Let's Buck Up a Bit

I checked the Constitution, and darn it, I couldn’t find it. I was looking for the part where the high price of lumber is a high crime and misdemeanor constituting grounds for impeaching the president.

The Founding Fathers dropped the ball on that one, but the writer of a recent letter to the editor on this page, in a spectacular display of infantilism, picked it up by issuing another call for impeaching the president. Her beef? Sundry economic woes, including the high price of lumber.

This letter exposes an ugly strain of whininess that has infected our nation, but it’s an election year, so polls show Chicken Little leading in the electoral vote count. Ask the average person and you’d be told that the United States is in the middle of a steep recession. Fanning the flames of this four-alarm panic are the leftist “mainstream” media, for if they can’t convince you that bread lines and “Brother, can you spare a dime?” are just over the horizon, you won’t vote for their poodle for president.

A recession is defined as two consecutive quarters of negative economic growth (economist-speak, I think, for shrinkage). Yet during the first quarter of 2008, the economy grew at a rate of 0.9 percent, during the second quarter, 1.9 percent. Not robust growth to be sure, but growth nonetheless. There is no recession. Nothing has receded.

But let’s take a bit of a longer view. In 1996 the U.S. unemployment rate in the middle of Clintonomics was 5.4 percent, about the same as it is now. In 1997, gross domestic product, a measure of the nation’s output of goods and services, was roughly $8 trillion. In 2007 GDP was $13.8 trillion. At the beginning of 1997, interest rates on 30-year fixed mortgages ranged from 7.8 to 8 percent. Today rates range from 6.5 to 6.9 percent, making homes more affordable for thousands of buyers. In 1997, the price of computing was measured in dollars per megabyte. Today it’s measured in cents per gigabyte. According to Pew Research Center data, since 1992, the percentage of Americans who agree that they “can afford what they want” has risen steadily from 39 percent to 52 percent, the highest ever. The point is that the United States enjoys a robust and diversified economy, one that rides out the inexorable cycles of ups and downs—a cycle dramatically illustrated by oil prices, which, after hitting $147 a barrel, were down to $114 as I write. If high gas prices are grounds for impeachment, then the same logic dictates that lower gas prices are grounds for a third term.

There are other reasons to stop whining. In 1996, U.S. life expectancy was 75.9 years. Today it’s over 78 years—81 if you’re a woman—and in nearly every major disease category, death rates are sharply down. In 1996 the infant mortality rate was 7.3 deaths per 1,000 live births. Today the rate is 6.4. Crime rates are down by half since the early 1990s. Violent crime is down roughly 60 percent. School violence is down roughly 50 percent. Admittedly, I’m cherry-picking. Gloomsters could cite other statistics. But c’mon, let’s buck up a little. Are some people struggling? Sure. Some struggled under Clinton in the 1990s. Others will struggle if the poodle wins best in show. But struggle sweetens success. Struggle calls forth faculties.

I was thinking about all this in connection with a heart-warming story that recently came to my attention. Maybe you’ve heard it. In early 2002, a member of the Maasai tribe in remote Kenya returned home from Stanford University to tell horrified villagers about the events of 9/11. The village elders gathered to determine how they could express their grief at what happened in the country that had embraced and educated one of their sons. They concluded that the handkerchief that would wipe away America’s tears would be a gift of 14 of their cows. These are people who are dirt poor; Kenyans’ annual per capita income is about $360. The Maasai didn’t know about 9/11 because they have no television or radio, nor electricity to run them. The only resource they have, one they regard as sacred, are cows.

And we grouse about the price of lumber. Good grief.

Michael J. O'Neal labors sweatily as a freelance writer. You can hitch him to your draycart at http://thespeech-writer.com.

Quote of the Day

"The people who get hurt (when minimum wage increases) are the middle class," [Moscow Subway franchise owner Larry Swanger] said. "They don't get the raise and everyone raises prices to accommodate.

"The middle class isn't going to get a 15 percent raise."

