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Bring On the Fat, Bring On the Taste – Celebrity Chefs Join Burger Wars, Baste Beef Patties in Butter

By KATY MCLAUGHLIN

Celebrity chefs have slaved in haute cuisine kitchens and mastered the world’s most complex dishes. Today, they’re dedicating their culinary brain power to another challenge: How to cash in on the burger craze.

Chefs such as French-trained Hubert Keller, all-American Bobby Flay and television star Emeril Lagasse are devoting their expertise to the once-humble hamburger. The rapidly growing pack of burger chefs is sparking fierce competition to expand, protect innovations and promote their recipes as the world’s best.

Most of the chefs make a big deal about the kind of meat served at their restaurants. Mr. Lagasse blends ground chuck, short rib and brisket; others promote their Angus, Kobe or grass-fed beef. Some beef experts say the main secret behind tasty celebrity-chef burgers is simple: They pile on the fat, whether from beef patties with 30% fat content or from patties basted in butter. That alone may make their burgers delicious at a time when supermarket ground beef may contain as little as 8% fat.

“I crave cheeseburgers more than anything else,” says Bobby Flay, who has five Bobby’s Burger Palace locations in the Northeast and is planning five to seven more in the next 12 to 18 months. “We treat the food like a high-end restaurant,” using only fresh, unprocessed ingredients, Mr. Flay says.

The craze for celebrity burgers ignited in 2003 when Mr. Keller, the chef behind San Francisco’s haute cuisine Fleur de Lys, needed an idea he could launch quickly in a vacant space that had become available in Las Vegas. He launched Burger Bar in 2004.

“I didn’t know it would become a huge home run,” Mr. Keller says. Instead of the 9% to 12% margins of his fine dining restaurants, Mr. Keller says he pulls down a 35% margin on annual sales of $7.5 million at Burger Bar in Las Vegas. Today, he also has units in St. Louis and San Francisco and is planning four more over the next year.

In a down economy, such dynamic profit numbers are drawing a crowd of chefs. Mr. Lagasse launched Burgers and More by Emeril in Bethlehem, Pa., late last year. Marcus Samuelsson opened Marc Burger in Chicago and Costa Mesa, Calif., two years ago. Laurent Tourondel, the chef who started three units of BLT Burger, separated from the partner behind those restaurants, and opened LT Burger in Sag Harbor, N.Y., in July. Richard Blais, who got exposure on TV show “Top Chef,” is the chef behind Flip Burger Boutique in Atlanta and Birmingham, Ala.

The chefs are competing with several popular chains serving burgers that aren’t prepared by celebrities but are more upscale than fast food—such as restaurateur Danny Meyer’s Shake Shack, with units in New York City, Saratoga Springs, N.Y., and Miami, and Five Guys, with more than 600 units in 40 states.

Kevin Connaughton, a theatrical lighting designer, has laid out $12.60 for a customized burger at Mr. Keller’s Burger Bar in San Francisco three or four times since it opened last year. “Anywhere that doesn’t specialize in burgers, it’s hard to get it properly cooked,” he says. “It’s definitely a very good burger.”

Most of the celebrity burger joints sprinkle in some trappings of fine dining, while charging anywhere from a few dollars extra to twice as much as the average diner. Marc Burger makes its own spicy ketchup. Burger Bar serves a burger topped with foie gras and truffles for $60; the San Francisco location features a wine cellar.

Ambience varies. The chains from Mr. Flay, Mr. Samuelsson and Mr. Blais look like stylish diners, with hip touches like a loft ceiling or a wavy dining counter. Mr. Keller’s looks more like an old-fashioned bar and grill, with dark-wood paneling. Many are located inside malls, stores or casinos, where chefs can rely on high-volume foot traffic.

Few celebrity chefs spend their days flipping burgers or working the fry-o-later. Instead, they design the concept, conceive the recipes, train the staff and check in regularly to maintain quality. Mr. Blais and Mr. Flay have staffed the top positions of their burger restaurants with cooks from their fine-dining operations.

Mr. Flay says before opening his first Burger Palace, he identified a fault with the hamburger: It has little textural contrast. So Mr. Flay created a concept he calls “crunchify,” which means putting a layer of crispy potato chips between meat and bun. He trademarked the term, as well as “Crunchburger.”

