine for the bottom line will be the inevitable reduction in store locations that individually and collectively they really need.
The NRF may feel that a well-timed stimulus check will put goodies instead of coal into retailers’ stockings for the holidays. But there is little evidence that the last stimulus did anything other than help people buy food and gas, and perhaps to retire some debt or save the money.
I personally think the government has taken on so much debt to address the credit crunch (justifiably) that this is not the right time for another costly initiative. Keep in mind that $2.79 gas is more beneficial to consumers’ disposable income than a stimulus check.
I think the government should pass on another stimulus package. The last one only handed out a few dollars and only to low income taxpayers. Seems all those government rescue packages only reward those who should not be rewarded. They want to bail out homeowners and banks that were involved in irresponsible loans. Banks and home buyers who did it the right way, 20% or more down, fixed rate mortgage, make their payments on time, etc, they get no bailout. The last stimulus package only rewarded low income tax payers making under $100k. Higher income tax payers got no reward for their contributions to the economy. Seems the more government gets involved in the economy, the worse it gets.
Consumers are a little numb right now. After the government has spent hundreds of millions here and a couple billion there to bail out various institutions, any check the individual consumer may get will look awfully paltry in comparison. This could turn to anger rather than a desire to shop.
Even if consumers do spend the checks with retailers, all it would do is turn the retail sales picture from terrible to bad. What sense does that make for the national economy? I agree with a few of those who have already stated the obvious, no stimulus checks will lead to shakeouts and a natural (as in market-made) restructuring of the various retail segments.
A new stimulus package will do nothing but delay the inevitable. American retailers have been benefiting from American consumers living beyond their means for many years now.
Consumers have mortgaged and remortgaged their homes, tapping out all their home equity while banks have lent at unscrupulously low rates.
It is a recipe for disaster and we all knew it. This consumption based economy has been kept afloat through years and years of low inflation, high employment, easy credit and rising real estate values.
American consumers are tapped out; there will be a consolidation in many industries and we are seeing it starting at the top with the banks and financial institutions. Values are falling, confidence is falling and all of it will serve to deflate the economy for some time to come.
Americans need to consolidate and pay off their debt, over valued markets need to be corrected and an artificial stimulus will do little to help in the long run.
This is the problem with the whole economic crises. Let’s look for a short term fix. Sooner or later we are going to have to pay the piper. NRF is not interested in the country, they are interested in their own pockets.
I don’t see how we can afford to do any more bailouts. There’s little doubt that we could use a shot in the arm for the average consumer right now, but at some point we have to quit living beyond our means. I know that nobody wants to hear that and it’s painful compared to the instant gratification that endless credit provides, but it has to end sometime. Why prolong the inevitable? Isn’t it time to pay up and try to set things on the right course?
I expect to see a significant fallout of retailers after this Christmas season with or without a stimulus package. While I doubt that anyone likes to see that happen, I’m guessing that there is not going to be enough Christmas spending this year to support everybody. The ones that survive will be better for the experience and stronger in the future, with less competition.
Americans’ desire to spend without regard for the consequences is one reason that our country is in this crisis. Every sector of our economy took on extraordinary and unsustainable debt, including Main Street households. Instead of succumbing to a desire to goose retail sales for holiday 2008, the Congress should instead take the longer view and encourage shoppers to live within their means for a few months to improve their financial posture.
So many citizens are incensed that their tax dollars are being used to prop up ailing financial institutions; can you imagine telling Americans that we’re using their not-yet-levied tax dollars to encourage them to spend?
In today’s New York Times OpEd page, Nobel Prize winner Paul Krugman stated that under these economic circumstances we have to look to stimulus and not worry about deficit. The government has already committed up to a trillion dollars for various forms of rescue. A trillion is one-thousand billion, so would several hundred billion more make a difference? Not likely in my mind.