- "Working hard for the money: Many Moscow businesses ahead of the curve as minimum wage goes up," Moscow-Pullman Daily News, July 12, 2008

PALOUSITICS EXCLUSIVE - Wal-Mart: What's Next? Part Six

This is Part Six of a series of articles that will explore what happens when a Wal-Mart Supercenter comes to town.

The information contained below is being made publicly available on the web for the first time.

Back in 1994, in the Central Washington city of Wenatchee, one of the first Wal-Mart stores in our state was built. As this store has now been open 14 years, it can provide a good example of the long-term effects of Wal-Mart on a community

Michael Luis & Associates, a public affairs, communications and civic leadership consulting firm in the Seattle area, has prepared profiles assessing the impact of the opening of Wal-Mart stores in communities throughout Washington. The one concerning Wenatchee can be downloaded here.

Some highlights:

...the retailing world discovered Wenatchee. Allison Williams, of the Wenatchee Mayor’s office, and who was with the Wenatchee Downtown Association at the time, says that she “can’t isolate the arrival of Wal-Mart from the arrival of the rest of the ‘marts.’ Within two years we had new K-Mart, Target and Costco stores. Word had gotten out that the region was underserved.”

The outside “discovery” of Wenatchee, combined with internal economic development efforts, transformed Wenatchee into a major retailing center for a largely rural area with about 200,000 people. According to Williams, it was “the story of every community that has gone from small to medium. Some businesses found that they weren’t serving the market, but many very good businesses survived and thrived, despite the opening of not just Wal-Mart, but several other large retailers.”

According to those who observed the arrival of Wal-Mart and other major retailers in the 1990s, the impact on existing Wenatchee retailers was not huge. Most stores survived and adjusted to the new environment.

...in most respects the retailers of Downtown Wenatchee do not compete directly with Wal-Mart and the other big boxes...the region still has a large population of low income people and agricultural workers who shop at Wal-Mart but probably would not shop in Downtown Wenatchee....the typical downtown customer...having significant disposable income and a desire for unique goods.

Purchasing power is spread fairly evenly around the county, so Wenatchee is collecting more in sales tax revenue than its residents alone are paying out, making retail sales a valuable attractor of City tax revenue.

...well-established training programs..help people make the transition from agricultural work to other industries...retail tends to be an entry point for these workers, and that stores like Wal-Mart provide excellent opportunities.

Monday: We'll go back over to the West Side and look at Wal-Mart in a town that was devastated in last year's floods: Chehalis.

Technorati Tags: wal-mart walmart

PALOUSITICS EXCLUSIVE - Wal-Mart: What's Next? Part Five

This is Part Five of a series of articles that will explore what happens when a Wal-Mart Supercenter comes to town.

The information contained below is being made publicly available on the web for the first time.

Covington, WA, is a fast-growing suburb of Seattle located in southeastern King County. I used to live just up the road from Covington in Kent.

Covington is booming, with many new retail and housing developments. I was there not too long ago. There is a new Safeway, I believe, with a Starbucks in it, and another Starbucks across the parking lot in the same strip mall!

In 2005, Wal-Mart opened a store there after some opposition. Building a Wal-Mart anywhere in the metroliberal Seattle area is next to impossible, as you can imagine. I've been to the Covington Wal-Mart. It is very nice and very unobtrusive, located well off the main drag of Kent-Kangley Road.

Michael Luis & Associates, a public affairs, communications and civic leadership consulting firm in the Seattle area, has prepared profiles assessing the impact of the opening of Wal-Mart stores in communities throughout Washington. The one concerning Covington can be downloaded here.

Some highlights:

The Covington Wal-Mart has only been open two years, but the impact of that store opening is clear. The major jump in sales from 2004 to 2005 reflects the opening of the new Wal-Mart in Covington, which opened its doors in early 2005.

Retail store sales growth in this fast-growing community has been even stronger and more consistent than Covington since 1998. Sales growth in Maple Valley slowed only very slightly from 2004 to 2005, during the opening year of the Covington Wal-Mart, indicating that the new Wal-Mart did not take a big bite out of retail in Maple Valley.