Three weeks ago, Mr. Flay called the chief executive of Cheesecake Factory and asked him to remove a “Double Cheese Crunch Burger,” with a layer of potato chips, from its menu.

“I’m going to protect this with all my might, because it’s the signature of my restaurant,” Mr. Flay says. (Cheesecake Factory says it was unaware of Mr. Flay’s trademark and will change the menu in the next printing cycle.)

The most expensive celebrity burger is usually a “Kobe” burger. Most menus specify that the beef used comes from American Wagyu cattle, a breed famous for its highly-marbled meat, meaning thin veins of fat run throughout the muscle, adding juiciness.

Beef experts are divided on the merit of Kobe burgers. Kobe beef contains fatty acids that give it a distinct taste and have a healthier profile than the fats in typical American beef, says Chris Kerth, professor of meat science at Texas A & M University. But the taste difference between ground Kobe and ground beef with an equally high fat content is so subtle, consumers probably can’t notice it, says Edgar Chambers IV, Kansas State University professor of food science.

Mr. Blais, who serves a Kobe burger, agrees that the unique marbling is lost in a hamburger but says Kobe beef is still a good choice for people who love a burger with abundant, tasty fat. His $39 Japanese Kobe burger consists of about 30% fat.

Chefs have their own special blends of beef cuts, such as short rib, sirloin or brisket.

“You’re creating a story and people love to hear stories,” says Mr. Keller, who uses ground chuck. Mr. Blais says his blend, which includes hangar steak, is the result of much research and study, including meals at rival Burger Bar, BLT Burger, Shake Shack and Five Guys.

“You get kind of tired of burgers after so much R & D,” Mr. Blais says. There’s minimal scientific research to guide them into the flavor differences among various meat cuts when ground.

“Grass fed” beef shows up in celebrity burgers—and often costs a little extra. Grass-fed beef contains healthier fats than typical grain-fed beef and is trendy in food circles partly because of a reputation for being better for the environment (although that is a question subject to scientific debate).

 Mr. Tourondel says his grass-fed burger is a big hit but he personally doesn’t like it. “Too lean, too dry,” says the chef, who ordinarily smears softened butter onto his burger patties before cooking.

Bernanke vs. China on Inflation: It’s the Food, Stupid

Really fascinating to see the tug-of-war between the policy makers in China and the U.S. gather steam this morning.

For those who haven’t been paying attention, the Fed is flooring the gas pedal to try to get the U.S. economy moving, by essentially creating money electronically and using it to buy U.S. Treasurys. (That’s the QE policy everybody has been talking about.)

Meanwhile, on the other side of the world the Chinese are trying to dam up the flood of liquidity that’s been pouring into their economy — in part because of the Fed’s easy money policy. That wave of cash is putting upward pressure on prices there.

But isn’t this a global economy? How can the top economy wonks in the two largest economies in the world have such a fundamentally different view where policy needs to go? In a word: Food.

The Fed’s QE policies are weakening the dollar. And the weak dollar has been driving food commodity prices higher. But that means very different things in the U.S. and China. Morgan Stanley economist Richard Berner churned out a good piece running down whether food inflation would be a serious hit to consumers in the U.S. and emerging markets. He writes:

Yes, but to a limited extent, reflecting the relatively small share of food (and energy) in [U.S.] consumer budgets. Admittedly, a jump to, say, 6% food inflation would take a significant bite out of consumer budgets: It would add 0.4-0.5% to the inflation rate and take a similar amount from real spendable income, at a time when such income is growing by only about 2%.

It’s worth noting that in emerging markets, the story is different: The weight of food and energy in consumer budgets and price indexes is at least twice as large as in the U.S. and other developed economies, so the impact on budgets is more substantial. Likewise, the influence on inflation expectations in EM economies is more pronounced. In the context of their strong growth, smaller margins of economic slack, and still accommodative monetary policy, the upside inflation risks in those economies are genuine.

Now you might ask, why is fending off inflation such a priority for China. Back in January, the Journal’s James Areddy explained that sensitivity to inflation runs deep in China — a reminder of how poor the country remains, with the price of pork, for instance, remaining a major consideration in household finances. Chinese political movements, including the Tiananmen Square protests in 1989, often have had their origins in inflation.

