Feb 13, 2009

The big spenders

I suppose big problems require big solutions, at least that’s what the political world seems to think. Seven hundred eighty-nine billion dollars for an economic stimulus bill that is built on a hope and a prayer is pretty amazing. This piece of wisdom passed in less than a week without any real debate.

I think we can honestly say that the federal government has bet the farm on what I would consider a very short-sighted plan. Obviously, I’m not a fan. The bill for this spending is around $2,656 for every man, woman, and child that is a citizen of the U.S. I wonder, if we pay up front, can we get a discount? The architects of this massive spending program say that it should produce up to 4 million new jobs. When you break that down, it comes to $217,000 per job created, and of course there are no guarantees. I know in my heart that private industry could do better than that, if they were given the proper motivation. For example, lower taxes would stimulate the economy in a matter of weeks versus the several years it will take the feds to implement their programs. This is a trickle-down stimulus bill. This has to be politics at its absolute worst and it reminds me of what President Obama’s Chief of Staff Rahm Emanuel said last December. “You never want a serious crisis to go to waste.”

The real irony to me is that our illustrious leaders spent this kind of money and didn’t even have the courtesy to publish the full text of the bill for the public before it was passed. I did spend several hours reading the initial version of the proposed bill, which was published Jan. 15, but that draft was only worth a paltry $530 billion and, surprisingly, didn’t have much pork in it, at least by my standards.

I did my duty and wrote letters to my senators in disbelief. I did receive the canned reply, but still felt my words fell on deaf ears, or blind eyes. It seemed that the longer this bill was discussed in the House and the Senate, the more support it lost from the general public. A recent Gallup Poll showed 52 percent of Americans think passing this stimulus bill is important, about the same percentage of folks who voted for Obama.

I would have to say that many people wanted some change in Washington, but I don’t think anyone expected anything like this. This stimulus package is a lot to ask from our children and grandchildren, who are either not able to vote or haven’t been conceived yet. But then again, they were already on the hook for my social security, so who’s counting? Getting America back to work is important, and consumer spending runs the world. We have seen this type of unemployment before and the government’s actions appear to me to be an over-reaction.

Not to say that any stimulus is unjustified, but the last $350 billion consumer stimulus bill was not terribly successful. So, it’s hard to see how this next one will work any better, especially when you realize just how long it’s going to take for many of the programs to create the first job. As far as the beef industry is concerned, it is disposable income that sells our product, particularly the middle meats which have been struggling. We’ve been talking about beef demand over the past several months and now that the Choice cutout has fallen to $136, we are starting to see better movement. showed that fourth quarter red meat demand was down 6.7 percent from a year earlier. Fourth quarter 2008 demand was down 13.2 percent from the previous quarter. Beef demand was down just over 2 percent for the year. Pork producers have experienced a greater slide than beef producers.

Poultry producers are the only winners in the protein market, with demand expanding just over 8 percent for the year. They have also seen price expansion in the past few weeks with boneless skinless chicken breast prices up nearly 35 percent. However, chicken legs and thighs are still a drag on that market.

Agriculture didn’t rate very high in the stimulus bill. As far as we can see, the only thing identified in the bill for ag are new computers for the Farm Service Agency, which doesn’t appear to be something that will put many folks to work. We all know that at the end of the day, this bill is about making government alarger and bigger part of our lives. I suppose the good thing is that people are still going to need food. That market will never go away, but I’m more cynical about government than ever before. — PETE CROW