The retail customer traffic drawn by Wal-Mart has been a catalyst for additional retail development in the emerging “downtown” of Covington.

Covington has benefited from increased tax revenues generated by expanded retail. A major new retailer like Wal-Mart shows up most prominently in increased local sales tax revenue, but also shows up in property taxes paid on the new building and whatever mix of business and utility taxes levied by the local government.

...the jump in inflation-adjusted revenues to the City of Covington between 2001 and 2005. During this four year period alone, sales tax revenue grew an inflation adjusted 54 percent.

As part of the development of the store, Wal-Mart made significant contributions to traffic mitigation measures that will serve other retail and future residential development in Downtown Covington. According to Hart, a well-designed store and adequate traffic improvements have made Wal-Mart a major net plus for the City.

According to Messer, of the Covington Chamber, Wal-Mart is a “fantastic” contributor to the community. Store personnel are active in the chamber and in local service clubs, regularly attending events.

In 2006, Wal-Mart made two important community contributions. When the annual “Covington Days” festival was threatened with cancellation, due to lack of funding, Wal-Mart stepped up with a check for $10,000, ensuring that the festival would take place. Wal-Mart also participated in a volunteer recognition event at Covington Elementary School, providing clothes for students to wear at a fashion show.

Thursday: We'll hop over to Apple Country and look at the effects of the Wal-Mart that opened in Wenatchee.

Technorati Tags: wal-mart walmart

PALOUSITICS EXCLUSIVE - Wal-Mart: What's Next? Part Four

This is Part Four of a series of articles that will explore what happens when a Wal-Mart Supercenter comes to town.

The information contained below is being made publicly available on the web for the first time.

In 2003, after Wal-Mart announced plans to construct a Supercenter in the Olympic Peninsula town of Sequim, WA, a small, vocal group of snobs got together and decided to oppose it. They called themselves "Sequim First." These opponents of "cookie-cutter development" picked a cookie-cutter name right out of Weird Al Norman's playbook (e.g. "Give it [your Wal-Mart hating club] a short, upbeat name like 'Freeport First.'”) Sheesh.

Sequim First's tactics will sound very familiar to Pullman readers. Initially, the city council approved the project. Then Sequim First filed a lawsuit appealing the SEPA approval and the decision not to require an independent Environmental Impact Statement to the Thurston County Superior Court. The group cited significant impacts to stormwater runoff, traffic, emergency services, water supply, and other municipal services, and damaging effects on the downtown core. The court rejected the appeal on March 19, 2004. Sequim First then appealed to the state Court of Appeals in June. Nevertheless, the new Wal-Mart opened on October 22, 2004. [Note: On August 18, 2005, Sequim First wrote to the Department of Ecology requesting that Sequim be added to the same costly NPDES Phase II stormwater permitting that Pullman is saddled with, because of "the continued emphasis on almost-uncontrolled growth in Sequim." Gotta love the spitefulness of these urbanistas.]

So what happened next?

Michael Luis & Associates, a public affairs, communications and civic leadership consulting firm in the Seattle area, has prepared profiles assessing the impact of the opening of Wal-Mart stores in communities throughout Washington. The one concerning Sequim can be downloaded here.

Some highlights (notice the similarities with Pullman):

...sales in retail stores in Sequim and Clallam County as a whole were relatively flat in the first part of the decade. Sales began to pick up steam across the county in 2004, and especially in Sequim, where Wal-Mart opened in October.

Not all of the increase in retail store activity in 2004 and 2005 was due to Wal-Mart, however. ...sales at stores in Sequim, other than Wal-Mart, [saw] a substantial bump upward in 2004 and 2005. The opening of the Wal-Mart clearly did not hamper overall progress in retail expansion in Sequim.

...only a few small stores closed after Wal-Mart opened, and those were owned by people who were ready to retire and close up shop anyway. Mayor Schubert, whose professional background is in retail, believes Wal-Mart’s arrival was a useful “kick in the backside for local retailers. It forced them to get on the ball.”