In short, food means starkly different things in the U.S. and in China, where within living memory as many as 30 million starved to death in famines brought about by Mao’s disastrous agricultural and industrial policies.

Confronting the monster -At last, plans are appearing to cut America’s deficit. But will politicians and the public embrace them?

BARACK OBAMA and his Republican opponents have spent much of the past month sniping at each other, but on November 15th they suddenly found themselves agreeing. Mitch McConnell, the leader of the Senate Republicans, called for a ban on earmarks, the pet projects politicians like to pop into spending bills. Mr Obama, who also wants a curb on them, quickly applauded.

A cynic would say that such agreement was easy, since the stakes are so low. Earmarks attract plenty of bad press, but the money is trivial—less than 0.5% of federal spending. On the more pressing question of how to close America’s gaping deficits, Democrats and Republicans remain far apart. Only a week before, the chairmen of a bipartisan commission set up by Mr Obama in February to find ways to get the deficit down floated a proposal focused on cutting spending. Republicans liked this, but Nancy Pelosi, the Democrats’ leader in the House of Representatives, called the idea “simply unacceptable”.

This sound and fury, however, may signify something important. The two sides are no longer arguing over whose taxes to cut or which entitlements to expand, but whose taxes will rise and which entitlements will shrink. It may all come to naught; or it may signal the dawn of a new age of austerity, similar to the era of tax increases and entitlement cuts that prevailed from 1982 to 1997.

America’s budget deficit in the fiscal year that ended on September 30th stood at $1.3 trillion; at 9% of GDP, the second-largest since the second world war. (Fiscal 2009 was the biggest.) That figure reflects the effects of the recession and the temporary stimulus, both of which will fade. The real problem is the future. On current policies the Congressional Budget Office (CBO) reckons that the federal debt, now 62% of GDP, will hit 87% by 2020. Add in state and local-government borrowing, and the total approaches 110%.

According to the IMF, America’s structural deficit and the growth in its debt over the medium term are among the worst in the rich world. The United States also stands out for its lack of any plan to deal with this. Germany has passed a balanced-budget constitutional amendment. Britain’s coalition government has launched an ambitious four-year plan to slash its massive deficit. Nicolas Sarkozy, France’s president, has finally triumphed in a bruising battle to raise the pension age.

America has a good and a bad excuse for its inaction. The good one is that the economy isn’t ready. Economic growth in the second half of this year has been a painful 2% at an annual rate. The unemployment rate, at 9.6%, remains near its peak. The effects of the stimulus are wearing off, so fiscal policy now veers towards contraction. If taxes rise or spending falls immediately, the economy could slide back into recession, as happened in Japan in 1997.

Giveaway and takeaway

But there is also a bad reason for delay: America’s political culture is unused to austerity. The country’s fiscal policy alternates between “giveaway” and “takeaway”, says Gene Steuerle, a Treasury official in the 1970s and 1980s and now a scholar at the Urban Institute, a think-tank. From 1946 to 1981 was an era of giveaway: entitlements expanded, most notably with Medicare and Medicaid in 1965, and taxes were cut, most famously in Ronald Reagan’s first year in office, in 1981. In 1982, however, fiscal policy flipped to takeaway. Mr Reagan’s tax cuts and defence build-up, compounded by the 1981-82 recession and sky-high real interest rates, produced record structural deficits. Pete Domenici, then a junior Republican senator, remembers going to the White House with other Republicans in 1982 to talk to Reagan about the deficit. He recalls the president’s stunned disbelief when he told him that he could run up more debt than all his predecessors combined.

Taxes were raised in 1982, 1983, 1984, 1987, 1990 and 1993. In 1986 a sweeping tax reform eliminated many exemptions. Takeaway also ruled on entitlements: in 1983 a bipartisan deal led to cuts in future Social Security (pensions), a gradual increase in the retirement age and a higher payroll tax. In 1996 Bill Clinton and Republicans in Congress remade welfare, limiting how long recipients (mostly single mothers) could receive benefits, and shifting most responsibility to the states.

