Scott Heintzelman Interview With Lowman Henry on www.ExuberantAccountant.com

(Editor’s Note: Scott Heintzelman of McKonly & Asbury, LLC recently interviewed Lincoln Institute Chairman & CEO Lowman Henry for his podcast. Follows is a transcript of that podcast which can also be heard at [L=url]http://www.exuberantaccountant.com/2009/07/listening-to-the-economic-hea
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SCOTT HEINTZELMAN INTERVIEW WITH LOWMAN HENRY OF LINCOLN INSTITUTE

SAH: With me on the phone today is Lowman Henry, a former county commissioner and founder and Chairman of the Board of Directors for the Lincoln Institute. Welcome Lowman.

LH: Thank you, Scott – good to be with you.

SAH: Would you care to share with me a little bit about what the Lincoln Institute is, what the mission of it is, and just how you serve the business community?

LH: Sure, the Lincoln Institute is a nonprofit, education foundation. We were founded about 16 years ago and our mission is to take information about what is happening at the state and national levels and to educate the business community, taxpayers, and voters about what is happening in their government. We then also do projects that allow public opinion to be funneled back to those who are making decisions. Be they people in the administration, such as cabinet secretaries, assistants, or actually legislators and elected officials themselves. The Lincoln Institute started out with our main mission being to do public opinion research in terms of polling and conducting focus groups and throughout our history we have done that. We have a regular series of polling that we do each year. We also periodically convene what we call Public Opinion for focus groups where we bring in 15 or 16 folks who are randomly selected and expose them to both sides of a given issue and then have a discussion about that. We test their opinions coming in and their opinions going out of the focus group experience. From that beginning, we branched out and 16 years ago we started a radio program, Lincoln Radio Journal which is a half hour public affairs show. Over the course of the years it has grown to the point where we have 77 stations around Pennsylvania that carry Lincoln Radio Journal and it focuses on stateside issues. Two years ago we branched out nationally and began syndication of American Radio Journal which also is a half hour of public affairs programs and we focus on national and even international issues. As of today, we have 99 stations in 33 states that airs that show. So, our radio products have overtaken the polling as our chief focus. And, of course, this being the world of the Internet, we have a number of Internet sites. We have our own website LincolnInstitute.org. A number of years ago, we also founded Patownhall.com and that’s a site where we aggregate the work of about 30 different writers, columnists, and various conservative organizations throughout Pennsylvania and post all their work on one site with links to their sites. In addition, we have websites for each of our radio shows. So that along with columns that we syndicate to newspapers and various media appearances make up the bulk of our work.

SAH: Excellent, that’s very interesting. I did not know that you guys had quite that large of a national footprint. Maybe explain to me a little bit more of what is in those radio journals. What information are you sharing and where are you finding this information? Is it all from your polling and the public opinion research that you’re doing?

