Cliff Compromise Could Help Economy, Cost Taxpayers

Posted: January 1, 2013
Published in: St. Louis Post Dispatch
Author: Tim Logan

The deal that was ironed out in Congress over nearly 24 hours Tuesday to resolve the so-called "fiscal cliff" should put the economy in St. Louis, and the nation as a whole, on sounder footing, local economists said.

But probably only for a little while. And your paycheck may suggest otherwise.

The agreement, which the Senate approved in the wee hours of Tuesday morning and the House OK'd as the night drew to a close, would forestall the mix of tax increases and spending cuts that was set to take effect this week, threatening to tip the U.S. back into a recession. If as expected it is signed by President Barack Obama, the deal will raise income and estate taxes on the wealthiest Americans and prolong several popular tax credits.

But it also will end a tax break that's been in place since 2010 that saves the typical family in St. Louis more than $1,000 a year.

The deal spells the end of the "payroll tax holiday," a 2 percentage point reduction in Social Security taxes that was enacted in 2010 to help stave off the recession. As a result, about 77 percent of households nationwide will see their taxes go up this year, according to estimates by the nonpartisan Tax Policy Center. For a family earning the median household income in St. Louis of $51,000, that translates to an extra $1,020 in taxes this year.

So while the fiscal cliff deal will lend some much-needed stability to the economy, said Jack Strauss, an economics professor at St. Louis University, it also could dampen growth, as families have less to spend.

"Incomes have been stagnant or declining for most people," Strauss said. "Now they're going to take this out. A lot of people really can't afford the decrease in their after-tax paycheck."

Other short-term recession-fighting measures survived in the deal, though, including an extension of unemployment benefits, popular tax breaks for children and college tuition and a five-year extension of a credit for the working poor. Several business tax credits were prolonged, too.

"This bill seems to have something for everybody," said Benjamin Ola Akande, dean of the business school at Webster University.

And Akande was hopeful it would have enough to boost confidence in an economic recovery that's been struggling for years to gain traction. Gary Thayer, chief macro strategist at Wells Fargo Advisors in St. Louis, said he, too, thought the deal would ease the minds of investors and executives, at least in the short run.

"This deal is a short-term fix that would prevent a recession in 2013 but is not a grand bargain that would solve many of the long-term debt and deficit problems," Thayer said.

And you can expect those problems will flare up again pretty quickly.

The agreement passed Tuesday merely punts on "sequestration," the massive across-the-board cuts in both defense and domestic federal spending that were part of the August 2011 agreement that created the "fiscal cliff" to begin with. Those cuts could hit hard in St. Louis, where huge employers ranging from Boeing Co. to Washington University Medical School have warned they could lead to furloughs, layoffs and other cutbacks here.

The cliff deal put a two-month stop on those cuts, meaning they'll now come due at the end of February, around the same time the U.S. Treasury is due to run out of money again, likely prompting another vote to increase the federal debt ceiling, which is what led to the creation of the "fiscal cliff" in the first place.

Indeed, Tuesday, even as lawmakers and economists talked about this deal, they were already pointing toward the next round of this seemingly endless fight over federal spending.

"Hopefully this is the last time in 2013 that we're going to have this discussion," said Strauss. "But it's not likely."

Jefferson National Parks Association Adds Seven New Directors

St. Louis, MO, April 24 – The Jefferson National Parks Association (JNPA) today announced the recent election of seven new members to its Board of Directors. JNPA is a St. Louis-based nonprofit organization that supports educational programming, exhibits, special events and site improvements in 10 national parks and public lands throughout the Midwest.  Its contributions are derived from the bookstores and other educational retail operations it runs for the parks.  JNPA’s largest affiliated park is the Jefferson National Expansion Memorial, better known as the Gateway Arch and Old Courthouse in St. Louis.

The newly elected Directors are:

  • Dr. Benjamin Ola Akande, Dean of the George Herbert Walker School of Business and Technology at Webster University;
  • Michael E. Kennedy, Chairman and Chief Executive Officer of KAI Design & Build;
  • Erle Lionberger, community volunteer active in historic preservation;
  • Robert O’Loughlin, Chairman and CEO of Lodging Hospitality Management;
  • Kathy Reeves, Corporate Community Relations Director at Enterprise Rent-A-Car;
  • Rachel Seward, Assistant Vice President and St. Louis Civic Relationship Manager in Community Affairs for Wells Fargo Advisors;
  • Martha Uhlhorn, Owner and President of La Bonne Bouchee Wholesale Bakery and Gourmet to Go.