Austerity was helped along by new budget rules. Most successful was the Budget Enforcement Act of 1990, which imposed caps on discretionary spending and also introduced the “Paygo” rule: any tax cut had to be offset by a spending cut, and any expansion of entitlements with a tax increase. By 1997 the deficit had fallen sharply.

Fiscal policy flipped back to giveaway in 1997. Ironically, this happened with the passage of the Balanced Budget Act that Mr Domenici helped negotiate with Mr Clinton. It aimed to balance the budget by 2002 by, among other things, curbing Medicare payments to doctors. But it also created a generous new child tax credit and cut capital-gains tax, the first significant tax cut since 1981.

A surge in tax revenue, pushed by the stockmarket bubble, then pushed the budget into surplus in 1998, four years ahead of schedule. With that, the culture of austerity died. Congress has regularly overridden the 1997 cuts in Medicare payments. Mr Bush cut taxes on income in 2001 and on capital gains and dividends in 2003. In 2003 he signed into law the first big entitlement in years, the prescription-drug benefit. In 2002 Paygo lapsed. Structural deficits soon re-emerged, but the bond market no longer seemed to care, as long as the global savings glut kept America’s borrowing costs low.

The Obama record

Almost from his first day in office Mr Obama promised to make “hard choices” on the deficit, and not to saddle America’s children with “a debt they cannot pay”. But his first two years have been firmly giveaway: not because of his $814 billion stimulus plan (an essential, and temporary, response to the crisis), but because he has allowed structural problems to fester. Though Paygo was reinstated this year, it exempted particular things that Mr Obama wanted, including keeping Mr Bush’s tax cuts for 98% of households.

The new health-care law does not aggravate the deficit, but nor does it do much to reduce it. The CBO reckons that federal health-care spending will almost double, from 5.5% of GDP this year to 9.8% in 2035—as it would also have done if reform had never happened.

So when Mr Obama appointed his bipartisan commission on deficit-cutting, it seemed a token gesture. The commission has yet to issue its final report, due on December 1st. But its chairmen—Alan Simpson, a former Republican senator, and Erskine Bowles, a former chief of staff to Bill Clinton—have put out a surprisingly bold draft proposal of their own. On November 17th a separate group of 19 experts headed by Mr Domenici, now retired, and Alice Rivlin, a former budget director for Mr Clinton, produced its own proposal.

The two groups share one aim: to get the federal debt down to 60% of GDP. The steps by which they get there, too, are remarkably similar (see table). Round the rich world a consensus has emerged that austerity should mean spending cuts rather than tax increases. Britain’s coalition government gets about 75% of its deficit reduction from spending cuts. The Simpson-Bowles proposal aims for 70%, while the Domenici-Rivlin commission targets slightly more than half.

Discretion versus valour

In America the easiest part of spending to target is discretionary items such as law- enforcement and defence, which must be authorised every year. Mr Obama has already promised to freeze discretionary spending, and in their “Pledge to America” congressional Republicans aimed to slash it by $100 billion. These promises are either hollow or implausible. Both Mr Obama and the Republicans exclude security and defence, which automatically cuts by more than half the amount of money at stake, to around $500 billion. Cutting, say, $100 billion from that would entail savage cuts to federal services without cutting the deficit much.

Excluding defence from cuts makes no sense, given its size and the amount of pork in the Pentagon budget. But even when defence is included, discretionary spending is less than 40% of the total. Entitlements, at nearly 60%, are the principal cause of long-term spending growth (see chart 2). Social Security is easiest to fix, because its annual shortfall stabilises after 2035. Indexing the retirement age to longevity would both reduce future costs and encourage people to work longer, boosting potential output. The Domenici-Rivlin report proposes a more elegant approach: it indexes lifetime benefits to longevity. As lifespans lengthen, a person could still retire at, say, 66, but with a smaller annual benefit. Further savings would come from slowing the rate at which benefits to upper-income earners grow and raising the maximum salary subject to the payroll tax.

