Pat Williams served nine terms as a U.S. representative from Montana. After his retirement, he returned to Montana and is currently teaching at the University of Montana. He occasionally writes op-ed columns, and recently submitted this one on recession spending:
During the early 1950s, the nation, our state, and my hometown of Butte, Montana, were suffering through a year-long economic recession. My parents owned restaurants in Butte and business was hurting, as it was for almost everyone.
Not yet a teenager, I remember my Dad convincing Mom that, “Come spring we should put a new front on the building.” She objected saying the times were too difficult, customers were not walking through the doors, and the restaurant’s rainy-day fund was already being tapped.
Mom was in charge of the menus and food buying in our restaurants. She hired, fired and established the employee schedules. Dad took care of the finances and our investments including silent partnerships in other restaurants. They discussed the idea of a new store front expenditure for several months that winter and Mom finally agreed. Come spring our main restaurant/candy store, which was smack in the middle of downtown Butte, received an expensive face lift—smack in the middle of the economic recession.
I remember Dad telling our customers and insisting to his fellow small business friends along Park Street, “Now is the right time.” His logic was that building contractors needed work, Butte’s people wanted jobs, the appearance of downtown was important, and, he insisted, interest rates were only going up. He firmly believed that one invested in one’s self by investing in your customers and your city.
That time, more than a half century ago, comes to me now because of the recent news that the wealthy are hoarding their money. The Federal Reserve has announced that the nation’s 500 largest corporations are sitting on $1.8 trillion of reserves. At this time of needed spending, smart investing, more jobs, and more money circulating on Main Street, our wealthiest companies have almost two trillion dollars in the mattress.
A business columnist, talking about this enormous surplus recently said this on National Public Radio: “Most of the problems we have today have been brought on by poor allocation of capital by the private sector acting by itself. They did it themselves, and they are trying to divert blame and the attention to those guys in Washington.”
We can all agree that the private sector must act rationally, practice bottom-line restraint, and respect the current reduced demand for goods and services. We also know that the federal stimulus strategies have stopped the dangerous hemorrhaging of financial markets and directly created or protected more than one million jobs. However, government acting alone and without the full and aggressive cooperation of the private sector means a staggering economy and a suffering people.
The truth of it is that neither major corporations nor rich individuals are stepping up to help. The financially well-off—and let’s define that for our purpose as those earning in excess of $210,000 annually—have a major effect on America’s well-being. Fully one-third of products, goods and services are purchased by the top 5 percent of income earners. Those are the very people who have slashed their personal spending.
One of the economic indicators is, of course, housing foreclosures. Most middle-income Americans are trying to pay their mortgages, even on homes that are financially upside down and underwater. Not the rich; they are simply abandoning their second or third homes and dumping the cost on the taxpayer or the local bank. From Silicon Valley to the “exclusive” (gated) communities here in the Northern Rockies, the wealthy are trashing our states’ economies by simply walking away from their legitimate financial obligations.
During the Great Depression FDR said, “We have always known that greed was bad morals; now we know it is bad economics as well.”
Oh, one thing more about my Dad. Following the completion of that new, expensive store front, we had a significant increase in customers saying thanks by enjoying a steak dinner, buying a box of candy, or simply throwing a dime on the counter for an extra cup of coffee.