LH: That’s how it began. When we were doing polling in the early days with our organization, we found that radio talk shows and radio newscasts were the area where we would receive the most coverage for what it was that we were producing. I have a radio background. I started out my career in radio, so I very quickly decided that this was a great opportunity to start a public affairs show. We have a rather unique niche in that radio stations all around the country are required under terms of their license agreements from the Federal Communication Commission to provide a certain amount of public service broadcasting, which by definition is broadcasting that they produce that they do not have commercial sponsors for. Now stations have difficulty with this – some stations have difficulty with this because it costs them money to produce a show and they cannot allow them to have commercial content in order for them to qualify. We solved that problem for them by giving them a public affairs program that is purely public affairs, no commercials, at no cost. They get it each week dependably and they can air it and it then qualifies for their commitment to the FCC for public service broadcasting. So they get a quality program at no cost, they get their commitment fulfilled, and we get the opportunity to be on their radio station which is why so many stations air the program. In terms of content, we have with Lincoln Radio Journal – it is a Pennsylvania specific program. Typically, we begin the program with a newsmaker interview and we talk with legislators, statewide elected officials, candidates, public policy folks, business people, primarily with an economic approach. Our organization is basically a conservative, free market, economic organization. We also have Doug Keegan who works with Harris SBSB out of Virginia. He does the Making Sense Segment once a month which talks about practical ways to handle your personal finances. Joe Geiger who is the head of the Pennsylvania Association of Nonprofit Organizations each month does a focus spotlight on a specific nonprofit organization in Pennsylvania and what they’re doing. Al Paschall, who is head of the Montgomery County Chamber of Commerce and who also, is a founding director of the Institute does the commentary at the end of each show. We also have a Capitol Watch segment which David Taylor who is executive director of the Pennsylvania Manufacturers’ Association, Kevin Shivers who heads the Pennsylvania Chapter of the National Federation of Independent Business, and Matt Brouillette who runs the Commonwealth Foundation do sort of a roundtable discussion of issues. We intermix the various segments on a regular basis and that forms the show. Now, American Radio Journal, which is our national show, again a half hour public affairs show, we start each edition with me doing a newsmaker interview with a top newsmaker. We’ve had a wide variety of guests, everything ranging from former ambassador to the UN John Bolton, to actors, to think tank heads, to international affairs. We’ve covered all sorts of things there. Chris Chocola who heads the National Club for Growth does an Inside Washington Report on each edition for us and then we have 3 different commentators who rotate commentary at the end of that show. So, we are able to pull in not only our work, but the work of a lot of other organizations, again primarily business related, primarily economic related into these programs.

SAH: Speaking of business related research and opinions; I think you also do the Keystone Climate Business Survey on a regular basis. Am I correct?

LH: Yes, we’ve done that survey twice a year now for 13 years.

SAH: So with all this research, what are you hearing right now in the business community? What are some of the fears, concerns, and maybe expectations? Often times I’ve heard this new term there’s a "new normal" in the business world – people are doing more with less.

LH: Well, actually there is no more normal. Normal is gone and we’re in uncharted waters. It’s interesting, Scott, and like I say, we’ve been doing this now for 13 years and the first question that we ask in every survey is we ask people whether they feel the business climate in Pennsylvania is better, the same, or worse than it was over the past 6 months. That number, as you can imagine, has declined into the negative territory to the point where we had 76% in our spring survey that said that the business climate had gotten worse in the previous month. We’re now in a more negative range than we were even at the previous negative which was the survey that was held right after the September 11, 2001 terrorist attack. Business people are concerned. Now, in Pennsylvania, our business community is doing I think a little better than most other states. Pennsylvania tends to not rise as fast or fall as fast. You get an overheated economy in places like California or Nevada or perhaps the real estate market in Florida. Those sorts of extremes did not happen here, so we didn’t go up as high so we didn’t have quite as far to fall, but it certainly is a negative climate and interestingly you would think that access to credit would be one of the biggest concerns of the business community. That fell in our last survey to either third or fourth place. That’s what the current economic recess is being blamed on in the present market.

SAH: That’s what you hear in the media as well.

LH: The media fed that flame. Keep in mind that the business climate survey is a survey of the people who actually run businesses, these are the owners.

SAH: People who are creating jobs.

LH: They’re the job creators, they’re the people who have to meet payroll every week, they’re where the rubber meets the road of doing business. This isn’t theoretical to them; this is their day to day existence. And these people told us that not having access to credit hasn’t been a particular problem. Their biggest problem by far – taxes. The amount of taxes that they pay, both federally and in the state and their fear over where taxes are going to go in the near and long term future.

SAH: Well, I expect that that is going to be a big concern. Obama’s administration has this new health care plan which I imagine is scaring everybody. I’ve heard different estimates of a cost of $1.7 trillion and at this point they are not quite sure how they are going to pay for it. From everything I’ve read there has to be a tax increase. I mean you just cannot continue to print money; however, this week in the bond market I know that they floated $165 billion of new debt. Our federal government did which is a record. Pretty scary – so taxes are going to go up.