The strict lids that have been instituted on property tax collections in Washington have kept these taxes from rising in areas without substantial new construction. Thus, in a city like Sequim, municipal finances have begun to rely more on sales tax for growth. ...sales tax collections in Sequim have increased substantially as large new retailers have opened in the city.

...four revenue sources...generated about $2.5 million in 2001, or about $575 per resident. This had increased to $3.9 million by 2005, or about $835 per resident. By
accommodating Wal-Mart and other retailers, Sequim stemmed the leakage of sales tax revenue to Port Angeles and other communities, and captured tax revenue from shoppers living in surrounding unincorporated areas.

Between 1995 and 2005, while the population of Clallam County grew by 10 percent, retail employment grew by over 40 percent. Overall employment in the county has been growing steadily, and the current unemployment rate, about 5.5 percent, is low by recent historic standards. Schubert says that with employers like Wal-Mart, “people who didn’t have jobs eight years ago now have jobs.”

As Sequim grew from a small rural town to an important tourist destination and retirement community, local retailing did not keep pace. Local retailers were adept at catering to visitors, but not at filling basic needs of residents, many of whom are on fixed incomes. Wal-Mart and other big box retailers have met this need, saving local residents from having to drive to Port Angeles or Silverdale.

Wednesday: We'll take a look at the effects of a Wal-Mart that opened in the Seattle suburb of Covington.

Technorati Tags: wal-mart walmart

Wal-Mart: What's Next? Part Two

This is Part Two of a series of articles that will explore what happens when a Wal-Mart Supercenter comes to town.

After a Wal-Mart Supercenter opens in Pullman, what will happen to other neighborhood businesses? There is plenty of evidence from all over the country. This from the June 23 Washington Post :

Wal-Mart opened its store in Landover Hills -- the first inside the Beltway -- in a storm of controversy last year bred in part by its reputation for running small businesses like Ramdass's out of the rural towns and suburbs that for decades were the retailer's breeding ground. There was concern that the so-called Wal-Mart effect would be replicated, if not magnified, once it moved into more urban areas, such as Landover Hills.

No comprehensive study has been done on Wal-Mart's impact on this stretch of Annapolis Road, the heart of this redeveloping neighborhood. But local proprietors and community leaders say the fears have not panned out. Some say the dour economy is a bigger threat than Wal-Mart. Other store owners credit Wal-Mart for boosting their sales, through both its proximity and community outreach programs.

Despite much union-inspired fear-mongering to the contrary, existing local businesses routinely manage to maintain their status quo antebellum or even increase their sales when Wal-Mart comes to town.

A study conducted by two Economics professors at West Virginia University, Russell S. Sobel and Andrea M. Dean, titled "Has Wal-Mart Buried Mom and Pop?: The Impact of Wal-Mart on Self Employment and Small Establishments in the United States" concluded:

...that the process of creative destruction unleashed by Wal-Mart has had no statistically significant long-run impact on the overall size and profitability of the small business sector in the United States.

As Landover pharamcist Anthony Ramdass states in the Post article,"Wal-Mart was just the big gorilla coming into the community. I think it's perception more than reality."

That statement sums up the intellectual bankruptcy and futility of the anti-Wal-Mart movement.

Monday: The first of several case studies from around Washington state

Technorati Tags: wal-mart walmart

Wal-Mart: What's Next? Part One

This is Part One of a series of articles that will explore what happens when a Wal-Mart Supercenter comes to town.

One of the first things that we can expect as construction nears an end is the opening of a Wal-Mart hiring center to process job applicants.

In Avon Park, FL, population 9,056, a new Supercenter is nearing completion. Highlands Today printed this story on June 25:

The temporary Wal-Mart Hiring Center had more than 2,000 jobseekers hoping to fill its 350 open positions in time for the new Supercenter's opening in August, according to one of the new Supercenter's co-managers.

Sherri Smith, who manned five other hiring centers in the Tampa Bay area, said she was "shocked" by the number of jobseekers that applied at the hiring center the past four weeks since it opened.
"It's a lot of paperwork," she said. "For being such a small town, I'm astounded in how many we're getting."