Ms. Mullin notes correctly that the stimulus checks from the spring were used for debt service, household expenses and necessities. That was before the economy got really bad. As I stated on Tuesday, “It is fair to say that the consumer’s situation has not changed in the last six months. If anything, discretionary spending has moved lower on the list of priorities well behind food, fuel and debt service. Any gains that the consumer is able to make…will not change the behavior we are seeing now. Those gains will first go to necessities then to debt service and with the scares of the last few months, even into savings. At the grocery stores, food sales will remain basic. Those retailers who depend on discretionary spending will continue to experience trauma in their businesses.”
If I were directing additional monies to consumers, I would do my best to secure the bottom of the economic ladder. My objective would be to keep people out of even greater tragedy. I would opt for additional unemployment insurance. Does that help retailers, especially ones that base their business on discretionary saving? NO! But it is likely a good dollar spent now, to avoid calamity in the future. An execution of a stimulus package similar to the first will have similar results. Dollars will go to debt service, household expenses and necessities.
The challenge to retailers is to honestly assess the situation. Too often companies, when in difficult situations, merely double down on those activities that they previously used to stimulate business, such as more advertising and promotion. At the retail level, more advertising and more promotion may not move one additional sale. Retailers have to look to continue to deliver ROI by limiting labor and inventory to reasonably meet a new, lower demand.
Paying people to shop did not work the first time around nor will it work a second time around. Consumers mostly wisely used their earlier stimulus checks to pay down existing debt. This would certainly still be the case in the event Congress were to authorize a second direct consumer stimulus payment.
As to Cathy’s comment above: Congress taking the long view and encouraging people to live within their means is a noble thought. But, this is Congress we’re talking about–the first of the big spenders and the ultimate role models for excess and pork.
Retailers need all the support they can get. Consumer confidence is low and we need all the help we can get, to get consumers more confident and get out there and spend.
Any government stimulus package should be in jobs! The Op-Ed in the NY times mentioned above said more government spending to create jobs–rebuilding our deteriorating infrastructure. I think that would mean a natural pick up for retail, if more people stay in good-paying jobs.
When you don’t want to cope with market forces today, you look to government for a stimulant. That’s a condition that has evolved over the past seven decades. Some companies with astute and perceptive managements have succeeded under all economic conditions including the Great Depression. (Go to question #1 and look at the existing retailers that lived through that terrible era.) Back then, I’m told, the dominate American mindset judged bailouts as being unacceptable. Since then we seem to have relaxed our self determination and ability to sacrifice, thereby making government our pampering Papa.
My sense is that what the government has done to date to inject liquidity into the banking system is likely to be pretty stimulative, and impact the economy at large just as quickly as any additional package. I do agree that legislation on additional unemployment compensation and measures to help foreclosed and stressed homeowners.
Over the longer term, monetary, fiscal and regulatory policies will need to be focused on creating incentives to gradually unwind all of the accumulated debt in the economy, from individual debt, to corporate debt to the federal debt. After this crisis, until that happens, economic growth and growth at retail are likely to be pretty sluggish.
I’m glad most of us are in general consensus here. We’re all retail people that could benefit by this, but I must agree with those that support not doing this so that we can balance things out a bit. We truly do suffer from an economy that lusts for “too much”–and we’re all to blame. This may simply be a necessary evil.
#1 economic medicine: more jobs. #2 economic medicine: higher wages. The Great Depression ended when World War II started. The unemployed got jobs and employers suffered through labor shortages. Wages rose.
It helps to have solvent banks and it helps when folks pay their mortgages and credit card bills. The unemployed can’t pay mortgages or credit card bills. Banks won’t be profitable if their borrowers (businesses and consumers) default. Doesn’t matter how much government money gets injected into a bank: without solvent borrowers, the bank isn’t sustainable.
The NRF’s political agenda doesn’t include labor shortage creation. They’re against it. But that’s what helps retailers: paying customers. And the NRF is against minimum wage increases. But higher wages are what folks need to shop.
If unemployment gets bad enough, the only profitable nonluxury stores will be supermarkets and drug stores, because they have government subsidies (food stamps, Medicaid, and Medicare).