Steve Odland appeared on CNBC’s The Exchange on October 25, 2019 to discuss how multi-national corporations should deal with China and the trade issues.
Steve Odland appeared on CNBC’s Squawk on the Street on 10/9/19 to discuss The Conference Board’s Global Consumer Confidence Index, trade, recession fears, etc.
Steve Odland appeared on CNBC’s The Exchange on July 9, 2019 to discuss the Fed’s decisions regarding rates.
Steve Odland appeared on CNBC’s Closing Bell 6/12/19 to discuss the US tariffs on China and the impact on the US consumer.
Steve Odland appeared on CNBC’s Worldwide Exchange program on 5/23/19 to discuss the state of US Retail, and what strategies the winners are employing.
Steve Odland appeared on CNBC’s “The Exchange” on 4/11/19 to discuss Health Savings Accounts and their relative merits versus IRAs as a tax efficient vehicle to save and cover out of pocket medical costs.
Steve Odland appeared on CNBC’s Squawk Alley on 12/28/18 to discuss The Conference Board’s Consumer Confidence Index. The consumer data do not forecast an imminent recession.
Steve Odland appeared on CNBC’s Power Lunch program on November 27, 2018 to discuss the Administration’s China negotiations, the Consumer Confidence Index, and the Consumer Expectations Index.
Steve Odland appeared on CNBC’s Power Lunch program on November 16, 2018 to discuss early warning signs of a potential slowdown in the global economy.
Steve Odland appeared on CNBC’s Power Lunch October 30, 2018, to discuss the latest Consumer Confidence Index results from The Conference Board.
Steve Odland appeared on CNBC’s Power Lunch on October 22, 2018 to discuss CEO’s worry about interest rates and their potential effect on the US economy.
Steve Odland appeared on CNBC’s Power Lunch on October 1, 2018 to discuss California’s new law requiring Boards of Directors of public companies domiciled in California to add women to their boards.
Steve Odland appeared on CNBC’s Squawk on the Street program on August 31, 2018 to discuss the new Conference Board survey results on worker satisfaction, consumer confidence, and the economy.
Steve Odland appeared on CNBC’s Power Lunch on July 31, 2018 to discuss The Conference Board Consumer Confidence Index. The July results show continued very high confidence in the economy tied to growth and job creation.
Steve Odland appeared on CNBC’s Power Lunch June 15, 2018 to discuss trade and tariffs.
Steve Odland appeared on CNBC’s Power Lunch 5/31/18 to discuss whether the U.S. is in a trade war and the effect on markets.
Steve Odland, Committee for Economic Development, appeared on CNBC’s Power lunch on April 6, 2018 to discuss fears of a trade war rattling the market and how it could impact the retail industry.
He appeared on CNBC’s Closing Bell on February 20, 2018.
Steve Odland appeared on CNBC’s Squawk Alley on 12/26/17 to discuss holiday retail sales.
- 2017 Holiday retail sales this year projected +4.9%, to highest level in history
- Bricks and mortar retailers expected +2%
- Online projected to be up +18%, now about 10% of total sales
- Mobile drives 23% of ecommerce, 44% of site visits
- 60% of consumers plan to buy online
- Amazon collecting 60-70% online sales increases, 44% share of online retail, projected to exceed 50% in coming years
- WMT online sales +60%, but only to 3% of total; AMZN 10x WMT online
Steve Odland appeared on CNBC’s Squawk Alley on August 22, 2017 to discuss the relationship between the Administration and CEOs, as well as the role of CEOs in the debate over political issues.
Steve Odland appeared on CNBC’s Squawk Box on August 17, 2017. Commenting on the Manufacturing Council and the Strategy & Policy Forum disbanding, he urged business leaders to continue to engage and focus on policy, not politics.
Steve Odland appeared on CNBC’s Closing Bell August 16, 2017 to discuss the disbanding of the Manufacturing Council and the Strategy & Policy Forum in the wake of the Charlottesville events and Administration reaction.
Don Peebles, CEO of Peebles Corporation, and Steve Odland, Committee for Economic Development CEO, discuss how President Trump’s new Chief of Staff John Kelly might control the White House chaos and get the agenda back on track.
From CNBC’s Power Lunch Program on July 31, 2017.
Steve Odland appeared on CNBC’s Squawk Alley on June 16, 2017 to discuss Amazon’s purchase of Whole Foods. The acquisition is an inexpensive way for Amazon to acquire a high quality perishables distribution system with 450 brick and mortar sites in 42 states. This opens the door to a $1T non cyclical food industry in the US for Amazon, and will help them deepen share of wallet among current customers as well as access new customers with a much higher shopping frequency that their average customer.
Steve Odland appeared on CNBC’s Power Lunch on May 10, 2017 to discuss the Administration’s dismissal of James Comey and the impact on policy in Washington.
Steve Odland appeared on CNBC’s Squawk On The Street on April17, 2017 to discuss the series of PR issues at United Airlines.
Steve Odland appeared on CNBC’s Power Lunch on April 11, 2017 to discuss the Administration’s meetings with CEOs and what are the focal points. The national debt is the key issue, and tax, regulatory, and healthcare policies need to be developed to drive GDP growth to grow our way out of the debt.
Steve Odland appeared on CNBC’s Power Lunch program on April 4, 2017 to discuss the new Administration interactions with CEOs, immigration, H1-B visas.
Steve Odland appeared on CNBC’s Power Lunch program march 6, 2017 to discuss the management style of the new Administration.
Steve Odland appeared on CNBC’s Squawk on the Street on 2/21/17 to discuss Retail sector performance and the proposed border tax.
Steve Odland appeared on CNBC’s Squawk Box February 6, 2017 to introduce the new book Sustaining Capitalism. Business leaders need to re-engage in the public square to work with elected officials and drive public policy reforms to ensure capitalism is sustained over the long run.
Steve Odland appeared on CNBC’s Squawk On The Street to discuss the meetings between CEOs and the new Administration. 2/2/17
Steve Odland appeared on 1/4/17 on CNBC’s Power Lunch to discuss how business leaders should engage with the new Trump Administration.
Steve Odland appeared with Yale’s Jeff Sonnenfeld on CNBC’s Power Lunch 12/29/16 to discuss how CEO’s should engage with the new Trump Administration.
Steve Odland appeared on CNBC’s Squawk Box on 12/28/16 to discuss holiday retail trends, consumer confidence, and the impact of online players on bricks and mortar retailers.
Steve Odland appeared on CNBC’s Squawk Alley on December 23, 2016 to discuss retail trends, and the possible policy impact of the new Administration and Congress on retail.
Steve Odland appeared on CNBC’s Closing Bell on December 6, 2016 to argue that trade lifts people and economies, that import tariffs reduce trade and are a tax on consumers and also input goods, and ultimately reduce manufacturing and exports. All in all, bad for the US economy. We need to address the issue through tax and regulatory reform instead.
Steve Odland appeared on CNBC’s Power Lunch show 12/2/16 to discuss the President-elect’s deal with Carrier. While this met his “deal maker” persona and met commitments made during the campaign, this strategy is best left to state and local governments. Ultimately the federal government needs to fix the tax and regulatory policies which have led to the loss of jobs and diminished business growth.
Steve Odland, former Office Depot CEO and Committee for Economic Development president and CEO, appeared on CNBC’s Squawk On The Street 11/23/16 to discuss the retail sector ahead of Black Friday and following the 2016 election.
Steve Odland appeared on CNBC’s Power Lunch November 18, 2016 to discuss CEO reaction to the new Administration.
Our new book, Sustaining Capitalism: Bipartisan Solutions to Restore Trust & Prosperity, now is available on Amazon.
In the wake of the financial disruptions of the last decade, most notably here in the United States but also in many other developed and developing free-enterprise economies, the most basic optimistic assumptions and attitudes about growth and prosperity have eroded. Today’s economy and society are reminiscent of the United States in the 1930s when fear begat fear, and the economy remained stagnant until the onset of World War II shocked it to life. People talked then of a “crisis of capitalism,” and believed that the booming wartime economy could fall right back into the Great Depression when the war ended.
And that is where we, the Committee for Economic Development (CED), enter this story. This book takes its inspiration from CED’s founding in 1942, when a small circle of U.S. business leaders gathered to identify solutions that would restore order to a global economy. Similarly, it was in response to a more recent crisis in American capitalism, following the financial downturn of 2008, that CED launched a multi-year research project on sustainable capitalism. This book, designed for business leaders and policymakers, is the culmination of those research efforts. Its publication appropriately coincides with the 75th anniversary of CED.
We at CED see an urgent need for revisions in both business practices and public policy if our economic system is to reestablish consistent economic growth and regain the trust of the American public. We write this book as our contribution toward resuming respectful dialog among what have become disparate and distrustful public factions. And we hope to convince our fellow business leaders that we need to engage the entire business community in public dialog and dedication to private best business practices. In the chapters that follow, we remind our readers of why the free enterprise system has earned—and deserves—its reputation as the preeminent form of economic organization, respond to what we believe are inaccurate accusations toward that system, and focus on remedies to legitimate concerns.
The analyses and recommendations presented in this book, aligned with other activities the CED is undertaking in connection with its 75th anniversary, underscore our fervent belief in the free-market economic system—our nation’s brand of capitalism, which has brought wealth and higher living standards to the United States and countries throughout the world. We see no more important task than to pursue CED’s ideals: long-term economic growth; efficient fiscal and regulatory policy; competitive and open markets; a globally competitive workforce; equal economic opportunity; and nonpartisanship in the nation’s interest. In short, we seek to make American capitalism sustainable, and to unite Americans of differing persuasions behind the core principle that the U.S. free-market economic system can be made to work for all of us.