As Jason Furman, a strong supporter of Wal-Mart and Barack Obama's economic advisor wrote, a Harvard applicant has a higher chance of being accepted than a person applying for a job at that Wal-Mart.

So much for Wal-Mart being such a bad place to work.

Tomorrow: Wal-Mart and Neighborhood Businesses

Technorati Tags: wal-mart walmart

"Competition from Wal-Mart lowers prices at local retailers"

This is another story about one of those "no-duh" studies. University of Massachusetts researchers have found that Wal-Mart supercenters affect the prices of conventional supermarkets located within a five-mile radius, resulting in lower prices for consumer goods.

And of all places, I found this story at the Wal-Mart Watch website! According to the UMass Daily Collegian:

Lavoie said that from the results, she could conclude that "families that shop exclusively at supermarkets within five miles of a Supercenter can expect to save between $37 and $104 per person each year, since Wal-Mart will cause these stores to lower their prices."

Families that shop exclusively at Supercenters "can save $88 to $223 per person," Lavoie said.

For towns and cities that do not have a Supercenter nearby, the supermarket prices did not lower in response to the competition. Shoppers who are willing to travel away from these towns and cities to Supercenters can expect to save from $186 to $298 per person each year.

Plans for a Wal-Mart Supercenter near the UMass campus recently fell through. So, insert brainwashed co-ed comment here:

"I try my hardest to avoid shopping at Wal-Mart and giving them business, because I know now how evil of a company it is and I do not want to support that."

Obviously the writers of the Collegian are not like the writers at the Watermelon, as they conclude:

Although it is a fact that some students would rather support local businesses that shop at big chains, it is also a fact that individuals and families can save money if they shop at Wal-Mart.

Refreshing. Thanks Wal-Mart Watch!Technorati Tags: wal-mart walmart

"What Wal-Mart Gets and the Candidates Don't"

Terrific op-ed from the Washington Post from Sunday a week ago. Warren Brown, self-admitted union man, explains it to the elitists like Obama, Clinton, and the PARDners. It's not about globalism, offshoring, or union-busting. The average person doesn't think about politics when they shop. I made this point last week. It's about being able to buy quality goods at the lowest price. Period.

I wish to say at the outset that I hold no grudges against Wal-Mart. In fact, my family and I are rather fond of that giant retail chain, where we often find the best prices, especially on pharmaceuticals.

It is an odd thing to admit. Many in our clan, including yours truly, hold union memberships. Politically, with me being the sore-thumb exception, we run from left to leftist. Yet, regardless of politics or union affiliation, when it comes to searching for the best quality at the most reasonable prices, Wal-Mart is one of the places we look first.

As I said, this is odd, almost embarrassing. Wal-Mart is no friend of unions. Wal-Mart is one of those American retailers keeping foreign factories humming and foreign workers employed. Viewed from that perspective and in context with the current political debate on international trade, Wal-Mart is something of a bad actor, one of those companies supposedly putting people out of jobs in places such as Ohio.

Poor Ohio. It has become one of the rustiest parts of the Rust Belt. It has lost tens of thousands of jobs, largely in the automotive and related industries, and it has shed nearly 200,000 residents over the past couple of decades.

In last week's titanic Democratic presidential primary battle, Ohio, one of the most unionized states in the nation, was made the prime example of what happens in America when international trade supposedly runs amok.

Sen. Hillary Rodham Clinton (D-N.Y.), the victor in that contest, rose to electoral glory on promises that she would fix what is wrong with international trade, that she would somehow find a way to reverse job losses allegedly caused by contracts such as the North American Free Trade Agreement.

Sen. Barack Obama (D-Ill.), who was made to look a bit wishy-washy on the free trade issue, largely lost Ohio as a result.

But here's suggesting that none of us should take seriously anything that politicians, Democrat or Republican, liberal or conservative, have to say against NAFTA in particular or international trade in general. The reason is simple: They neither understand Wal-Mart nor do they routinely shop there.

