Howard Schultz on Budget & Economy

Starbucks CEO; independent candidate for President until July 2019


$22 trillion debt is immoral and reckless

For too long now, our government has been spending more than it takes in. This year, that figure--unbelievable--will be almost one trillion dollars. Yes, one trillion dollars. Our national debt--all of the money our federal government has spent, beyond its means--is $22 trillion. It's immoral, it's reckless, and both parties are complicit. That's larger than the size of the entire U.S. economy.

This is a moral abdication--because the burden of that debt is going to fall on the shoulders of your generation. We already spend more on interest on the debt--this is an amazing number, $500 billion of interest expense every year--than we do on all federal programs to help the children of our country. It's insane. It's reckless. It's wrong. It's a lack of leadership. It's a lack of responsibility. And once again, it's emblematic of how broken the system is and both parties are complicit. That figure is only going to increase in the years to come unless somebody decides to fix it.

Source: Miami Dade College speech:2020 Presidential Campaign website , Mar 13, 2019

People feel the painful effects of political gamesmanship

In July 2011, the issue was whether or not the federal government should increase the so-called debt ceiling. Republicans said they wouldn't even vote on raising the ceiling unless a new bill included massive cuts to spending. Democrats, meanwhile, said they wouldn't consider raising the debt ceiling without also raising taxes.

Politicians postured in front of cameras. Congressional votes were called, then cancelled. Blame was abundant.

Two things in particular plagued me. First, missing the deadline, or hitting the ceiling, meant that some of the country's most vulnerable and deserving citizens--people on Medicare, veterans, and federal pensioners--would have late, partial, or missed payments. People would immediately feel the painful effects of political gamesmanship.

Second, raising the debt ceiling was a false goal. What the nation needed was not more debt but a comprehensive, balanced budget, coupled with a bipartisan economic plan that spurred long-term economic growth.

Source: From the Ground Up, by Howard Schultz, p. 58-9 , Jan 28, 2019

$5M to start community lending in Great Recession

We agreed that focusing on funding small businesses made sense to us [to address high unemployment during the Great Recession]. Starbucks had spent more than a decade as a small, private company before going public, and each of our stores operated, in many ways, like its own small business.

We found a reputable partner, a trusted nonprofit. The money we raised in Starbucks stores would pass 100 percent to [small lenders] around the country. That money would be equity to borrow more money against and lend to any organization that provided jobs in the community. On average, [the total amount lent would be] seven times the original amount of a grant they received.

Starbucks, in turn, would reimburse operating costs to ensure that 100 percent of every dollar raised from our customers went into communities. In addition, the Starbucks Foundation would make an immediate donation of $5 million, rather than wait for customer donations to add up.

Source: From the Ground Up, by Howard Schultz, p. 79-83 , Jan 28, 2019

Raising debt ceiling is false goal: focus on balanced budget

It was 2011. Unless new budget legislation was passed by August 2, lawmakers and pundits were warning that government would not be able to pay its bills. The most immediate, unresolved issue was whether or not the federal government should increase the debt ceiling.

Raising the debt ceiling was a false goal. What the nation needed was not more debt but a comprehensive, balanced budget, coupled with a bipartisan economic plan that spurred long-term economic growth, increased jobs, and helped more citizens help themselves by lifting stagnant wages for the dwindling middle class, getting more young people through college, putting entrepreneurs back in business.

They were fighting over the wrong thing. Instead of coming together to address these very real needs of the American people, politicians were arguing about whether to accumulate more debt and whether to raise or lower taxes. These are important macro decisions, but they are not growth strategies.

Source: From the Ground Up, by Howard Schultz, p. 58-9 , Jan 28, 2019

2008: closed 600 Starbucks stores due to Great Recession

Press release: "Starbucks Increases Number of U.S. Company-Operated Store Closures as Part of Transformation Strategy: Approximately 600 Underperforming Stores Will Be Closed; Company Takes Significant Step Toward Improving Long-Term Profitable Growth"

I had striven for honesty, trusting our people to honor the realities of the situation Starbucks was in. [The press release continued]:

"Throughout the history of the company, we have always aspired to put our people first. This makes our decision to close the stores more difficult. At the same time, we recognize that we must make decisions that will strengthen the U.S. store portfolio and enable us to enter fiscal 2009 focused on enhancing operating efficiency, improved customer satisfaction and ensuring long-term shareholder value for our partners and customers."

Six days after the announcement, on July 7, 2008, our stock fell to a 52-week low of $14.95 a share.

Source: Onward, by Howard Schultz, p.157-8 , Mar 27, 2012

2009 stimulus package lifted consumer confidence

On Feb. 17, 2009, Pres. Obama had signed into law an ambitious $787 billion stimulus package to try to rescue a nation reeling from an economy weaker than it had been in decades. Unemployment in the US was on its way to a 25-year high of 8.1%.

"Is [the stimulus] going to be helpful in terms of getting the consumer out of this funk?" Maria asked me. My perspective, which I shared with her, was that its most immediate effect would be to lift consumer confidence, which was so critical for people to feel comfortable enough to spend money again. I also said that I did not think the current climate was going to dramatically improve anytime soon, something that all companies had to accept.

At Starbucks, we continued the incredibly complicated, sometimes painful work of cost cutting and making our processes more efficient. Revamping the supply chain. We were closing 300 more stores than previously planned. Most difficult was that we had just gone through another round of layoffs.

Source: Onward, by Howard Schultz, p.263-5 , Mar 27, 2012

Debt ceiling agreement and balanced budget will save economy

It is business leaders' "responsibility" to help increase consumer confidence, especially though job creation. But the lack of a long-term agreement on the debt ceiling deal--Congress and the administration still need to agree on $1.5 trillion more in budget savings by the end of the year--is a direct link, he says, to the faltering economy. Most business people today are not going to invest in the uncertainty that exists in America. That uncertainly is directly linked to the debt ceiling.
Source: Lauren Effron on ABC News, "Show Confidence" , Sep 7, 2011

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