Although the term “sustainable” has environmental connotations today, we use the word in its more traditional business sense, meaning long-term successful duration. We do not directly address environmental sustainability in this volume.
Steve Odland appeared on CNBC’s Squawk on the Street on November 10, 2016 to discuss the election of Donald Trump and the likely policy focus of his Administration.
Steve Odland appeared on CNBC’s Squawk On The Street August 18, 2016 to discuss Amazon’s success and softness in other retail.
Steve Odland appeared on CNBC’s Power Lunch on July 12. 2016 to comment on the JP Morgan plan to raise salaries for the lowest paid employees in the firm.
Steve Odland appeared on CNBC’s Squawk on the Street program june 15, 2016 to discuss the BRT survey of CEOs regarding the economy.
Steve Odland appeared on CNBC’s Squawk On The Street on May 11, 2016 to discuss the Staples-Office Depot deal as well as Macy’s first quarter results.
Steve Odland appeared on CNBC’s Power Lunch 4/11/16 to argue that the corporate tax code is broken and needs fundamental reform.
Steve Odland appeared on CNBC’s Power Lunch on April 5, 2016 to argue that executive compensation should be tied to long term shareholder value creation.
Steve Odland appeared on CNBC’s Power Lunch on April 5, 2016 to discuss Corporate Inversions and argued that 1) companies are following the law; 2) politicians should stop the name calling; and 3) Congress needs to fix the underlying tax code.
Steve Odland appeared on CNBC’s Power Lunch on 3/24/16 to discuss whether America needs a CEO in the White House.
Steve Odland appeared on CNBC’s Power Lunch on 3/24/16 to discuss the attack on Yahoo by activists.
Steve Odland appeared on CNBC’s Power Lunch on 3/15/16 to argue that while normally executive compensation should be tied to creation of shareholder value, in the case of Chipotle, they need a higher focus on food safety to deal with the acute issues facing that company and perhaps compensation should be at least partially based directly on measurements related to safety.
Steve Odland appeared on CNBC’s Squawk On The Street 3/11/16 to argue that businesses simply follow the laws passed by Congress. Politicians should stop bashing business for the outcomes but should simply change the laws instead.
Steve Odland appeared on CNBC’s Squawk On The Street March 10, 2016 to discuss the 2016 U.S. Presidential Elections.
Steve Odland appeared on CNBC’s Power Lunch program on January 13, 2016 to discuss GE’s move of their headquarters from Connecticut to Boston.
Steve Odland appeared on CNBC’s Fast Money Halftime Report on November 25, 2015. He argued that retail inventories coming out of Q3 were high, trends were poor in most areas of retail, and so margins were going to be pressured. Winners currently are mobile, web-based, anything auto, anything, home improvement, and fast fashion.
Steve Odland appeared on Squawk On The Street on CNBC 11/13/15 to explain that retail sales misses with large inventory builds will create the need for retailers to drastically cut prices for clearance and thereby reduce retail margins for the holiday selling season.
Steve Odland appeared on CNBC October 26,2015 to discuss the Valeant Pharmaceutical situation. The independent committee of the board will need quickly to investigate the issue with Philidor and communicate openly and transparently to their customers and the investment community.
Steve Odland appeared on CNBC Wednesday, October 7, 2015 to discuss the VW Supervisory Board meeting, YUM, and the $2T in cash trapped offshore on US corporate balance sheets.
On September 25, 2015 Steve Odland appeared on CNBC to discuss China and Volkswagen.
Steve Odland appeared on CNBC Power Lunch on September 24, 2015 to argue that China is an important trading partner, business partner, geopolitical ally, but that they need to act responsibly when it comes to cyber security, counterfeiting of goods, and intellectual capital.
Three Steps Congress and the President Must Take to Energize Job Creation
We’re living in an economic twilight zone. A seemingly healthy economy is seen from afar; one with rising wages and a dropping unemployment rate that now stands at 5.3% – within the range of what’s considered to be full employment. But when you look up close you see an America that’s nowhere close to firing on all cylinders:
- More than one in four of the unemployed, over two million people, have been looking for work for six months or more.
- Nearly 94 million people over age of 16 are outside the workforce—a record high.
- One in seven Americans still lives in poverty.
- Close to a million more people work part-time than before the Great Recession but want to be employed full-time.
- GDP growth is stuck in neutral at under 2%.
Our economy needs to expand faster and we need more full-time job creation. Congress will return from recess next week. Together with the President, they should take up an agenda with the following three steps – all of which have bi-partisan support – to ramp up job creation.
- Lift the Oil Export Ban
Dating back to the ‘70s fuel crisis, the U.S. energy sector is still barred from selling crude oil outside the country, with few exceptions. No longer does this make sense from an economic or a national security standpoint. Our newfound capabilities to efficiently extract energy from shale, of which we have in abundance, have helped put America at the top of the pack in oil and gas production.
It’s estimated that lifting the ban would lead to approximately 400,000 jobs being created annually from 2016-2030, along with adding $86 billion to our gross domestic product. To boot, national, state, and local governments, many of which suffer from strained coffers, would reap a combined $1.3 trillion in revenue. Finally, lifting the ban would contribute to lower gasoline prices and increased American energy security.
2. Reform the Corporate Tax Code for Businesses Large and Small
The U.S. corporate tax code makes our companies uncompetitive. At 35%, the tax rate is the highest among industrialized nations. U.S. multinational companies have an estimated $2 trillion in earnings currently trapped overseas. Just enacting a repatriation tax holiday could bring well over a half trillion dollars into the country. But the rate must be lowered permanently to incentivize corporations to invest and create more U.S. jobs.
Improving the individual tax code is equally important for job creation. Over half of the private sector workforce is actually in smaller companies – LLCs, LPs, etc. – that pay income tax at the individual rate. This rate tops off around 40% but can rise to 50% or more when state income taxes are included. Given that more businesses are now dying than being created, and that most small businesses – the sector accounting for two-thirds of net new jobs – pay at the individual rate, Congress and the President must modify the structure to lower the cost of doing business and make creating jobs easier.
3. Nurture Innovators and Entrepreneurs, Including Immigrants
Today, the U.S. grants less than one in ten green cards for economic reasons, yet some international competitors welcome up to half their immigrants for that purpose. Celebrated as the land of innovation, the rate of start-up creation in America actually has been declining for the last few decades.
Despite restrictive policies, foreigners who have been allowed into the U.S. have made immense economic contributions. A 2011 report suggests that nearly half of the top 50 venture-backed start-ups were founded or co-founded by immigrants. Another study indicates that nearly two jobs overall are created in industries associated with computers and engineering with the entrance of every one immigrant with a high-skilled work visa in those industries. Moreover, while immigrants comprise just over a tenth of the population, they account for about a fifth of small business owners. While comprehensive immigration reform is at a standstill, Congress and the President can increase job creation through legislation increasing visas and green cards to foreign innovators and entrepreneurs.
Implementing these three proposals by no means will cure all of our economic ills. But harnessing our abundant energy, making fixes to create a pro-growth tax code, and welcoming the best and brightest foreigners to apply their talent here will take a significant step toward restoring the dynamism that the U.S. economy can – and should – achieve.
Steve Odland, a CNBC contributor, is CEO of the Committee for Economic Development and former CEO of Office Depot and AutoZone.
In this appearance on Varney & Co. on Fox Business Network, 6/25/15, Steve Odland commented that the Supreme Court ruling regarding the Affordable Care Act cements Federal control over healthcare.
Steve Odland Appeared on Fox Business Network’s Varney on 6/10/15 to discuss the new Department of Labor rule to extend overtime pay to all those making under $52,000 per year. This rule, if implemented, will raise compensation for some but the increased cost will cause businesses to reduce hours, eliminate jobs, automate positions, etc. and hurt the very people they are trying to help.
Steve Odland explains how the economy is not doing well driven by current public policy. This from Varney & Company on Fox Business Network June 1, 2015.
On May 8, 2015, Steve Odland, the CEO of the Committee for Economic Development, appeared on Varney & Co. to discuss the April jobs report along with the recent UK elections. On the election front, Steve described why the recent outcome in the UK may very well be a harbinger of what’s to come politically in America. In regard to the jobs report, he noted that while April’s employment numbers were decent, the long-term economic outlook remains a concern. Steve concluded by citing a host of policies that Congress must reform so the economic dynamism that we’re capable of achieving is realized.
Steve Odland appeared on CNBC’s Closing Bell May 11, 2015, to discuss the new practice by Zappos.com to eliminate management layers and create “holacracy” or self-directed work teams.
Steve Odland appeared on Fox Business Network’s Varney and Company on 3/23/15 to discuss Google’s challenge from the Federal Trade Commission and criticism of potential crony capitalism.
Steve Odland appeared on Fox Business Network’s “After the Bell” program on March 12, 2015 to discuss retail sales and the economy. Retail sales, 70% of U.S. GDP, have declined sequentially for three straight months. Some of this is due to weather, and the gas price bump versus the dramatic declines of six months ago. But a longer term trend is the impact of deleveraging by the consumer. Consumers are devoting more of their discretionary income to paying down household debt. This is resulting in fewer dollars being expended in the retail sector.
Steve Odland appeared on Cavuto on the Fox Business Channel January 27, 2015 to argue that further health care reforms are necessary to lower costs and increase access.
Steve Odland appeared on the Fox Business Cavuto show on January 13, 2015 to discuss Aetna’s move to increase their “minimum wage” to $16 per hour. Also discussed in a second segment was the Administration’s announcement of support for a free community college education.