“We are delighted and gratified that JNPA has attracted such experienced and diverse leaders to our board,” said JNPA Board Chair Michael Hardgrove.  “Their guidance will be invaluable as we continue to look for new ways to support our national park partners in the coming years.”

The seven new board members join 14 other JNPA Directors, including:

  • Michael Hardgrove, Chair
  • Karen Luebbert, Ph.D., Vice-Chair
  • Ivy Neyland-Pinkston, Treasurer
  • Cathy Dunkin, Secretary
  • Tom Villa, Immediate Past Chair
  • Peter Benoist
  • Michael P. Burke
  • Jeannine Cook
  • Tom Irwin
  • Eugene J. Mackey, III
  • Les Sterman
  • Blanche M. Touhill, PhD.
  • The Honorable George H. Walker, III
  • Charles A. Weiss.

David A. Grove serves the organization as President and CEO.

Boycotting BP gas stations would miss the mark, experts say

26-June-2010Published in: St. Louis Post Dispatch Author: Matthew Hathaway
Consumers can change the world simply by not buying — but boycotts don't always work that way.

Twenty years ago, South Africa was in the throes of cultural and economic isolation largely because consumers vowed to punish any companies doing business with the apartheid state. That international boycott is credited with helping bring down the country's racist system, and today a transformed South Africa is the focus of international sports as host of the World Cup.

If South Africa is the best example of just how mighty a consumer boycott can be, the campaign to punish BP might be its opposite - an ineffective response to the Gulf of Mexico oil spill that will most harshly affect small-business owners who had nothing to do with the disaster.

Yet this week, the Facebook page Boycott BP gained its 700,000th supporter.

And, in the real world, plenty of St. Louis consumers have stopped buying from BP stations, said Tracey Hughes, a spokeswoman for Wallis Cos. of Cuba, Mo., a distributor of gasoline to about 60 area BP stations.

"Everybody is feeling the impact, although there are pockets where the consumer backlash is stronger," said Hughes, who said some stations have reported double-digit declines in sales recently.

On Thursday, in a commentary published in USA Today, Public Citizen President Robert Weissman renewed that group's call for consumers to avoid BP stations for at least three months.

Innocents will suffer from a boycott, Weissman acknowledged, but "that can't be reason for consumers to forfeit their collective power to influence or punish bad-actor companies."

For a consumer boycott to work, business must feel its sting, either from lost sales or tarnished reputations, and they need to have a clear path to winning customers back. The apartheid-era boycott worked because it met both these criteria; the BP boycott does not, said Benjamin Ola Akande, the dean of Webster University's George Herbert Walker School of Business and Technology and an expert in energy economics.

Boycotting gas stations flagged with the BP brand is, at most, a symbolic act that will have an insignificant impact on the company's bottom line, Akande said.

That's because BP owns fewer than 200 of about 11,000 stations bearing its logo. Those stations are owned by independent operators, and the gas they sell may or may not have been drilled by BP.

The oil giant does make money from these stations, but the company won't say how much. Industry experts have said that they believe it's insignificant and that the flagged stations' real value to BP are as platforms for corporate marketing.

Under a boycott, the flagged stations could become liabilities. They are the battlegrounds where boycotters can chip away at BP's cultivated public image, or at least that's the position of Public Citizen. In the long run, BP will suffer.

In the short term, the collateral damage of a boycott is overwhelmingly borne by independent operators who had no say in BP's drilling operations or gulf cleanup effort.

"If you're boycotting, you're missing your intended target," said Ronald Leone, executive director of the Missouri Petroleum Marketers and Convenience Store Association. "You're hurting local businessmen, their employees, the people they buy products from ... even the Little League teams they sponsor."

To make any BP boycott even more difficult, the company makes plenty of money from stations not bearing the BP logo.

For instance, angry consumers could end up skipping BP-flagged stations that, in fact, are selling fuel that was drilled by other firms and taking their business to another chain — or a non-branded service station — only to fill up their tanks with petroleum that was drilled, transported and sold by BP.

Patrick Welch, an economics professor at St. Louis University, compares the BP boycott with car buyers shying away from Toyota after that company's recall of more than 8 million vehicles because of unintended acceleration problems.

Toyota must respond to consumers' concerns because it has no other choice. The automaker can't simply sell its inventory to a competitor. But because BP has that option, "it can, to a large degree if not completely, dodge the bullet of a boycott," Welch said.

Leone agrees.

"Let's assume a boycott works, it ultimately isn't going to hurt BP corporate because they'll just sell their crude on the open market," he said. "It's not like the product isn't going to be sold."