Consider Ohio: Wal-Mart is one of the largest employers and biggest taxpayers in the state. As of March 2007, there were 99 Wal-Mart Supercenter stores in the Ohio, 38 Wal-Mart discount stores, 30 Wal-Mart Sam's Clubs and five Wal-Mart regional distribution centers.

In Ohio state sales taxes alone, the company paid $410.2 million in 2007. In other state and local taxes, it paid $82.4 million.

All of those Wal-Mart facilities and the money they generated were supported by one phenomenon: consumers, union and nonunion, employed by and laid off by domestic car companies and other manufacturing entities, seeking the highest quality products at the very best prices.

If Wal-Mart could not meet that essential consumer demand, it would not exist in Ohio or anywhere else. It certainly would not be the formidable retailer it is today.

What does that mean for the current political debate on international trade? Simply this: As long as politicians continue to ignore the Wal-Mart phenomenon, the consumer-driven reality of international trade, they are being dishonest. They are blowing smoke.

The truth is as simple as it is harsh. Automotive and other industrial jobs lost in Ohio are not coming back, certainly not the way they were, because the same consumers who shop at Wal-Mart stores in Ohio and everywhere else there is a Wal-Mart store are not willing to pay for those jobs and the products they represent.

Look at it this way: If I buy enough Honda cars made at the lower cost, nonunion Honda plant in Marysville, Ohio, I'm putting pressure on my union buddies at the higher-cost General Motors, Ford and Chrysler plants to offer me equal or better products at prices equal to or better than those offered by Honda.

I might drink with my union buddies. I might tailgate with them. I might even join them in shouting "hooray" for Clinton or Obama. But if they can't give me the car I want at the price I demand, I'm buying that nonunion Honda. If that means GM, Ford and Chrysler plants close, I'm sorry about that and all that means for my friends who will lose their jobs.

But they should have found a way to give me what I was willing to pay for. They should have understood why so many of us shop at Wal-Mart.

Technorati Tags: wal-mart walmart

Retail Gravity on the Palouse

I have shown how Hotelling's Model explains why retail stores tend to agglomerate in the center. This is, admittedly, a very simplistic explanation.

University of Texas economist William J. Reilly studied the purchases made by the residents of the various counties in Texas. Reilly knew that generally the farther away two counties were from each other the fewer transactions would take place between them. On the other hand if a county had a big city with a lot of bigger retail stores it would act as a magnet attracting the shopping by residents of surrounding and even distant counties. Also a county that had a larger number of residents would have more transactions with a given county than one with a smaller number of residents. Using this data, Reilly published a book in 1931 titled Reilly's Law of Retail Gravitation. In the book, Reilly postulated that two cities of equal size have a trade area boundary midway between the two cities. When cities are of unequal size, the boundary lies closer to the smaller city, giving the larger city a larger trade area.

Reilly's Law calculates a point of indifference (where consumers are indifferent as to which location they use) between two towns in order to determine the retail trade area of each city. Reilly called the boundary between two trade areas the breaking point. On that line, exactly half the population shops at either of the two cities. Obvously, if you were planing on serving both trade areas, you would want to locate as close to this line as possible.

This break point (BP) is equal to the distance (Dab) between the two cities, divided by the following: Unity or total (1) plus the square root of, the population of City A (Pa) divided by the size of City B (Pb). If you have studied physics, you realize this is quite similar to Newton's Law of Gravitation, which states that two bodies attract each other with a force that is proportional to the product of their masses and inversely proportional to the square of the distance between them

According to the Hotelling Model, the break point should be halfway in between Moscow and Pullman at around 4.65 miles from Pullman. However, since Pullman has a larger population, it is assumed that it will draw more customers. Using the 2005 Census population estimates for Pullman and Moscow and the distance between the center of each city, the break point according to Reilly's Law is 4.8 miles away from Pullman (see chart above). This in part explains why the center of retail gravity on the Palouse is shifted in Moscow's direction. And if Pullman grows more than Moscow, as anticpated, the center will shift even further towards Moscow.


Plotting this out on a map, the theoretical break point between Pullman (A) and Moscow (B) would be approximately at the intersection of SR 270 and Sunshine Road (C). The Hawkins development (D) is two miles to the east of this point.