Steve Odland appeared on Fox Business Network’s Cavuto show on December 2, 2014 to discuss the $18T in public debt. Without entitlement reform, our debt will grow from its current level of 75% debt/GDP to over 100% and all of the federal discretionary spending will go to paying the interest on the debt. Every dollar of debt is a future promise to pay. Stated differently, this generation of retirees are going to leave Millennials with an untenable amount of debt.
In this Fox Business Network appearance with Stuart Varney on 10/17/14 Steve Odland argues that we need leadership, not a Czar for the Ebola crisis. This leader needs to bring together the government, medical, and security communities in a collaborative fashion rather than dictate political outcomes.
In this 10/13/14 Cavuto appearance on the Fox Business network, Steve Odland argues that the lack of leadership from Washington is leading to a lack of trust among Americans and is rattling markets.
Brick And Mortar Retail Still Relevant In A Digital World
iPhone 6: Full of Features But Android Is By Far And Away #1
iPhone 6 or Alibaba: Which Should You Line Up For
Larry Ellison Steps Down: What Does this Mean For Oracle
How Do CEO’s Manage Currency Risk?
Steve Odland appeared on Varney & Co. on the Fox Business Channel, September 3, 2014 to discuss the minimum wage debate. Government and business leaders need to de-politicize this issue and focus on creating equal opportunity for people to achieve the American Dream through education and hard work.
Steve Odland appeared on Fox Business’ Cavuto show on August 29, 2014 to talk about leadership. Washington needs to step up and commit to a course of action or leave a vacuum that bad actors will fill.
In this 8/4/14 appearance on CNBC’s Squawk On The Street, Steve Odland discusses the state of the economy, government policy, and business’ uncertainty. Government policy is causing businesses to hold back on investment, thereby slowing the rate of job growth and the economic recovery.
In this appearance on CNBC’s Closing Bell on July 14, 2014, Steve Odland argues that despite the new jobs added last month, the U.S. economy continues to struggle. GDP growth likely will be flat for the first half in total and up around 1.5% for 2014. This level of growth and job creation has us treading water and only absorbing new entrants to the workforce, not raising overall employment levels.
In this Varney & Co. appearance on Fox Business Network Steve Odland discusses the potential for the U.S. to slide into another recession. This clip appeared on June 26, 2014.
Steve Odland discusses retail trends in the first part of 2014 on this Fox Business After the Bell segment with Liz Clayman on May 23, 2014.
Steve Odland discusses India’s newly-elected leader and his pro-business stance on Fox Business Network’s Opening Bell with Maria Bartiromo on May 16, 2014.
Steve Odland discusses the state of CEO pay on Fox Business Opening Bell program with Maria Bartiromo on May 16, 2014.
Steve Odland discusses the state of the consumer on Fox Business Opening Bell program with Maria Bartiromo on May 16, 2014.
Published on Apr 11, 2014
In an effort to maintain a high level of employees who are happy in their jobs, Amazon.com is offering to pay unhappy employees $5,000 to quit. Dr. Gina Loudon and Steve Odland join FBN’s Neil Cavuto to weigh in on the pros and cons of this idea.
In this appearance on After the Bell on Fox Business Network on March 13, 2014, Steve Odland explains how February 2014 retail sales grew by only .3% and January sales were adjusted down to -.6%. So unfortunately, while February looks a little better, January became worse so in the past quarter retail sales in total still are down. This is an issue since 70% of our GDP is reliant on consumer spending and retail sales are the earliest predictor of GDP trends.
Weather clearly was an issue and while some of those sales will bounce back, some will be lost permanently. Luxury goods and E-commerce sales are doing well while most mass merchants and department stores are not. This indicates that those with money at the high end are spending but the mass markets are not. Clearly, economic weakness is the over-riding concern long term as the weather picture will ease after short-term impact.
- Experts say that 30% of our GDP is vulnerable to weather
- Weather in January hit GDP by about a half percentage point
- With February storms, could hit another half point dragging Q1 GDP below 3% to perhaps 2%
- Significance is driven by where the weather happens. Upper Midwest and Great Lakes regions are accustomed to it and so less impact
- But these storms hit broadly across the eastern half of the US with majority of population and significant percent of GDP
- Weather has significant impact on retail; and consumer is 70% of GDP
- In retail sectors like food, demand gets compressed to pre and post storms
- Hurts restaurant sales—permanent loss of sales
- Hurts all discretionary sales. Historically some of that came back, but not as much any more
- Sales get shifted now to online; that trains people to move more from bricks & mortar to online permanently
- So bad weather in general is bad for traditional retailer and could be permanently damaging while good for online and permanently impactful
- Inclement weather has a way of prioritizing consumer spending. Large retailers like Home Depot, Walmart, grocery stores and gas stations tend to do well leading up to large storms because consumers feel the need to stockpile “essentials” like food, gas, and home supplies.
- For brick and mortar stores, these winter storms have no doubt led to plunging sales. Businesses which heed warnings to close for safety reasons lose days of profits.
- For southern states, the weather has been paralyzing. But, we could see nuances in different parts of the country. Many states that are accustomed to the weather are likely to rebound faster.
- But, there is certainly a correlation between weather and sales. In March of 1993, a blizzard forced retail sales to drop 1%. And in late December of 2010, a major storm in the northeast cost retailers $1B. It’ll be interesting to see estimates from this year.
- The National Retail Federation predicted that sales would rise 4.1 percent in 2014, outpacing 2013’s 3.7 percent growth last year.
- Higher than normal heating bills could be the cause of lower consumer spending.
Holiday sales grew only 2.7%, the lowest level since the depth of the Great Recession in 2009. And this is on top of a weak year ago. Further, GDP grew $4.1% in the third quarter mostly due to inventory build up in advance of the holiday season. So large inventory less weak sales equals surplus! This should lead to large January markdowns.
We’re stuck in a five year pattern of very slow growth while we have trillions of dollars held in cash on consumer and business balance sheets. This means people don’t have the confidence to invest. And the primary reason for that comes back to uncertainty over government policy: taxation, debt, deficit, entitlement reform. Businesses can’t plan since they don’t know what will be their costs, especially on the labor side. We need government economic reform to drive certainty and unleash investment.
In this segment on the Cavuto Show with Charles Payne on December 23, 2013, Steve Odland discusses the Target credit card data breach and what steps retailers and consumers can take to safeguard their data.
In this appearance on Varney & Co. on December 16, 2013, Steve Odland says that the only way traditional bricks and mortar retailers can survive long term versus online retailers is to create a compelling shopping experience, get competitive on pricing, and create an online experience of their own.
In this appearance on Cavuto on October 28, 2013, Steve Odland argues that the ACA government website is a disaster–but a man-made one. Time and money will fix it. But the larger issue is whether this portends the kind of governance we will see around our healthcare once new coverage takes effect. More to come.
What the Budget Conference Can Accomplish
This post assesses the task facing the budget negotiators on Capitol Hill. It concludes that those negotiators could achieve real progress by laying out a budget plan based on those fundamental issues on which the two parties should be able to agree. So rather than trading mini-concessions that would have little long-term payoff, the two sides instead should build the framework of a plan that would have true ultimate beneficial impact.
By Joe Minarik, SVP and Director of Research, Committee for Economic Development
With the debt limit / shutdown standoff now on temporary hold (thank goodness), attention has shifted to the newly appointed conference committee for the fiscal year 2014 budget resolution, whose formation was a part of the shutdown-settlement deal. This conference committee is just a bit late – given that it was supposed to produce a resolution to be passed by both chambers of the Congress back on April 15, and the fiscal year already is more than three weeks underway; but better late than never.
In fact, the budget conference committee faces a formidable task. Job one will be to find a way past the new deadlines of January 15 (when the continuing resolution for the annual appropriations expires, and also when the second round of the budget “sequester” kicks in), and February 7 (when the Treasury again hits the debt limit). These deadlines might suggest a game of small-ball – finding a few dollars here and a few dollars there to justify another punt, like the one that was played a couple of weeks ago.
But small-ball far understates the occasion. The last few months have been a disaster for the economy and for U.S. business. Both businesses and households reacted to the uncertainty of the indefinite shutdown and the impending default by going into a freeze – businesses on hiring and investing, and households on spending. Meanwhile, government employees who weren’t getting paid and government contractors who were in economic limbo were not engaging in much commerce either. All of this scrubbed off some of what little momentum the already stumbling economy had. Washington cannot revert to this self-destructive pattern barely a quarter of a year later, when appropriations could again expire, and the debt limit could again constrain the nation’s ability to pay its bills. In fact, any hint now of a relapse into shutdown showdown and default deadlock could impose an even greater economic toll. The nation – in the person of the budget conference committee – must find a better way.
The suggested game of small-ball would exchange a few dollars of entitlement (or “mandatory”) spending cuts for relief from a few dollars of appropriated (or “discretionary”) spending cuts that were mandated by the 2011 spending caps and the sequester. But just about everyone understands that such a game of small-ball today would be a waste of time. On the discretionary side of that transaction, the Congress could argue about the levels of the statutory caps on appropriations, but just about everyone agrees that the current cap levels are too low. Why? People differ, but many say that the defense levels are too low; others say that the non-defense numbers are too low, and still others say that both category caps are too low. Taken together, these three groups almost certainly constitute a congressional majority. And you can add to those a certain majority of economists who say that the constraint on appropriations meaningfully holds back an already weak economy.