LH: Not only are they printing money, but we are borrowing money at a record pace. A couple of weeks ago at the PA Press Club luncheon, Pat Toomey who is a candidate for the U.S. senate and who has a background in economics, was saying that the amount of borrowing that we are needing to engage in is at the point now where it exceeds the available surplus in nations that have money to invest or lend. So, we’re reaching a point where there is not enough money in the world to cover our borrowing needs. Which, as you pointed out, means only one thing you start printing it? Of course when you start printing it you end up with hyper inflation and on and on it goes. But, not only do you have the $1.7 trillion that we’re talking about with the potential nationalized health care system, but just think about what we’ve already engaged in with the borrowing for the stimulus, the borrowing that took place last October when the economy first went – that bailout that occurred. The TARP that ended up not covering the things that it was supposed to cover.

SAH: And GM and Chrysler

LH: And sandwiched in between that after the stimulus, there was the omnibus spending bill and you’re right and GM and Chrysler.

SAH: That’s only $50 billion – that’s not that much.

LH: No a mere $50 billion and even as we speak today, what is before congress, this so- called bill to temper global warming which is a cap and trade program. The cap and trade program will amount to a tax of literally billions of dollars on the American economy and it’s going to hit those industries that are energy intensive which means that it’s going to decimate the American manufacturing sectors. Which already, as you know, is on the skids.

SAH: Lowman, what are you hearing from Washington – do they have the votes to get that through.

LH: Well, as we’re speaking, it would appear that they’re short of the votes; however, a full court press is obviously being put on by the White House, Nancy Pelosi, Al Gore, and all those who are trying to pass it. My expectation is that it will be a very narrow vote in the house, probably even fewer than 10. Which way it’s going to go right now, I think it’s sort of up in the air. My suspicion is that it will probably pass the house by a narrow margin, but when legislation comes out of the house by those narrow margins and hits the senate, I think the senate is the place where this can be either stopped or at least tempered somewhat.

SAH: So, it will be imperative if people are against this to one, research it, understand it, and then reach out to their congressmen, representatives, senators, whatever and try to make them aware of their feelings.

LH: And that should be done immediately if not sooner, because this is running white hot in Washington D.C. and while it’s all well and good to sit and we want to encourage investments in alternative energy sources, the fact of the matter is that the cap and trade legislation as proposed will only cause shortages and will cost. There was one estimate that came out of the Heritage Foundation that it will cost the average family in America almost $3,000 more per year in energy expenses over the next four or five years.

SAH: And imagine if you’re a large manufacturing company, what that would mean as you are using electricity to power your machinery and whatever.

LH: Well, what’s going to happen is that these companies are going to start moving their production. They’re going to accelerate movement of their production to other countries that don’t have cap and trade – where they can get cheaper energy. So we’re going to lose more manufacturing jobs overseas.

SAH: And if I’m not mistaken, and I haven’t studied the bill like you have, it has a greater negative impact on states that have an industrial base such as Pennsylvania and some of the Midwest states. Am I correct that this is true?

LH: Absolutely and also in Pennsylvania, it will hurt us because we have tremendous coal reserves, we have the Marcellus shale natural gas reserves that are just starting to be tapped and developed. Those areas of our state’s economy, frankly there are few of them, but the areas that are showing promise for growth for the future, this cap and trade bill would stomp them out.

SAH: Utterly amazing. Write your congressman. What other thoughts do you have Lowman, what else are you hearing out there? What are the concerns of your business leaders and community leaders? What are they telling you?