One of the problems with Reilly's Law is that is not constant for all shopping trips. Retailers can offer additional competitive advantages and this can change the attractiveness of a location. In order to overcome these limitations, several refinements have been made to Reilly's Law. One of these was "Huff's Law of Shopper Attraction." Huff's Law describes retail trade areas on the basis of the size of the store (product assortment), distance, and the sensitivity to travel time associated with the type of product being sought.

The probability of a consumer traveling from home to shopping location A is equal to the square footage of selling space in location A divided by the travel from consumer's home to shopping location A divided by the sum of the square footage of selling space in all different shopping locations (A, B, C...) divided by travel time.

So let's look at the location desirability of Hawkins alone at the SR270/Sunshine Road location versus the desirability of the Hawkins/WarBonnet Plaza/Palouse Mall agglomeration, which was created by land use restrictions in the corridor.

For these calculations, the travel time to the SR270/Sunshine Road location from Pullman is 7 minutes. The travel time to the Hawkins/WarBonnet Plaza/Palouse Mall agglomeration is 11 minutes. Square footage at the SR270/Sunshine Road location is 740,000. Square footage of the Hawkins/WarBonnet Plaza/Palouse Mall agglomeration is roughly 1.32 million.


In this case, even though travel time to the Hawkins/WarBonnet Plaza/Palouse Mall agglomeration is 4 minutes longer, consumers are 6.4% more likely to shop there versus a SR270/Sunshine Road with Hawkins alone.

Hawkins knows all these things already, and that is why they chose the location that they did. It is based on economic science and not any desire to "screw over" Pullman.

Hotelling and Hawkins

In his Town Crier column last Wednesday, Chris Lupke wrote that:

A mall on the Idaho border with no promise of tax revenue won't help our parks or police and won't pave our streets. But what it will do is permanently situate the retail center in and near Moscow, miles from Pullman. Better negotiators could have insisted it be sited closer to our retail base.

Lu Laoshi may be a "national expert" in Chinese and Chinese culture, but he doesn't know jack about the economics of retail.

Some 80 years ago, economist Harold Hotelling devised an analogy to explain the spatial functioning of the marketplace.

His analogy became known as "Hotelling's Model":


Suppose there is a beach which is 100 yards long. Assume beachgoers are spread evenly across the length of the beach. Along come two ice cream vendors. The vendors are selling product of similar quality and price (ceteris paribus.) Logically, the layman would expect the vendors to place their carts at the 25 and 75 yard lines of the beach, thus allowing for an equal division of profits and providing the greatest convenience to beachgoers, as no one would be more than 25 yards from an ice cream cart.

However, one vendor will recognize that by relocating closer to the midpoint of the beach he can achieve an increase in market share. So, on the illustration above, the vendor at Position A will move his cart to the 30 yard line, increasing his market share to 52 1/2 %. The vendor at Position C will compensate by moving his cart to the 70 yard line. This continues as both vendors move incrementally towards the middle of the beach. Eventually, both vendors' carts are at Position B, right next to each other. They have achieved economic equilibrium, with each having a 50% market share.

Hotelling's Model, as you might guess, is very sensitive to cost assumption. There must be some cost to traveling because customers prefer the closest vendor. But these costs must be small, because the people at the end of the beach continue to buy the same amount no matter how far they are from the nearest vendor. If traveling costs are less, then people might not care whether they go to the nearest vendor. If they are greater, so that when the vendor gets far away, people do not bother to go, the vendors will no longer cluster at the middle.

Pullman residents, being six miles away from Hawkins, have negligible traveling costs. Travel costs for Moscow residents are even less. Put the shop in the middle, the customers will come, especially if there is already other retail clustered there. That explains why Hawkins chose the location it did. All very logical and very much in accord with economic principles. That is why the Pullman/Moscow corridor is a potential gold mine.

My Response to Roger Whitten

Roger Whitten of Oakesdale has had a letter to the editor critical of the Hakwins project printed in both the Whitman County Gazette and the Moscow-Pullman Daily News. Here is my response that will run in the Gazette next week:

In a letter published in the Gazette last week, Roger Whitten argued that what we need is locally owned stores versus corporate owned big box stores.