The proof of all this? The House could not pass appropriations bills at those caps. In the months before the shutdown, the House and the Senate were in a battle over appropriations levels. The House customarily acts first on appropriations, and it jealously guards that prerogative. Nothing would have strengthened the House’s hand more than completing all of its bills. Yet it could pass only the easiest four (Defense, Homeland Security, Veterans, and Energy & Water) of its 12 required bills. When the time came just before the August recess to consider the first controversial bill – for the Departments of Transportation and Housing & Urban Development (THUD) – the process fell to a halt. House Appropriations Committee Chairman Hal Rogers (R-KY) publicly acknowledged that the sequester was not viable. So appropriations need to be higher than the sequester level to attain a majority in the Congress, and to fund levels of government services that the Congress perceives to be adequate.
And then on the entitlement side of that transaction, those small cuts, by definition, would not make even a dent in our large long-run budget problem. What we really need instead – as is recognized on both sides of the aisle – is fundamental reform of at least the three major budget components: taxation, Medicare, and Social Security. And if one purpose of eliminating the sequester cuts is to provide some stimulus for the economy, then offsetting that sequester relief with cuts elsewhere in the budget would precisely offset the stimulus, accomplishing a net nothing. A sequester-for-entitlement trade might be a political “confidence builder,” but as small-ball it would build little confidence. We have a big long-term problem which is not amenable to a quick small-ball solution.
But what more meaningful solution might possibly be achieved, given the hostility and mistrust that arose from the just-paused shutdown and debt-limit crisis?
Clearly, satisfaction cannot be guaranteed. If there were some sure-fire political and substantive winner, it would have been adopted long ago. Reducing the budget deficit means cutting spending or raising taxes (or both), and neither is fun. And the conference committee has far too little time to achieve a “grand bargain.”
But let’s take a different approach toward this problem: What are the elements of a solution on which the two sides agree? Can the conference committee set down those elements, and thereby establish the minimum standards for the two sides to meet in the hard, time-consuming work that must follow over succeeding months and years?
Here is how such a process might work:
The budget conference committee should start (more steps follow) with a realistic level of the discretionary spending caps – approximately equal to turning off the fiscal 2014 and subsequent rounds of the sequester, and thereby writing new appropriations caps for the next 10 years at those levels. A majority of the Congress clearly agrees that raising the caps is inevitable. It certainly would remove a major roadblock to a final resolution of the 2014 budget dispute. Responsible adults who want to achieve a successful agreement would acknowledge that broad consensus, just do it, and move on to resolve their other differences.
An immediate counter-reaction from some would be to start a fight over the division of that appropriations relief between the defense and non-defense parts of the budget. The conference committee should resist that impulse. A fight over the split between defense and nondefense now would threaten all progress. What the economy needs immediately is a step forward toward stability and predictability. Continued wrangling over a decision that cannot be finalized in the short time between now and the end of the year would send a signal that would be 180 degrees wrong, and counterproductive. The two parties should begin a process of reconciliation by formalizing their agreement where they do agree. Beyond the legislation for the current fiscal year (2014), the fight over the defense share of total appropriations can be fought later. For 2014, where a decision must be made to close out the appropriations process, the conference should simply accept the current-law defense vs. nondefense split, and move on to writing the most comprehensive appropriations bills possible at this late hour.
That first part of the budget conference agreement would settle the dispute for the short term. The second part of the agreement (I will sneak in the third part below) should look to the truly crucial question, which is our long-term budget crisis.
Even the vast majority of those economists who are the most bearish on the immediate economic outlook acknowledge that the nation cannot go on indefinitely with a public debt that is growing faster than our collective public income – or in the accepted jargon, with a rising ratio of the federal debt to the gross domestic product (GDP). One response to that debt threat is to bury your head in the sand. You can take that approach to a leaky roof on your house, or to a leaky engine or transmission in your car – but I would not recommend it, and most Americans would not accept it from their “leaders.” The obvious reason is that the damage continues to worsen as you procrastinate, and so the ultimate cost of the repair keeps going up. The result for the federal budget is the same as for your home or your car.
It is certainly true that the members of the budget conference will not solve and resolve the massive and complex long-term budget problem between now and December 15. But can’t they at least agree on the maximum acceptable path for the debt?
So step two of the agreement is simply to set down how much debt we are willing to tolerate. Right now, the projections of the non-partisan Congressional Budget Office say that by 10 years from now, after a brief respite over the next few years, the debt will be in excess of 71 percent of the GDP, and it will be rising without limit. The nation’s finances will be a heart attack waiting to happen. The chart below shows one idea of an alternative path, a nomination for the maximum amount of debt that the nation should be willing to accept. By 10 years from now under that alternative path, the debt will be only 65 percent of the GDP – much higher than in our best economic years, but lower than where we are heading now – and it will be falling, not rising, which is the key. The falling trend will give us some margin for error in case there is some economic bad news in those next 10 years.
The trick here is that by setting down that maximum acceptable debt path, and having already chosen the spending caps for the annual appropriations, the budget conference will have determined the amount of budget savings necessary from the rest of the budget – everything not included in the annual appropriations bills. This is part three of a potential agreement by the budget conference, based on simple issues where the two political parties should be able to come together.
The result, incidentally, will be much like the budget system that was agreed to by Republican President George H.W. Bush and a Democratic Congress in 1990 – and which was subsequently credited by many authorities, including former Federal Reserve Board Chairman Alan Greenspan, for leading to the balanced budgets of the late 1990s. The only difference is that the 1990 budget process asked only for future budget action to be “deficit-neutral” – to “pay as you go,” which led to the shorthand name of “paygo.” This new system would require future action actually to reduce the budget deficit, which might be called “save as you go,” or “savego.”
Again, facing this approach, there will be Washington players who reflexively will want to start a fight. Should those budget savings come from tax increases, or entitlement benefit cuts? So the budget conference will face a choice: Do we want to go up in flames over a conflict that we cannot possibly resolve in less than two months; or do we want to agree where we can, and leave the toughest questions until they need to be resolved?
Every American can make his or her choice of the better answer. I will vote for option two. There are those for whom “consensus” and “compromise” have come to be synonymous with “capitulation” or even “treason.” But down that road lies only defeat and decline. The debt problem truly is make-or-break for this nation. If our debt continues to grow faster than our economy, then at some point, the world will begin to question our ability and our willingness to make good on our debts. The shock at that moment will crack the American economy and harm every citizen. We can avoid that moment merely by acknowledging the threat and laying down a plan, and sticking to it.
There are numerous technical questions behind such a budget plan. Perhaps the most prominent would be: How soon should the called-for budget savings begin? The answer can be debated, but the numbers embodied in the chart above assume that the first gradually phased-in budget savings do not begin to arrive until fiscal year 2016 – by which time the Federal Reserve is widely expected to be withdrawing its highly accommodative monetary policy. The Fed therefore could offset the macroeconomic impact of the budget tightening suggested here by tightening monetary conditions more slowly.
Sticking to this path will not be easy. Achieving those long-term budget savings will require fundamental reforms. But that is not news. That is merely facing up to the stains on the upstairs ceiling or the puddle of oil on the garage floor, and taking on the problem before it gets even worse.
Each one of a million Americans would be willing to step forward with his or her own personal budget plan, and each of those Americans would he happiest if the debt were addressed his or her own way. The problem is that we do not need one million different plans each supported by one American; we need one plan supported by a majority of Americans (or really, a majority of the Congress, and the President). That one plan certainly will not make everyone happy. But in all likelihood, the majority of American households and business leaders would be much more confident than they are today in making long-term economic commitments – like hiring, or investing, or buying new homes or automobiles –if they saw that a majority of the Members of Congress had set down their minimum standards for a budget solution, and thereby made a public commitment to meet those standards in the coming years. It is the least on which a group of responsible adult leaders should be able to agree.
In this interview on CNBC on 10/21/13 Steve Odland argues that consumer confidence is poor and that is negatively impacting consumer spending (70% of GDP) and small business investment. Government policy needs long term change to improve confidence: long-term tax, social security, and Medicare reform all are needed. A framework needs to be put in place to begin to take at least small steps in the coming months for confidence to pick up.
Committee for Economic Development CEO Steve Odland on the government shutdown and debt ceiling on Fox Business After The Bell, 10/9/13.
Steve Odland, Committee for Economic Development CEO, explains the fears felt by corporate executives over the budget battle and the debt ceiling, and the possibility of an agreement that could delay a resolution by up to six weeks in this interview from October 11, 2013 on WSJ Live.
In this appearance on Bloomberg’s Taking Stock on September 4, 2013, I discuss the double digit growth rate of auto sales in the U.S. in August, 2013. While the sales are up and tracking to a 15.5M unit sales year, this is down considerably from pre-recession 17M unit levels. Further, the deficit of sales during and post the recession likely is 15-20M units. Further, average vehicle age is up to about 11.8 years, a record. So with almost free money to finance sales, and a huge need, this level of sales is poor and indicates an ongoing weak economy.
— Steve Odland
I appeared on the Andrew Wilkow show on August 20, 2013 to discuss the efforts by some groups to raise the minimum wage. The objective of having people make more money and move up the ladder is part of the American Dream. But, unfortunately, raising the federal minimum wage will have the opposite effect: it will cause businesses to cut back hiring and result in fewer jobs, more automation, and jobs moved to lower cost locales.
— Steve Odland
On August 21, 2013 I appeared on CNBC Squawk on the Street to argue that the U.S. economy is in a no growth period and desperately needs job growth as demonstrated by the struggles of the office products industry. The economy crashed in 2008 and has not recovered since. Job growth barely is keeping up with population growth and 77% of new jobs this year are low paying part-time positions. Businesses are not investing to create jobs due to increased government regulation, escalating costs from the “Affordable” Care Act, and uncertainty about tax and regulatory policy.