Spicy soup is a taste of home


Hot and spicy is nothing new for Benjamin Akande, who cut his teeth on pepper soup.

"They spoon-fed me this soup since as long as I can remember," said Akande, who is from Lagos, Nigeria. "We lived very close to the Atlantic growing up. We'd drive a few miles to pick up fresh seafood every day."

When the Akande family moved to Louisville, pepper soup with fish stayed on the menu, even in landlocked Kentucky.

While his parents pursued graduate degrees, Benjamin studied his favorite subject — history — in elementary school. An economics class in the seventh grade ignited his passion for what he calls the language of business. "I loved economics — I was enamored with the process — how we can elevate and sustain cultures and nations, creating jobs."

His appetite for history and economics dovetailed throughout undergraduate school at Wayland Baptist University in Texas, where he earned a bachelor's degree in business administration. He moved on to the University of Oklahoma, where he earned two master's degrees and a Ph.D. in economics and met his wife, Bola, who was in pharmacy school.

Throughout his college career, he cooked, recalling how his mother had made certain dishes, experimenting and learning. "I'd always watched my mom cook — that was my apprenticeship — and when I went home, I'd watch her more closely, remembering the combinations. But my wife, the ultimate chef — she was my graduate and post-graduate education in cooking," he said.

Their children experiment in the kitchen, too. "My kids are their own individuals — each with different interests. They love music, math, science, theater. They cook, bake cakes. They are finding their own style," he said.

Akande's style includes using combinations of fish such as sea bass, whiting and prawns in his pepper soup.

"The pepper soup — when you first eat it, you eat just the fish, as your mouth gets used to the heat. Then you spoon a little broth with the fish. Soon, you take just the broth — and you enjoy the heat, the taste."

Author offers some tests for nurturing a company

Date: December 14, 2007Publication: ST. Louis Post-Dispatch Section: Business Edition: Five Star Lift Page: B5

Chris Zook, head of Bain and Co.'s global strategy practice, is a seasoned consultant who has dedicated his career to studying why some companies thrive for seemingly an eternity while others fade into oblivion. In his new book, Zook provides a blueprint on how to look deep within organizations to identify hidden or underutilized assets. Zook claims that too many companies are becoming irrelevant and nearing extinction. These companies are unable to find their flaws, and their last resort is based on a hope that their company will become instantly innovative by neutralizing threats without confronting them.

"Unstoppable" boldly predicts that more companies are going to enter a period when their historic core no longer will be sufficient to continue profiting. So how can a company go from unsustainable to unstoppable?

It begins with asking a few simple questions: What is your organization's DNA? What are you really good at? Are you spiraling into crisis? Answering these questions will help define a company's strategic response.

•When followers become leaders. Zook says the best types of followers are those who participate broadly in the market with no differentiation and no sustaining core of their own, followed by those who are brilliant in identifying a growing niche and underserved segment in a market. The third type of followers are new entrants with a unique business model.

•Managing the strategic balance sheet. Zook warns that many companies discover too late that their once-successful growth formula is approaching its limit. Successful companies target new leadership opportunities in the new core instead of chasing hot markets. They seek repeatable formulas for growth and build on hidden assets. Many companies find no viable solution to the collapse of their profit pool, the attack of a disruptive technology or the finality with which their past growth formula suddenly runs out of runway.

•Finding hidden assets. Zook uses the case of the Apple iPod to illustrate how an organization with a declining market presence can be transformed using once-hidden assets. Apple's success came with the launch of the iTunes music store, which, when blended with iPod, enabled iPod sales to take off and attain a 70 percent market share for portable MP3 players, while the iTunes music stores captured 85 percent of the market for download. The combined products and services more than tripled Apple's worth from 2003 to 2006.

Why read "Unstoppable"? I offer four reasons.

•X-ray your organization for hidden assets. The book offers a guide on how to take a closer look at your organization to find your hidden assets.

•Think of capabilities as building blocks for renewal. Leverage your repertoire of hidden assets - undervalued business platforms, unexploited customer assets and underutilized capabilities.

•Give yourself a reality check. Zook claims that knowing where you stand in the market will enable you to find the launch pad for transformation and to appraise the odds of success.

•Don't underestimate the power of focus. Every organization must redefine its business model by moving its strongest capabilities into new markets, being self-aware and demonstrating a willingness to decline attractive opportunities that are traps.


'Unstoppable; Finding Hidden Assets to Renew the Core and Fuel Profitable Growth'

Chris Zook

Harvard Business School Press, $29.95