Rising health-care costs are more difficult to deal with, largely because of rising demand for services and an ageing population. Under both proposals, richer patients would pay for more of their Medicare coverage. The services available under traditional Medicare and Medicaid (for the elderly and the poor respectively) would also have to be rationed. Paul Ryan, the leading Republican on budget matters in the House, has proposed replacing traditional Medicare with vouchers to buy private insurance. The Domenici-Rivlin plan recommends that publicly funded private insurance should be offered alongside traditional Medicare. A new independent panel, created under Mr Obama’s health reform to monitor payments and services, may slow the rate of benefit growth if Congress lets it work. On Medicaid the federal government could switch from matching state spending to block grants, as it did with welfare. This puts the onus of controlling services and caseloads onto the states.

A more efficient way to claw back revenue would be reform of the tax system. The system is riddled with so-called “tax expenditures”—credits, exemptions, deductions and other loopholes that cost $1 trillion a year in forgone revenue. Some, like the earned-income tax credit, are closely targeted to the poor. But the rich benefit most, because the value of a tax break—for mortgage interest, employer-provided health insurance and many more—rises with the taxpayer’s tax rate. The lower rate on capital gains and dividends also mostly benefits the rich. Eliminating these breaks would broaden the tax base; it would probably also make it possible to lower marginal rates, even below the levels of Mr Bush’s tax cuts.

Preparing the public

Taxes may still have to be raised by other means to get the deficit down. At present, compared with other countries, America taxes income too heavily and consumption too little. A sensible solution would therefore be a value-added tax; every other rich country has one. The Domenici-Rivlin report suggests a 6.5% “debt-reduction sales tax”. A carbon tax, or a higher petrol tax, could play the same role.

The proposals are bold; but no one who is making them currently holds office. Will America’s politicians ever dare sign on? Research by Alberto Alesina of Harvard University has found that, contrary to political wisdom, governments that enact austerity measures are often re-elected: Denmark’s in the early 1980s and Sweden’s and Canada’s in the 1990s, for example. Support for Britain’s austerity-preaching Conservatives has remained strong, though the measures will not bite until next year.

Britain’s lessons are not much use in America, however. Its parliamentary system gives a government much more freedom to act, provided it has a majority. In America, a president must convince both the Senate and the House to go along. And nowadays even the minority party can block legislation in the Senate.

Mr Bowles and Mr Simpson may soften the bite of some of their proposals, but they will still be lucky to get 14 of their 18 members agreeing on a proposal by December 1st. Peter Orszag, Mr Obama’s former budget director, says it may not matter. “The key is not whether they get 14 out of 18 but what the administration does. Even if they get ten out of 18, if the administration is behind it, it has running room. But this would require a massive push from the administration.” And that, he adds, depends in turn on how far Mr Obama is willing to move towards the centre.

In Britain the Tories spent months before they were elected preparing the public for austerity. Voters in America do not seem remotely ready yet. In a recent CBS News poll 56% of respondents said Congress should focus on the economy and jobs; just 4% thought the deficit should be its priority.

It is true that both Reagan and Mr Clinton were re-elected after pursuing austerity in their first terms. But they were prodded by the bond market: yields were over 10% in 1982 and around 6% in 1993. Now yields are under 3%. Some, including members of Mr Obama’s economic team, think this shows that the market is more worried about deflation than deficits. They note that fiscal tightening in America in 1937 and Japan in 1997 prolonged economic suffering. To counteract this, the Domenici-Rivlin plan includes a $650 billion payroll-tax holiday in 2011.

Mr Domenici would love to see Mr Obama and Congress share the same urgency he felt as he walked into Reagan’s office in 1982. A fan of military metaphors, he calls the current challenge the greatest the country has faced since Pearl Harbour. “America is on the threshold of potential economic devastation,” he says. “The day of infamy is close.” The big difference, however, is that the public doesn’t know it yet. “It’s not like they bombed Hawaii.”

China buys up the world – And the world should stay open for business

IN THEORY, the ownership of a business in a capitalist economy is irrelevant. In practice, it is often controversial. From Japanese firms’ wave of purchases in America in the 1980s and Vodafone’s takeover of Germany’s Mannesmann in 2000 to the more recent antics of private-equity firms, acquisitions have often prompted bouts of national angst.

Such concerns are likely to intensify over the next few years, for China’s state-owned firms are on a shopping spree. Chinese buyers—mostly opaque, often run by the Communist Party and sometimes driven by politics as well as profit—have accounted for a tenth of cross-border deals by value this year, bidding for everything from American gas and Brazilian electricity grids to a Swedish car company, Volvo.