The government and some workers are advocating to raise the Federal Minimum Wage from $7.25 per hour to $9.00 per hour. In this video from Fox Business, I argue that a raise at the national level will disproportionately hurt certain geographic areas, some industries that cannot move jobs to lower cost locales, and people who are seeking entry level jobs. So while the objective of having people make more money is good on the surface, the unintended consequences will hurt the very people they are trying to help. Further, 77% of the jobs created so far this year have been part-time jobs at close to minimum wage. So if the minimum is increased, companies will be forces to cut hours, automate, or create fewer jobs and this in turn will kill what little job recovery we have.
Business leaders have an enormous stake in the actions taken by our political leaders. Over 70% of the GDP is driven directly by the private sector and the remainder is government spending fueled by taxes provided by businesses and their employees. So our economy is entirely funded by businesses. CEOs need to engage in the development of public policy as business “statespeople” and advocate for actions in the nation’s interest.
— Steve Odland
By Joe Minarik, The Committee For Economic Development
Spring has led to summer, which leads to fall, which leads by current custom to another round of “fiscal cliffs.” There are four that reach a relatively high level of gravity: (1) a run-in with the debt limit, expected between mid-October and mid-November; (2) the expiration of the annual agency appropriations (with a hard deadline of September 30 / October 1); and both (3) pending Medicare reimbursement cuts under the “sustainable growth rate” (SGR) provision, and (4) expirations of several temporary tax cuts, both at the turn of the calendar year. Beyond those, there is plenty of other remaining unfinished public business (you have read about the conflict over the Farm Bill, for example).
We have talked a fair amount about the debt limit, which carries the greatest potential for damage to the nation’s well-being. But it is worth providing a bit of additional background on the annual appropriations bills, because they too are looking increasingly fraught as the hours of the Congressional session tick away. (In contrast, you can bet that the Medicare SGR provision will be de-fused with another “doc fix,” and virtually all of the remaining temporary tax cuts will be extended for yet another round, both more with Kabuki than with true drama.)
For the record, the last instance when the Congress passed all of its appropriations bills on time was September, 1994, for the 1995 fiscal year – so just short of a fifth of a century ago. Some might by reflex refer to such a Congressional session as “normal,” but clearly, at least by the standard of the frequency of achievement, it was anything but.
In every year since, at least some federal agencies did not have their appropriations on time. This is in the interest of no one – even those who have a low estimation of the value of government. Presumably, high on the list of reasons for skepticism about government are inefficiency and waste – and uncertainty about and delays of agency funding clearly add to waste and inefficiency.
Over the last few years, however, with regularly scheduled brinkmanship over agency funding, the end-of-fiscal-year deadlines have become increasingly tense. And this year, the tension reaches a new high, for several reasons that are worth explaining here. Let’s look at what the Congress has been up to.
First, flash back to the debt-limit crisis that culminated in August of 2011. The deal to turn off that time bomb was understood by some as an overall attack on the budget problem, but all it really entailed was cuts in appropriations – which were and are a small and shrinking part of the budget (and therefore not the cause of the long-term budget problem, though no part of the budget should be excluded as a contributor to the solution). The appropriations cuts that were enacted at that time were imposed (as were appropriations cuts for the last quarter century) through statutory spending caps, covering a ten-year period. Yes, there is fat in every large organization. But by a reasonable standard, those caps impose increasing restraint over the ten years; and most experts believe that the magnitude of the eventual amount of prescribed restraint (and therefore the amount of the assumed budget savings) was adventurous, if not excessive. The fat was easiest to find in the first year. FY2014 will be year three (depending on how you count), and we are having this discussion in some part because the negative reaction has begun.
But the assumed spending cuts don’t stop with the August 2011 appropriations caps. On top of that, the August deal created a “supercommittee,” charged it to save a further $1.2 trillion over 10 years, and in the event that it failed created an additional “sequester” of that amount, falling exclusively on those same annual appropriations – which once again are a shrinking share of the budget, and not the source of the long-term fiscal problem. With the failure of the supercommittee, we now face the additional savings from the sequester. It began last year, so fiscal year 2014 will constitute year two of its spending reductions. So for those who believe that the first round of appropriations caps will prove at some point to be excessive, the sequester accelerates and aggravates that problem.
However, unlike the 2013 sequester – which was an automatic across-the-board cut of all annual appropriations – the 2014 sequester (like the sequesters in all subsequent years) is merely a further reduction in the original August, 2011 spending caps. That bears good news and bad news. The good news is that, unlike the across-the-board 2013 first-year sequester, the Congress now has flexibility to try to minimize any pain. The bad news is that to implement those savings this year the Congress must govern, and make difficult decisions. As noted earlier, the track record of governing and decision-making in recent years – with respect to the annual appropriations, but more broadly as well – may be judged by many to be relatively weak.
So that is one reason why this year’s appropriations process looks to be particularly awkward. There are other reasons as well. One flows from the divided political control of the Congress. The two chambers are on totally different tracks in their appropriations processes (such as they are). The beginning of the textbook process is for the House and the Senate to agree on total amounts to spend, both overall and in different substantive areas. This year, the House and the Senate have disagreed on the total, and on virtually every individual program area. And strikingly, neither chamber has followed the current law.
As the following chart shows, the House has chosen to write its appropriations bills to conform to the spending caps including the effect of the 2014 sequester. The Senate, however, is writing bills that meet the caps without the sequester – that is, the Senate appropriations target does not achieve the additional savings prescribed by the 2014 sequester.
So you may choose to rack up one point for the House. But the current law specifies separate spending caps for defense and non-defense appropriations. The House disregards those separate caps, and raises defense spending up to the level prescribed by the law without the sequester, and then makes up for that extra spending on defense by cutting nondefense spending below its cap in equal amount. Now, technically and legally, the separate defense and non-defense caps are maximums, not precisely prescribed amounts. But all of the caps were determined in a negotiated deal involving the Senate, the House and the White House; and so, arguably, overspending one cap and underspending another violates that previous agreement. And overspending the defense cap clearly is contrary to current law. The Senate, although it ignores the additional cuts in the sequester, does observe the separate defense and non-defense caps that were written in the law before the 2014 sequester was imposed, as is shown in the following charts.
So a second reason why this year’s appropriations process will be difficult is that the two chambers of the Congress are going their separate ways, but neither is obeying a strict interpretation of the current law. Neither can claim the moral (or legal) high ground, and that could tend to prolong the process. And if the House claims righteousness on the ground that it obeys the sequester, the Senate can take offense that the House violates both the sequester’s defense spending cap and the prior bipartisan agreement, likely extending the argument.
And there is one final reason why this year’s appropriations process will be both unusual and difficult, and that has to do with an interaction of the Congress’s obvious tendency to procrastinate on this part of its business, on the one hand, with the phenomenon of the level of spending going down, on the other.
As noted earlier, no college freshman or younger (prodigies excepted) has lived through a timely Congressional appropriations cycle. As you might imagine, therefore, the Congress has learned how legally to violate the rules. It passes a temporary appropriations bill, called a “continuing resolution” (or “CR”), so that agencies can continue operating until the Congress can come to agreement on a complete full-year bill. Now, it stands to reason that if the Congress cannot agree on a full appropriations bill, it cannot agree on much detail in a CR either (else it would just pass a full bill rather than dither with a temporary CR). Therefore, the typical formulation of a CR is simply to continue agency operations at the same funding levels as last year, until the new funding levels can be agreed upon. (There are routinized mechanisms for dealing in CRs with “anomalies” in spending, such as year-to-year changes in spending amounts specified in long-term contracts.)
But this glide-by method makes sense only when spending is going up. An agency can pinch pennies for a short period of time if it knows that more funds are in the pipeline. But that same agency can get in big trouble if it starts a fiscal year at a higher spending level, and then has its funding cut. Building on that point, if the Congress wants to procrastinate, simply continuing at the previous year’s funding level is an easy handle to grab. But if spending is actually going down from one year to the next, and continuing at the previous year’s level is not a viable option, then there is no such easy hand-hold on a CR amount. Instead, the Congress has to negotiate an appropriate lower amount. And if the Congress had been prepared to negotiate such an agreement, it should have been able to pass a full bill on time, instead of procrastinating through a CR.
And this year, of course, appropriations will go down – in nominal (not-inflation-adjusted) dollars – because this year’s caps are well below last year’s actual spending (as shown in the following chart). So the Congress cannot simply argue up until the deadline and then temporarily extend last year’s spending levels. Instead, they must come to a substantive bipartisan agreement – and if the Congress were capable of doing that, we would be talking about something other than appropriations deadlock at this very moment.
So what happens if the Congress cannot agree? Well, that is yet another bear trap awaiting a misstep by the Republic. At this stage of the process, such as it is, neither chamber agrees with the actual current law – the August 2011 spending caps, plus the further reduction in those spending caps under the 2014 sequester. If the two chambers cannot agree to a new law to change those amounts, then those amounts prevail, and determine the maximum spending amounts under the 2014 annual appropriations. But the eternal verity that is easy to forget in all this jumble is that those maximum spending amounts in the law do not actually appropriate a single dime. If the Congress does not pass its annual appropriations, the agencies have no money whatsoever to spend, and the government shuts down. So if the Congress cannot agree, we get a mess.
Now, a government shutdown ranks leagues of seriousness below a government default (understanding that the two parties in the Congress argue over precisely what the term “default” means). But our economy is shaky enough as it is. Most economists would rather not know what would happen to growth and employment if some people, businesses, and state or local governments who had planned to write checks cannot do so because they have not received the federal government checks they were expecting.
You have heard recent reference being made to the “regular order” in the Congress. Again, if the “regular order” includes annual appropriations bills being passed on time, then it has been a rare order indeed. But even just a little bit more regularity certainly would be welcome at this time. It is hard to justify all of the brinkmanship that we must endure at this time of economic peril. And the impending fight over the annual agency appropriations looks set to be another painful component of that brinkmanship.
