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Gut check / February 13, 2013
Poor South Hill; the town that has long reigned as Mecklenburg’s economic and business driver has taken its third punch to the gut since the start of the new year. Late Monday, Stage Stores announced the mid-year closing of the Peebles Corporate Office and the elimination of 180 jobs in town, which comes as especially devastating news on the heels of pending shutdowns at IVC and Home Care Industries. Say a prayer for the hundreds of local employees and their families who turn to 2013 with nothing but trouble hanging over their heads.

It may be that the closing of the South Hill Peebles headquarters was pre-ordained the moment Stage Stores bought the company back in 1985. Retail is hard-nosed business, but apparel is among the most challenging segments of all: it’s a highly competitive, typically low-margin grind. Historically Peebles has done very well operating stores in out-of-the-way communities where bigger players cared not to tread. That small-town feel extended back to management and the workforce, one reason among many why people rightfully think of South Hill as a Peebles town.

No longer. The Peebles distribution center will continue to exist even after the closing of the corporate office, and for that much, at least, we can be thankful. (Also unaffected is the Peebles department store in South Hill). But make no mistake: losing the local Peebles corporate office rips at the fabric of the Town of South Hill in ways that the IVC and Home Care shutdowns do not. Since opening in Lawrenceville more than a century ago, then adding its second store in South Hill in 1927, the Peebles chain (a.k.a. W.S. Peebles & Company) has been foundational to the community’s business and civic identity. Manufacturing outfits may come and go, but Peebles was a source of enduring and justified pride.

If nothing else, South Hill’s run of misfortune should serve as a reminder of just how weak the economy remains, as if fresh evidence were really needed on that score. It may be that the Peebles office closing has little to do with current business conditions and simply represents a decision by Houston-based Stage to streamline operations. It wouldn’t be the first time a company opted to boost its bottom line by downsizing. By the same token, however, it defies belief to think that the job losses at Peebles, and at IVC and Home Care before it, aren’t tied to broader trends. Put it this way: if the economy were growing, maybe we’d have some new jobs to ease the pain of those that are going away.

In this light, one can’t help but to be amazed and appalled by what Washington is — or, more to the point, isn’t — doing to address our ongoing national crisis of high unemployment and slack growth. One thing that surely hurt the economy was the recent fiscal cliff debacle, which was entirely the creation of a dysfunctional Congress. Perhaps the worst outcome to come out of that whole sorry process was the end of the payroll tax holiday. It turns out that people actually do notice when their paychecks are $20 or $30 smaller. The 2 percent payroll tax cut was pushed by the Obama White House in 2011 as a stimulative measure, but in the fiscal cliff negotiations it was one of the first things to go. (Republicans opposed the temporary tax cut and Obama did not fight hard to keep it, although he did insist on continuing extended unemployment benefits — a decision that may loom large in South Hill in the months and years to come).

As everyone may recall, the big debate in Washington a couple of months ago was over whether the nation’s wealthiest individuals could afford a 4 percent tax increase on earned income above $250,000 — never mind that the well-to-do often derive their wealth from dividends, capital gains and other forms of income that are taxed at rates well below the headline-grabbing top brackets. Meantime, what did Washington do to help the paycheck-to-paycheck crowd, which is to say most of us? Not enough, obviously. The result? Ask merchants hereabouts if they’ve been affected by customers who have less to spend after paying the bills. You won’t find storekeepers who will deny the impact. And what of Stage Stores? It’s hard to imagine its retail business hasn’t suffered, too.

The delusional thinking at the nation’s capital continues: Congress now has turned its attention to the sequester, another phony crisis that lawmakers have manufactured out of the whole cloth of their own ideological inflexibility and economic illiteracy. (I love it how virtually every right-winger on the Internet has become an economist of the hard-money Austrian school. These people know about as much about economics as I know about strudel-making.) The upshot of the sequester is that it threatens to subtract $1 trillion in economic demand over the next decade, and $85 billion in upcoming months. If this happens, you’ll hear the squeals all the way across the state; northern Virginia, which is heavily dependent on the federal government and the defense industry, would be especially hard-hit. The sequester is just the latest variation on austerity economics, which has proved an utter failure everywhere it’s been tried. In a weak economy suffering from slack demand, the notion that subtracting billions in spending will somehow make matters better is plain nuts.

Government spending unto itself is hardly the answer for what ails the economy. At worst, it’s a necessary evil for getting out of a trough like the one we’ve experienced in the U.S. over the past four-plus years. Fostering growth over the long-term, however, will require investments in the country’s productive capacities — whether it’s educational improvements or better transit systems or entirely new ways to satisfy our enormous energy needs. It’s ironic that the best thing looming in the future for the Town of South Hill — the construction of the new $1 billion Dominion natural gas-fired power plant in Brunswick County — stems from the regulatory response to climate change.

There are lots of like-minded things we could be doing to remake and rebuild the economy while providing a desperately needed boost in jobs in the short- and mid-term. Unfortunately, policy remains disturbingly in the throes of economic quackery. In the meantime, businesses inevitably fail, but few successors are rising up to take their place. For the sake of the 400-plus workers in South Hill who’ve just lost their jobs with the onset of a new year, now would be a great time to begin turning this dismal situation around.

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