 There is, understandably, rising opposition to this trend. The notion that capitalists should allow communists to buy their companies is, some argue, taking economic liberalism to an absurd extreme. But that is just what they should do, for the spread of Chinese capital should bring benefits to its recipients, and the world as a whole.

 Why China is different

 Not so long ago, government-controlled companies were regarded as half-formed creatures destined for full privatisation. But a combination of factors—huge savings in the emerging world, oil wealth and a loss of confidence in the free-market model—has led to a resurgence of state capitalism. About a fifth of global stockmarket value now sits in such firms, more than twice the level ten years ago.

 The rich world has tolerated the rise of mercantilist economies before: think of South Korea’s state-led development or Singapore’s state-controlled firms, which are active acquirers abroad. Yet China is different. It is already the world’s second-biggest economy, and in time is likely to overtake America. Its firms are giants that until now have been inward-looking but are starting to use their vast resources abroad.

 Chinese firms own just 6% of global investment in international business. Historically, top dogs have had a far bigger share than that. Both Britain and America peaked with a share of about 50%, in 1914 and 1967 respectively. China’s natural rise could be turbocharged by its vast pool of savings. Today this is largely invested in rich countries’ government bonds; tomorrow it could be used to buy companies and protect China against rich countries’ devaluations and possible defaults.

 Chinese firms are going global for the usual reasons: to acquire raw materials, get technical know-how and gain access to foreign markets. But they are under the guidance of a state that many countries consider a strategic competitor, not an ally. As our briefing explains (seearticle), it often appoints executives, directs deals and finances them through state banks. Once bought, natural-resource firms can become captive suppliers of the Middle Kingdom. Some believe China Inc can be more sinister than that: for example, America thinks that Chinese telecoms-equipment firms pose a threat to its national security.

 Private companies have played a big part in delivering the benefits of globalisation. They span the planet, allocating resources as they see fit and competing to win customers. The idea that an opaque government might come to dominate global capitalism is unappealing. Resources would be allocated by officials, not the market. Politics, not profit, might drive decisions. Such concerns are being voiced with increasing fervour. Australia and Canada, once open markets for takeovers, are creating hurdles for China’s state-backed firms, particularly in natural resources, and it is easy to see other countries becoming less welcoming too.

 That would be a mistake. China is miles away from posing this kind of threat: most of its firms are only just finding their feet abroad. Even in natural resources, where it has been most active in dealmaking, it is not close to controlling enough supply to rig the market for most commodities.

 Nor is China’s system as monolithic as foreigners often assume. State companies compete at home and their decision-making is consensual rather than dictatorial. When abroad they may have mixed motives, and some sectors—defence and strategic infrastructure, for instance—are too sensitive to allow them in. But such areas are relatively few.

 What if Chinese state-owned companies run their acquisitions for politics, not profit? So long as other firms could satisfy consumers’ needs, it would not matter. Chinese companies could safely be allowed to own energy firms, for instance, in a competitive market where customers could turn to other suppliers. And if Chinese firms throw subsidised capital around the world, that’s fine. America and Europe could use the money. The danger that cheap Chinese capital might undermine rivals can be better dealt with by beefing up competition law than by keeping investment out.

 Not all Chinese companies are state-directed. Some are largely independent and mainly interested in profits. Often these firms are making the running abroad. Take Volvo’s new owner, Geely. Volvo should now be able to sell more cars in China; without the deal its future was bleak.

 Show a little confidence

 Chinese firms can bring new energy and capital to flagging companies around the world; but influence will not just flow one way. To succeed abroad, Chinese companies will have to adapt. That means hiring local managers, investing in local research and placating local concerns—for example by listing subsidiaries locally. Indian and Brazilian firms have an advantage abroad thanks to their private-sector DNA and more open cultures. That has not been lost on Chinese managers.

 China’s advance may bring benefits beyond the narrowly commercial. As it invests in the global economy, so its interests will become increasingly aligned with the rest of the world’s; and as that happens its enthusiasm for international co-operation may grow. To reject China’s advances would thus be a disservice to future generations, as well as a deeply pessimistic statement about capitalism’s confidence in itself.