The truth is that there is plenty of room for both here in Whitman County.

Because of the entrepreneurial American spirit, small business is the backbone of our economy. In fact, Lowe’s Home Improvement Warehouse first started out as a mom-and-pop hardware store back in 1921 in North Wilkesboro, North Carolina. Through hard work and ambition, there is now at least one Lowe’s in every state in the union.

But since the advent of national retailers such as A&P and Woolworth’s, the American consumer has turned to shopping at chain stores. And why not? Chains are familiar, a big plus in our highly mobile modern society, offer more bang for the buck to working families, and particularly in rural areas, provide a much larger range of shopping choices than would normally be available. They also help the communities in which they locate by bringing in jobs and increased tax revenue and help local retailers by bringing in customers from a wide geographic area.

If shoppers can’t get what they want here, they’ll go elsewhere. And that’s exactly what has happened. An economist at the University of Idaho found that in 2004, Whitman County, including Pullman, had a net loss of $158.4 million in taxable retail sales to neighboring communities with more chain stores such as Moscow, Clarkston, Lewiston, and Spokane. As far as any “decrease in sales tax revenue from the existing locally owned stores,” our severe lack of retail is the real culprit.

Whitten stated that, “Money spent in a corporate owned big box store leaves the county.” But that’s not true at all. Money is fungible. That means that regardless of whether it originates in a locally owned store or a corporate owned store, all money is the same. A dollar spent in a local store that goes towards sales taxes, property taxes, employee salaries and benefits, charitable donations, etc., is no more valuable than a dollar spent in a chain store.

Will the Hawkins development “suck money out of the county” as Whitten claims? Will there be “no net gain in sales tax revenue?” The answer is a resounding “NO!” According to the Department of Revenue, Whitman County, excluding Pullman, generated $30,774,961 in taxable retail sales in 2006. Estimates for the Hawkins mall, at a mere 40% build out, come in at $123,823,621 in annual taxable retail sales. That’s right. One shopping development will generate FOUR times the existing retail sales of all of rural Whitman County! That means four times as much sales tax revenue for the county (approximately $1.3 million a year). And more development near Hawkins can be expected to follow. Even though Mr. Whitten is not going to “go into debt to help large corporations,” $10 million for such a return is a slam-dunk calculation in any economic equation.

Some have questioned why the County Commissioners are placing so much emphasis (and county funds) into the area around Pullman. The answer is simple. If you only have a limited amount to invest in a stock, you’re going to pick the company that is growing the most and can give you the biggest return. Forecasts for area growth have the City of Pullman increasing its population by 24.49% between 2006 and 2025. Whitman County is only expected to grow by 9.37% during the same period. However, the sales taxes generated by development in the Pullman/Moscow corridor will be used not just in Pullman, but all over the county; from Hooper to Palouse, and from Rosalia to Uniontown.

For these reasons, we should all support the bold actions taken by our County Commissioners to stimulate economic growth. For their role in delivering the Hawkins project alone, Commissioner Jerry Finch and Commissioner Greg Partch deserve another term and have my vote.

Here is Whitten's letter:

In regard to the Hawkins shopping mall development, I wonder if the Whitman County commissioners are factoring in the decrease in sales tax revenue from the existing locally owned stores. For if a person buys a stick of lumber at a Lowe's Home Improvement store instead of buying lumber from an existing locally owned store, there is no net gain in sales tax revenue.

In fact, it would be an economic loss to the county because money that stays local recirculates locally. Money spent in a corporate-owned big-box store leaves the county.

It is the small Mom and Pop type of businesses that bring money into the county and keeps it here. The large corporate stores suck money out of the county.

If they follow the zoning codes, Hawkins has every right to build a shopping mall on its property. I, however, am not willing to go into debt to help large corporations take money out of the local economy. The county commissioner's decision to give Hawkins $10 million for the development of their own land is a miscalculation in the overall economic equation.