In this clip from the May 23, 2013 Cavuto show, Steve Odland articulates how U.S. markets are not taking our economic situation seriously. China manufacturing numbers have moved negative, meaning the world engine for economic growth is slowing. This inkles a poor Christmas buying season since most retailers and manufactures should be in full swing for the holidays. Further, Federal Reserve Chairman Ben Bernanke suggested that the Fed will dial back bond buying in the future so the era of easy money will be ending. The only other solution is to print money to satisfy the increasing debt and cover our deficit spending. Asian and European markets sold off on all this news but inexplicably, U.S. markets did not. We cannot keep going like this economically and keep hitting record highs. At some point the U.S. will need to pay the piper.
— Steve Odland
The Business Roundtable suggests in a new paper that it’s time to consider shifting the focus of U.S. business-tax policy away from targeted subsidies that aim to boost investment in plant and equipment. Instead, the U.S. should consider lowering overall corporate tax rates in order to attract all sorts of new investment and profits, the BRT suggests in comments to the House Ways and Means Committee.
The idea behind the shift is to attract new investments from nimble multinationals – particularly their highly mobile and highly profitable investments in research patents and other intangibles – at a time when capital has become much more mobile.
By contrast, U.S. investment subsidies such as accelerated depreciation only succeed in getting domestic industries to increase capital expenditures by a couple of percentage points, the BRT paper suggests.
“Some evidence…suggests that corporate rate reduction could be more effective in attracting highly profitable investments to the United States than an incentive in the form of a tax deduction or credit,” the BRT says in its comments to the congressional committee, which is weighing a tax-code overhaul. “For a highly profitable investment, the tax savings from accelerating the deduction for depreciation allowances, for example, are small relative to a reduction in the rate of tax on the income from the investment. A company choosing where to locate its most profitable investments is likely to be more influenced by a lower tax rate on the investment than an enhanced deduction.”
The paper foreshadows a looming debate that could pit some domestic heavy industries against a range of multinational businesses. Many of the tax breaks that likely would be sacrificed in order to lower the corporate tax rate currently benefit manufacturers, including accelerated depreciation and the domestic production deduction.
The shift to a lower corporate rate would allow lots of other types of businesses to benefit from U.S. subsidies, and return more of their operations and profits to the U.S., they say. Manufacturers could be protected with a special tax rate or other provisions.
Businesses are beseiged by new regulations, rising taxes, costly mandates from the new healthcare regulations, etc. And so, they are not adding jobs. The percentage of Americans working is at its lowest point since 1979 despite the unemployment figures. See Steve Odland’s appearance from April 4, 2013 on the Cavuto Show.
– Steve Odland
The situation in Cyprus is worrisome. It’s not just threatening to Cypriots, or Europeans. When governments start seizing assets to pay down the debt it is a threat to everyone. Europeans are saying this is a new template for dealing with too much government debt or banking issues. Are U.S. citizens at risk too? Click on the link above to watch Steve Odland’s appearance on Cavuto from 3/26/13.
— Steve Odland
Odland and Minarik: It’s Time to Act to Save Our Economy
Fundamental changes and sound long-term policies are needed soon
- By Steve Odland and Joe Minarik
- Printed in Roll Call, Feb. 27, 2013, 7:17 p.m.
Our elected leaders are failing our nation. Partisanship and short-sightedness halt progress toward fiscal austerity. Businesses are suffering from economic uncertainty and instability. So, too, are American workers, as unemployment numbers continue to be high. Business investment remains tepid. Without fundamental changes and sound, long-term policies, our economy will continue to falter.
We need to set a course soon. The state of our nation and economy require purposeful engagement by Congress and the president, along with energy, thought and planning to produce short- and long-term strategies to restore and sustain a healthy American economy. To achieve progress, all sides must compromise or every American will suffer the consequences.
Congress must act in the next two weeks to avoid a repeat of economic and financial shocks. First, the debt limit must be taken off the table as a negotiating tactic. Efforts in the near-term must focus on replacing the across-the-board spending sequester with balanced revenue increases and better-crafted spending cuts.
Congress can consider any one or more of a wide range of alternative revenue increase provisions, such as repealing unnecessary “tax extenders” outlined within the recently enacted American Taxpayer Relief Act, increasing the federal gasoline tax, raising the excise tax on alcohol and taxing “carried interest” as ordinary income. Spending cuts should focus on Medicare, a major cause of our nation’s projected long-term budget problem.
Many alternative policies, both entitlement changes and minor revenue increases, can achieve the sequester’s first year of deficit reduction spread over 10 years, and will not derail economic recovery.
Second, the Congress and the president should commit to overhaul Social Security. Both sides agreed last year that changes are necessary, and we believe that the prospects for success this year are high. A comprehensive approach to an overhaul could incorporate changes such as a strengthened minimum benefit and help for very long-lived beneficiaries, which would protect or even improve the status of the neediest elderly. Success on this front would give a cynical and disappointed public a new measure of confidence that Washington actually can address their problems.
Finally, following tangible progress this year, the Congress and the president should proceed to the broader task of Medicare, Medicaid and a tax overhaul, the roots of our long- term debt problem. Consider changing Medicare Advantage with better choices and incentives for higher-quality health care at lower cost. Make health exchanges from the 2010 health care bill stronger, more efficient and less costly by expanding their base of enrollees. Set the lowest tax rates possible and broaden the tax base.
Our budget problem is overwhelmingly long term in nature. We have large deficits now, caused in part by the weakness of the economy. Extraordinary action to reduce deficits now could reduce demand and weaken the economy further, possibly leading back to a recession. Still, deficits today pile up debt that must be serviced in the future — a dilemma created by a failure to keep the budget on the straight and narrow.
A two-year approach to solving our lingering budget and deficit challenges, with a limited target for the remainder of this year, would both increase the odds of success and decrease the risk to the still-shaky economic recovery. A sincere, serious plan will give businesses the confidence they need to once again invest in the U.S. and grow jobs. It is time for action and it is past time for compromise. We call on the Congress and the president to do what it takes to set our nation on a path to economic stability.
Steve Odland is CEO of the Committee for Economic Development. Joe Minarik is senior vice president and director of research at CED and former chief economist at the Office of Management and Budget.
See Steve Odland’s latest interview from 2/12/13 on Cavuto. He argues that government fiscal policies are causing businesses to hold back on investments and job creation in the U.S.
— Steve Odland
See Steve Odland’s appearance on Neil Cavuto 1/3/13 arguing that we need to cut spending.
— Steve Odland
The annual scramble to make smart tax moves before Dec. 31 is proving especially vexing this year.
Congress still hasn’t settled 2013 tax rates on income, investments, large gifts and estates. Deductions and other breaks are also in doubt, now that politicians from both parties are calling for cutbacks—although in different ways.
And huge questions remain unanswered even for the 2012 tax year. For example, the Internal Revenue Service on Nov. 13 warned lawmakers that if they don’t act soon, the alternative minimum tax, which reduces the value of some tax breaks, will apply to 33 million households for 2012 rather than four million. More than 60 million people might not be able to file returns or receive refunds until late March, the IRS says, because it would have to reprogram computers.
Yet despite the uncertainties, advisers say year-end tax planning is possible. The best move this year, says Paul Gevertzman, a tax specialist at accounting firm Anchin, Block & Anchin in New York, is to avoid “crystal-ball planning”—or thinking it’s possible to know exactly what will happen. Instead, taxpayers should focus on what is known, maximize breaks while they still exist, reduce vulnerability to unknowns without acting rashly and, above all, stay flexible, he says.
“We know Congress has to reach a compromise, but we can’t know what it will be,” he says.
We do know that 2013 will mark the debut of the 3.8% flat levy on net investment income for joint filers with adjusted gross income of $250,000 or more ($200,000 for singles). Congress passed this levy, plus a 0.9% increase in Medicare tax for affluent earners, to help fund the massive 2010 health-care changes. The tax introduces new layers of complexity into investors’ planning. (For more details, see box.)
Big unknowns include the top rates on long-term capital gains and qualified dividends, both now 15%. The rate on gains could hit 23.8% or more, and the rate on dividends could be as high as 43.4%.
Because of the new 3.8% tax and possible higher rates, some tax specialists are again recommending that taxpayers seriously consider converting their taxable individual retirement accounts to tax-free Roth IRAs. The switch is the ultimate flexible tax move, because converters have until Oct. 15, 2013 to reverse the conversion. (For more details, see box.)
Meanwhile, there are few ways taxpayers can shrink 2012 taxes after Dec. 31, other than contributing to some retirement accounts or health savings accounts. Here are moves to consider before year end, plus a few to avoid.
Make charitable gifts. The best value often comes from donating appreciated assets, because donors can get a full deduction while skipping capital-gains tax on the asset’s growth. Cash donations to charities are often deductible up to 50% of adjusted gross income, while the limit for gifts of other assets is often 30%. Disallowed portions usually carry over to future years.
If you aren’t sure whether the group is eligible to receive tax-deductible gifts, American Institute of CPAs tax specialist Melissa Labant recommends checking “Select Check” at www.irs.gov, a master list of qualified charities.
Are you concerned that the charitable deduction could shrink next year? If so, make a large donation to a “donor-advised” fund and qualify for a full write-off this year. Assets can then grow tax-free in the fund until donors specify tax-free recipients, sometimes years later. There’s no deduction at that point.
