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Guest column | Charlie Reese

Spending at local businesses is the ultimate economic stimulus

The largest spending program the world has ever known is sending hundreds of billions of dollars from our nation's capital to government agencies and communities throughout the country in what is the mother of all trickle-down economic plans.

It is a giant roll of the dice —an all-in gamble with the hopes of bringing prosperity back into our economy, lives and communities. Half the nation seems to think it's a fair bet, and half are dangling tea bags from protest signs. Here's a message for both sides of the divide: Real economic stimulus, to paraphrase what Tip O'Neill once said about politics, is all local.

In other words, spending by the federal government on a massive scale is less important than spending by individual citizens and their local governments on a micro-economic basis with local small businesses. If your community has suffered an economic decline, don't wait for the feds to spend to the rescue. Consider how your own spending money circulates. If you (or your local government) bought goods or services from a local business, your money stays in the neighborhood awhile. Numerous economic impact studies have proven that locally-spent dollars circulate within small businesses in one community up to five times, as opposed to dollars spent outside your community, such as with online purchases or distant vendors. A Chicago area study by Civic Economics and the Andersonville Development Corporation found that for every $100 spent with a local firm, $68 stayed in the local economy. Another study by the Santa Fe Independent Business Report found that dollars spent at independent businesses deliver twice the economic impact of those spent at national chains. Once money is spent outside of your community, it vanishes from the local scene and with it goes any ancillary municipal benefits.

Dr. Rex LaMore of Michigan State University developed the Community Income and Expenditures Model (CIEM) to help municipalities and local communities better understand where their dollars are going once they are spent. As a result, the city of Lansing changed their procurement policy after one bid contract for 50 automobiles went to an outside bidder, who just barely beat out a local dealer. The city changed its policy so that if a local bidder comes within 5 percent of the lowest bid, they would be given the opportunity to match it. Such consideration for locally-owned businesses makes good business sense. It's the local businesses that employ local citizens, use other local businesses and vendors, donate to local charitable organizations and nonprofits, and pay local taxes. The economic impact for local governments to be loyal to their own businesses when feasible will benefit the taxpayers when they most need it.

Whether you purchase items from your local business or from vendors outside your community, a key consideration should be more than price. A local, independent business not only keeps your money fueling the local economy, but the choice might serve you better. Consumer Reports found in a study with 32,000 drugstore consumers that independent drugstores outranked mass merchandisers, national chains and Internet companies in terms of personal attention and service and, you might be surprised to learn, with lower prices.

In a free market economy we are free to spend our money anywhere we wish. But remember this: For every dollar you spend outside of your community, not one cent goes to pay for your local police, firefighters, teachers, neighborhood schools, local road projects, local transportation, parks and recreation, local water supply and sewer and utility improvements.

Indeed, it's money down someone else's drain.

Charlie Reese lives in Lutz.

Spending at local businesses is the ultimate economic stimulus 04/30/09 [Last modified: Thursday, April 30, 2009 6:00pm]
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