LH: Well, we’re seeing a growing concern, Scott, over the mountain of debt that has been incurred here just in the last four and a half to five months. And we’re even seeing that in some polling that has been done. F&M College released a poll just this week that was showing the approval ratings for President Obama and Governor Rendell are dropping and support for their policies are dropping dramatically and the reason why is the amount of debt that has been incurred. And on the state level, we have a budget crisis in Pennsylvania. The budget is supposed to be passed by the 1st of July. There is probably no way possible that will happen. But, Governor Rendell has come out with virtually a tax increase proposal of the day including you referenced health care. He has proposed putting a tax on health care policies. So employers who are already providing health care for their employees would not only have that expense, but then would be hit with a 2% tax on top of it in order to fund what Governor Rendell would set up as a state run health care system. Then, there’s also a proposal to increase the state’s income tax by some 17%. And this is just the start of it; there are a whole lot of other proposals such as delaying phase-out of the capable stock and franchise taxes which would again harm businesses in Pennsylvania, particularly industrial business. So, from the business community’s perspective, this is why they are telling us taxes are their biggest concern because there is a steady drumbeat of talk from Harrisburg about raise this tax, raise that tax, and raise the other tax. Then they look to Washington and see trillions upon trillions of dollars in spending in debt and any prudent person knows that you’re going to have to raise taxes to pay for that. So taxes are alarming the business community.

SAH: What’s interesting to me is that politicians always want to be pro-job, but they are always doing things that are anti-business and you can’t have it both ways. With unemployment, which is at 9.4% and by all estimates is going to reach nationwide something over 10%; it’s going to take a long time getting those people back to work. And you can’t just keep putting them on the government payroll which alarms me with the current administration. So, hopefully at some point people will wake up and see that they need to be business friendly and allow those people to start hiring and getting people back to work, but with all these additional taxes it’s not going to happen. I think we’re going to have a long, long time until we get out of this and cycle through all the unemployed folks.

LH: Well, and as you know, every time taxes are raised, tax revenue drops because economic activity declines so all these tax increases, you’re correct, will only delay our recovery. My concern is if you look at what’s happening in Washington and everything that has been done so far is not only going to shorten the recovery, but could and likely will, cause a rebound recession if not a rebound depression.

SAH: Yes, I’m hearing the same thing. So what are you recommending? You’re a wise man; you’ve polled a lot of people and done lots of research. Besides telling people how to vote or to call their congressmen, what action steps would you take right now if you were a president of a manufacturing company or a construction company, someone that had employees and is running a business, what would you advise them right now?

LH: Well, don’t rely on my wisdom which is greatly limited, but let’s look at what history has taught us. For businesses right now, number one, keep debt as low as possible, reduce debt as much as possible. Be prudent, don’t take too many risks right now, but most importantly, if you’re running a business or if you’re engaged even as an employee, get involved and start paying attention to what is happening in Washington and Harrisburg because what we see all the time is the spending interests. Those who want to take from government. They’re here everyday in Harrisburg. There are rallies from people who want their share of the pie, who want more money to be spent. Same thing in Washington D.C. The problem is all too many members in the business community are so busy earning a living, doing their job, trying to keep their businesses afloat that all their time and energy goes to that. They don’t pay attention necessarily – especially to the detail. They need to know what is happening in Harrisburg and Washington. They’ve got to pay attention. They have to get involved, because we have to change our course, we have to cut back on the spending rather than accelerate it. We’ve got to shrink the size of government, leave more money in the private sector so that business people have more money to invest in their businesses. If we don’t change this course, we’re going to be headed to; unfortunately, I think economic times are going to get even rougher that what we’ve experienced over the last year or so.

SAH: Boy, I couldn’t agree more and your advice to get more involved is spot on. I really appreciate that and I think the listeners of this Podcast will as well. Lowman, I have enjoyed speaking with you. I think you are a wise man and I hope that people do take your advice, get involved, and call their local congressmen, write letters, and try to make their views known.

This has been Scott Heintzelman, author of the Exuberant Accountant blog and I’ve been speaking with Lowman Henry, who is the founder and chairman of the board of the Lincoln Institute. Thank you so much for your time today Lowman.

LH: Scott, it’s been great being with yo