If you want to donate IRA assets to charity, wait a bit longer. Since 2006, IRA owners 70½ and older have been able to give up to $100,000 of the required payout directly to a charity. There’s no deduction, but no taxable income either. This wildly popular provision expired at the beginning of 2012, but lawmakers might yet reinstate it—as they did in 2010.
Until lawmakers clarify the issue, would-be donors should “leave room” for their donations because the first dollars out of an IRA count as the required payout. For example, if your required payout is $20,000 and you want to give $3,000 of that directly to your church, withdraw no more than $17,000 until this year’s rules are clear.
Make an extra mortgage payment, or pay down principal. Usually taxpayers can’t accelerate more than one month of mortgage interest, but that helps a bit if you think the mortgage-interest deduction will be curbed next year. Or find cash to pay down principal, which reduces overall interest.
Bloomberg NewsThe Internal Revenue Service building
Don’t fret about the alternative minimum tax “patch” for 2012. If Congress doesn’t fix the AMT, eight times as many households will be subject to the tax as in previous years, and there will be severe disruptions to next spring’s tax-filing season. So it probably will get done, tax experts say.
Maximize contributions to employer-sponsored retirement plans. Unlike with IRAs, the deadline for 401(k) contributions is Dec. 31. This year, the employee limit is $17,000, or $22,500 for workers 50 or older. This pretax contribution has two benefits: It bolsters savings and reduces adjusted gross income that might qualify the taxpayer for benefits that phase out at higher incomes.
Evaluate stock options and restricted stock. This is a highly complex area because some elements of these benefits are taxed as ordinary income and some are capital gains. Next year, the new 3.8% investment income tax and the 0.9% Medicare tax hike will further complicate decisions.
For some investors, it will make sense to exercise options before year end or accelerate taxes on restricted stock into this year. Such decisions depend heavily on expected investment growth, notes Grant Thornton benefits specialist Eddie Adkins.
The bottom line: if you have these benefits, get expert help soon.
Think twice before harvesting gains. Yes, the capital-gains tax will be higher next year. But Katherine Nixon, chief investment officer for wealth at Northern Trust in Chicago, is telling clients to resist the urge to sell long-term holdings willy-nilly to qualify for this year’s lower rate on gains. “That shrinks invested capital, and therefore future wealth,” she says.
Accelerating a sale into this year can make sense, she says, for investors who were planning to divest within the next two years—either because a holding no longer fits a portfolio or cash will be needed, say for tuition.
Harvest capital losses, up to a point. Investment losses can offset investment gains plus up to $3,000 of ordinary income, both for single and joint filers. This year, tax specialist Joel Dickson at Vanguard Group cuts the Gordian knot of rate-change dilemmas with a simple recommendation: “Take enough losses to offset your gains, plus $3,000 and perhaps a bit more,” he says.
Note that “wash sale” rules penalize buyers who acquire the same asset within 30 days of selling at a loss.
Use up funds in a medical flexible-spending account. They often don’t carry over, although some employers will allow workers to spend 2012 funds in the first weeks of 2013. Next year, the contribution limit will be $2,500, less than some employers now allow.
Accelerate medical expenses. The threshold for deducting these expenses, now 7.5% of adjusted gross income (10% for AMT payers), rises to 10% next year for most taxpayers.
People who are 65 and older, however, can use the 7.5% threshold through 2016. This phase-in will be useful, say advisers, because most taxpayers claiming large medical deductions are in the final years of life.
Note that the IRS’s list of what’s deductible is far broader than what insurance typically reimburses, extending to contact-lens solution, assisted-living costs and even special education. For details, seeIRS Publication 502.
Set up a health savings account for 2012. Qualified taxpayers can make 2012 contributions to HSAs as late as April 15, 2013, but the account has to exist by year end.
Write next semester’s tuition checks before year end. The American Opportunity Tax Credit allows qualified taxpayers to get a benefit this year for next spring’s tuition if the payment is made before year end—even though the credit is set to expire for 2013. For more information, see IRS Publication 970.
Prepay state taxes. Deductions for state and local income, sales and property taxes are already disallowed by the alternative minimum tax, and they might shrink further next year, even if Congress reinstates the expired sales-tax deduction for 2012. Consider accelerating next year’s state tax payments if they don’t throw you into the AMT, in which case you’ll lose the write-off altogether.
Make gifts up to $13,000 to relatives or friends. Such gifts are tax-free, and the number of recipients isn’t limited as long as the value of each gift doesn’t exceed $13,000. Cash is often the best gift, as presents of assets such as stock carry their “cost basis” with them.
For example, if an aunt gives her niece shares worth $13,000 that were purchased for $5,000, then the niece will owe tax on any gain above $5,000 when she sells the shares.
It’s also possible to forgive $13,000 of a loan instead of giving assets outright. Payments of tuition and medical expenses are tax-free as well, but the giver must write the check to the provider.
Contribute to 529 education savings accounts. Assets in these accounts enjoy tax-free growth, and withdrawals from them are tax-free when used for tuition and other qualified expenses. Some states also provide tax benefits to givers.
These accounts also offer a rare benefit: Contributions leave the giver’s estate, yet he or she can take back the principal without penalty if the money is needed. Contributions do count toward the $13,000 gift limit, however.
Have a closely held business pay a dividend. With the dividend-tax rate in flux, firms that are organized as C corporations or were C corporations but now are in Subchapter S format should consider paying dividends before year end, says Chris Hesse of accounting firm CliftonLarsonAllen in Minneapolis.
Buy depreciable equipment for a closely held business. Both “bonus” and “Section 179” depreciation deductions are set to drop sharply in 2013. According to Jason Cha, a tax specialist at the American Institute of CPAs, the combined depreciation on $190,000 of qualified purchases of furniture, fixtures and equipment is about $168,000 this year but less than $49,000 next year.
In this appearance on Neil Cavuto on 11/7/12, I argue that fiscal reform is necessary. We need to cut the deficit by reducing government spending and raising more revenue. But I argue that this cannot happen through tax rate increases but rather, tax reform is necessary. This won’t happen in a lame duck Congress but they should pass measures to avoid the fiscal cliff and then work on real tax reform to modify deductions and loopholes. Growth cures all, however, and pro-economic growth tax policy is vital to stimulating the Economy.
— Steve Odland
I appeared on CNBC’s The Kudlow Report on October 25, 2012 to discuss the deficit, government debt and the looming fiscal cliff. We need to cut government spending and reform the tax code to reduce deductions, flatten rates, and produce more revenue through economic growth that will result.
— Steve Odland
The U.S. Economy went into free-fall in the latter part of 2008 when the housing crisis and its falling assets values triggered a banking crisis, triggering a liquidity crisis, triggering a severe economic contraction. If only we hadn’t glutted the market with easy money.
Perhaps we should have retained the 20% down, 80% maximum mortgage standard and the housing boom wouldn’t have been so high. Perhaps the 20% down payment would have exposed property owners to the first 20% decline in prices without triggering asset write-downs and crises at financial institutions. Perhaps there wouldn’t even have been a 20% decline in values since there likely wouldn’t have been the real estate boom. Perhaps, perhaps.
People still are seeking to parse blame for the crisis. Some blame the “greedy” banks that loaned all that money. But I don’t recall the banks loaning money to people who didn’t ask for the loan. Some blame Congress for pushing lax standards at Fannie Mae and Freddie Mac. Sure, they set up economic incentives that made real estate buyers an “offer they couldn’t refuse,” like no money down, little required documentation of ability to pay, etc. Perhaps, but Fannie and Freddie didn’t force people to take loans they couldn’t afford.
So who’s to blame for the crisis? People. People in government who demanded eased standards. People in banks who went along knowing that loaning money to people who couldn’t pay wouldn’t work over the long run. People who bought real estate they couldn’t afford and financed it with loans they couldn’t repay. We continually look for “perpetrators” of acts against “victims.” The people who set up the environment of loose money aren’t exactly perpetrators and the people who took money they never expected to repay aren’t exactly victims. Perhaps we should stop with the labels and call it a draw.
The real issue now is what to do. We still are trying to prosecute people on the lending side while trying to “protect” people on the borrowing side. Perhaps the real victims are we the people who had nothing to do with any of the above but now are expected to pay for it. We need to be very careful here not to continue the mistakes that got us here to begin with. For instance, some are arguing that we need to loan more to stimulate real estate purchases to reignite the economy. Really? Didn’t we learn anything? Some are saying we need to raise taxes to take money from those who still have some to fund more giving to “victims.” Hmm. Does that really work anywhere in the world?
So what’s it going to take? Let’s go back to lending standards that encourage personal responsibility. Let’s go back to people living within their means. Let’s go back to everyone paying something to support this great country rather than having a view that “others can pay.” Maybe we need to let the market work rather than having quasi-government agencies distort the markets. Maybe we then need to be patient and let things heal. Let the economy catch up to the new liquidity levels, let markets adjust to new equilibriums, and let people adjust attitudinally to newfound responsibility to act accountably as did previous generations. Then, it will get better.
— Steve Odland
America’s Declining Economic Freedom
Former Office Depot CEO Steve Odland on a ranking of countries based on economic freedom on which the U.S. has fallen to 18th.
I appeared on Neil Cavuto’s show on August 27, 2012 to discuss Mitt Romney’s business experience. Click on the link above to view.
— Steve Odland
After the Great Recession, people have been waiting anxiously for the Great Recovery. But quarter after quarter, the numbers come in and nothing improves. Economic growth is only 1.5% rather than the high single digit growth that usually follows a significant recession. The Fed still is scrambling to find new means to stimulate the economy despite near-zero interest rates. Consumer sentiment is poor. The misery index has increased over the past three and a half years from 7.83 to 9.71. Business confidence has been hammered by increased regulation and costs, most notably from health care. Hiring is non-existent. Business taxes are the highest in the world creating head winds for U.S. businesses.
