Another holiday season has passed and, in a well-established pattern, retailers’ sales performance failed to meet retailers’ buoyant predictions. After five years of diminished consumer spending, maybe it’s time to permanently adjust expectations. Forced retailer enthusiasm aside, this is the new normal and it’s what happens when conservative policy advocates guide public policymaking.
The day after Christmas, retail sector financial analysts reported that holiday consumer sales figures underperformed expectations. One sector blog noted that the National Retail Federation—the industry’s largest advocacy organization—holiday season’s spending growth forecast was “utter, unmitigated nonsense.” Since this has been the pattern since 2008, that consumers behaved very differently than retailers and market analysts predicted or at least publicly spun, maybe it’s time to let go of the past, exam the present and craft a new policy strategy for moving forward.
While I care about Target’s December sales performance and genuinely believe that Hollywood will deliver at least three terrific holiday season movies that sell a lot of tickets, those desires take a backseat to my interest in family and community security and stability. Consumers regularly demonstrate they understand the situation. Mortgage crisis-driven home values plummeted from a 2007 peak and only now are barely beginning to recover. Spooked by the economic recession and slow recovery, employers are still only hiring cautiously. Is it any wonder that people aren’t rushing to throw their hard-earned dollars at the next shiny, must-have thing?
Retail does well when people do well. Economists call this consumer confidence. The past five years have taught us new and varied ways to understand that people aren’t doing so well. Two figures perfectly capture this discontent. The first is the 99%, a rallying cry for broad class unity from the Occupy movement. It’s the idea that, economic interest should bind rather than divide our nation’s population. The second is an interesting variant on the first, expressed by presidential candidate Mitt Romney as the 47%.
Captured during a private fundraising event, Romney declared that 47% of American voters were lost to him because they were non-tax payers, motivated by losing government handouts under a Romney Administration. While Romney rejected the idea of economic class self-interest as a way to understand wealthy people’s behavior, he demonstrated remarkable comfort with the idea when it concerned poor and working folks. In his own way, Romney reinforced a central Marxist analytical concept.
The retail economy performs well when consumers feel confident. Confidence comes from a feeling of financial, family, and community security. Consumer insecurity, in contrast, reflects the reverse. While marginal irrationality is an element of both confidence and insecurity, for feeling better to translate into increased consumer spending, people have to have money in their pockets. The past five years have taught us the cost of fueling consumer spending with credit instruments rather than rising wages. The latter is real; the former is illusory.
This is a long-winded way of saying, duh; when people aren’t making money, they stop spending what they don’t have. Retailers can’t profit from reduced household consumer spending. They, in turn, cut back, forcing the supply chain to cut back and so on. That downward spiral is also revealed in reduced tax receipts, compelling government to cut budgets, further reinforcing the economic retreat. Do this long enough and a new, lesser pattern emerges.
Minnesota public policy is rooted in the idea of a robust, diverse economy. Economic diversity means that Minnesota isn’t reliant on the fiscal health of a single economic sector. We have agriculture and banking. We have high tech manufacturing and a service sector. We have mining and tourism. This mix means that we’re shielded from the best and worst elements of the national and global economies. We never quite ride the wave’s crest, like North Dakota gas and oil production right now, but we don’t crash when the defense industry slows down like California. However, a new, less-confident consumer normal means that, unless something changes, Minnesota’s future will look a lot like Minnesota’s present.
Minnesota does best when it invests in itself. That means robust school funding at all levels, pre-K, K-12, and higher education. That means road and bridge infrastructure that creates economic opportunity and security. That means expanding affordable healthcare to keep a highly productive workforce on the job and innovating. That means growing new, higher paying jobs that transform and advance Minnesota’s economy.
It’s time to stop waiting for things to go back to the way that they were. That’s never going to happen. Minnesota policymakers face choices charting a path forward, building on Minnesota’s strengths. Conservative public policy initiatives are failing Minnesota. Let’s replace them with common sense policy that makes people feel safe and secure, not abandoned. The “new normal” isn’t new but it certainly doesn’t have to become normal.