The definition of insanity is doing the same thing over and over again and expecting different results. OK, so what we’re doing isn’t working. How about trying something else? Cut government spending, cut taxes thereby leaving this money in the private sector for multiplier-impacted investment, cut regulation, and watch the economy soar.
— Steve Odland
Not surprisingly, the numbers for GDP growth for 2012 Q2 were very poor. But we all could feel that even before the numbers were issued. Government policies continue to batter the economy but unfortunately they don’t seem to understand that. The facts do not meet orthodoxy and so the only conclusion is that we need more of the same: higher taxes, more regulation, more government spending, etc. Of course what we need is an “about face” in order to let the economy heal and begin to grow again.
See the article from the WSJ by Neil Shah for more detail:
- Updated July 27, 2012, 12:53 p.m. ET
U.S. Growth Slows in 2nd Quarter
By NEIL SHAH
The economy is slowing to a crawl as consumers cut back spending on big-ticket items and businesses curtailed investments, fueling fears that the U.S. could sink to stall-speed this year.
Gross domestic product, the broadest measure of all goods and services produced in the economy, grew at a weak 1.5% annual rate, the Commerce Department said Friday — a sharp slowing from the first quarter’s 2% pace and the fourth quarter’s 4.1%.
The slowing economy, along with new government figures showing the recovery has been weaker than previously thought, raises the risk that a financial shock — an escalation of Europe’s economic crisis, say, or next year’s scheduled tax increases and spending cuts, the so-called “fiscal cliff” — could shove the economy back into recession. Weak growth could also prompt Federal Reserve officials to take more steps to boost the economy at upcoming meetings — especially since there are few signs their efforts have fueled unwanted inflation.
“The economy is kind of being strangled,” said Bob Baur, chief global economist at Principal Global Investors. “We underestimated how much uncertainty may have contributed to a lack of desire to expand and hire.” Mr. Baur expects a 2% to 2.5% pace of growth in the second half and has “grown more cautious,” he says.
One of the biggest drags on the recovery is a lack of consumer spending, which accounts for roughly two-thirds of demand in the economy. Spending rose 1.5% in the second quarter, lower than the 2.4% pace in the first — with buying of big-ticket items hurting the most. Retail sales have dropped three months in a row, while consumer confidence has wilted. A big factor is the weak labor market. Employers added fewer jobs in the second quarter than they have since the labor market began recovering in 2010. The unemployment rate, at 8.2%, has barely moved recently. And a severe drought in the Midwest is starting to push up food prices, which could make Americans less willing to spend.
The report did contain some encouraging news. Sales of houses continued to contribute to the nation’s growth, though the pace flagged from the first quarter. Despite Europe’s problems and slowing in the rest of the world, U.S. exports rose 5.3% in the second quarter. Cutbacks by federal, local and state governments continued to drag down the economy, but eased from earlier this year. Some of this year’s slowdown could also be the result of unusually heightened activity during the winter months given unseasonably warm weather.
Still, the persistent unwillingness of consumers and businesses to spend and invest more despite historically low interest rates has economists and Federal Reserve officials worried about the coming months. Instead of spending, Americans are saving: The personal saving rate — saving as a percentage of disposable personal income — rose to 4% in the second quarter from 3.6% in the first, even though gasoline prices were falling.
Businesses, meanwhile, aren’t investing as confidently as earlier this year, with many citing uncertainty over U.S. fiscal and tax policies, global economic turmoil — especially Europe — and weak domestic demand. Companies Apple Inc. and Ford Motor Co. have blamed bad results on Europe’s recession. Manufacturing has weakened in recent months, while new orders for nondefense capital goods, excluding aircraft — a proxy for business investment — fell 1.4% in June from a month earlier.
Allan Pasternak, a founder of BAMCO Inc., a Middlesex, N.J., metal manufacturer, says his firm is doing brisk business but he’s concerned about next year and proceeding carefully when using profits on investments.
“I really don’t know what to expect,” he says. “Our main concern is, is the economy going to experience another significant downturn.” He also blames the “indecisiveness of our politicians, more than any of the actual policies” for creating uncertainty over government policies and crimping the ability of businesses to make decisions. BAMCO, for its part, is trying to be “lean and mean” and holding off on investing in new buildings even as business is growing.
A few months ago, economists predicted growth would pick up in the second half of the year as America’s job market improved, government cutbacks stopped hurting growth and the fall in the price of oil lowered gasoline prices. None of those have really happened. “The economy has lost a fair amount of momentum this year,” noted Paul Dales, an economist at Capital Economics, which predicts only 2% growth this year, below the economy’s long-term potential of around 2.5%. Among the new headwinds: The rise of the dollar, which makes it harder for U.S. exporters to sell their goods abroad and could hit corporate profits.
The Commerce Department on Friday also said new revisions show the recovery from the 2007-2009 recession was weaker than previously thought. The recession, however, was a little milder than thought, largely thanks because rising government spending cushioned the blow.
Last week’s job report was dismal. Again. How long are we going to tolerate this anemic recovery? When will we demand change? Only 80,000 jobs were created last month with about 250,000 jobs added in the entire quarter. We need to add 150,000 jobs per month to keep up with population growth. We need to add 250,000 jobs per month for the next five years (!) to get back to the employment levels of four years ago. Five million fewer people are working today than a few years ago. This is the lowest percentage of the population employed since the 1930s. Government policy matters and is contributing to the problems. They need to lower taxes, reduce regulation, stop the incremental health care burden, and fix the fiscal cliff. Until this happens, jobs are not coming back.
— Steve Odland
In this CNBC appearance from October, 2007, I expressed concern that the consumer was not going to be able to support the economy. Unfortunately most of my concerns from that time were correct and the economy collapsed due to the burst of the housing bubble. But still concerning is that most of the factors related to the consumer are still bogging down the economy today. Non-discretionary spending in food and energy still is rising, credit still is unavailable, and housing still has not bottomed in many areas. Until consumer wealth stabilizes and real income starts to grow, the U.S. economy, which is 70% consumer spending, cannot recover.
— Steve Odland
Here is the link to my interview with Neil Cavuto regarding the reelection of Scott Walker and the potential national implications from June 5, 2012.
— Steve Odland
This clip features Steve Odland on The Kudlow Report. Key points are:
The decline in the dollar is not good for America.
Exports become more viable, but imports become more expensive. Since we are an export society, the net result is that a devaluation makes imported products more expensive and potentially leads to inflation.
Further, we are a debtor nation. The decline in the dollar reduces confidence in our lenders, primarily China and Japan. We rapidly are becoming the risky asset in the world. Europe of course continues to make us look better by comparison, but our spending is worrisome.
The levers that Washington want to pull to fix this all relate to more government spending. But in fact, this will cause further damage. The only solution is to pull back on the increases in government spending and allow the economy to grow into the debt levels over time.
— Steve Odland
In this appearance on the Cavuto show, Steve Odland discusses growing anger among Americans as companies are not hiring in an uncertain economy. Protests at the Bank of America annual meeting criticize the bank for its policies. But the more the Occupy movement protests, the more they spook American businesses and the fewer jobs are created. Further, the uncertainty in the economic, tax, regulatory, and political environment has businesses holding their cash on the sidelines and not reinvesting in job creation.
— Steve Odland
Insuring your home, and for small business people their place of work, is important to reduce risk. Of course, you could competitively shop the policy every year but that is onerous as it takes a lot of study to understand the difference between policies. Often it’s easier to stay with the policy that has the appropriate coverage. And longer-term policyholders can earn discounts for longevity. Here are 10 ways that you can control your home insurance costs:
- Increase deductibles. Insurance isn’t meant to cover the small stuff. Set deductibles as high as you can afford. For example, a $150,000 house could have a $1500 or 1% deductible.
- Make improvements. Install a backup generator, a whole house surge protector, and smoke/CO2 detectors. Refit roof trusses with strapping.
- Opt for hip roofs. Hip roofs offer the most slippery shape in high wind settings or storms. You don’t want areas that can catch the wind and are prone to damage.
- Locate intelligently. Stay away from flood prone areas. Look for brick or stone houses in high wind areas and wooden frame houses in earthquake-prone areas. Locate in communities with professional fire departments. Have your home inspected before purchase. Also check the Comprehensive Loss Underwriting Exchange report of your home before purchase to see insurance claim history.
- Don’t make small claims. Frequent claims can drive up rates. Don’t sweat the small stuff. Insurance is meant to protect from catastrophic loss.
- Reinforce your home. Install storm shutters, reinforce the roof, retrofit older homes for earthquake resistance, and modernize heating, plumbing, electrical to reduce risk of fire and water damage.
- Improve home security. Add smoke detectors, burglar alarms, and deadbolts.
- Exclude land value. It’s unlikely the land beneath your home will be stolen or burnt in a fire. Insure the value of the home only.
- Combine policies with one insurer. Most insurance companies offer discounts for multiple policy households. Combine home and auto insurance. Then buy an umbrella liability policy over both to optimize cost.
- Eliminate unnecessary coverage. Don’t buy coverage you don’t need: earthquake coverage is unnecessary in most zones; don’t schedule jewelry if it’s inexpensive, etc.
Talk to your agent about other discounts. Sometimes there is a discount for good drivers, or retirees, or people with good credit ratings.
Be sure you have enough insurance. Don’t be penny-wise and pound-foolish. Saving a few dollars a year will seem silly if you find out you’ve skimped on coverage that later costs you thousands. Be sure to read the policy and ask your agent a lot of questions so you understand what coverage you do and don’t have.
— Steve Odland