Monday, November 28, 2011

Failure


The news from the congressional supercommittee was not surprising.  No budget deal – meaning we now will have an automatic triggering of across-the-board budget reductions.  What a bad decision by our Congressional leaders, what a bad impact for our economy, and what a failure to read the will of the public.

How did we get here?  Clearly, too many lines in the sand.  A reluctance to cut spending coupled with an equally forceful reluctance to increase any tax rates.  Leadership by following a "my way or the highway philosophy."  There are without question some areas in social services, health, and defense where spending reductions should be very measured.  There are also many tax rates that should under no conditions be increased.  But there is also without question justification for some spending cuts and justifications for some tax increases (or loop-hole decreases).

But where we are now, with across-the-board adjustments the default position, is on the verge of doings greater harm to the economy.  With the triggering of across-the-board cuts, spending in areas such as health, research, some kinds of student aid, and even defense all are about to be reduced.  Who loses by doing this, other than those directly involved in these industries?  We all do given the critical nature, the future consequences, and huge impact of the industries involved.   And are we really sure that this budget reduction number even makes sense for the economy or is it another case of a guesstimate by Congress, which can now lead to another line in the sand?

Most of us know that compromise is possible if politics move to the sideline and national interest moves to the forefront.  Most of us also know that the best interests of our economy and our country require compromise.  Will our nation's leaders jeopardize our best interests by cutting without thinking or will our leaders rise to the occasion?  We don't need or want more political rhetoric.  Instead, we need thoughtful solutions to cut the deficit brought about by thoughtful elected officials.  For the current crisis, the last best time is clearly now.

Monday, November 21, 2011

Happy Birthday Chevrolet


This month, Chevrolet turns 100 years old.  Happy Birthday Chevrolet.  In the Chevy line-up over the years are many of the models that I fell in love with when I was growing up.  I still love seeing an early Corvette and I have always been crazy about the ‘57 Chevy Bel Air hardtop, ideally in candy apple red though I could do without the fluffy dice hanging from the rear view mirror.  But the Chevies I most wanted, came out when I was nowhere near driving age.  When I reached driving age, the first car I bought and paid for was a ‘69 Chevy Nova.  The car was OK transportation.  The car had three options—a (powerglide) automatic transmission, an AM radio (with one speaker), and for $6.95, real vinyl upholstery.  The car was reliable transportation but nothing more.  I really wanted a car along the lines of the more classic Chevrolets. I wanted a car that I could connect with on an emotional level.

In 1974, a new Chevrolet Vega came out.  The car was nicely styled, especially the hatchback and I purchased it with almost every option that Chevrolet offered.  And in fact not only did I purchase a Vega, I convinced two of my friends who were in the market for new cars to purchase a Vega as well and by purchasing three at the same time, we got as good a price for the car as possible.  The car was a sales success, not only among the three of us, but it also resonated well among the general public.  It may not have been a 1957 Bel Air or a Corvette, but I liked driving it and  even looked for reasons to drive.  So far so good.

Within months, the  three speed automatic transmission started slipping and shortly thereafter my three speed transmission became a one speed transmission.  In rush hour, when I needed to drive at 15 miles per hour or less, I was fine; otherwise I was going nowhere fast…except back to the dealer.  The dealer was courteous and immediately kept the car to repair the transmission.  It seems that there was a synthetic transmission oil that had replaced the previous oil and no doubt GM saved a few cents on each car by this change.  Which is fine…as long as the replacement was thoroughly tested and as durable as the original product.
Now, any car can have a one-time problem and especially in the mid 1970s one time problems were the norm on cars, not the exception. But there was one other flaw that quickly developed. Though the car was  economical  in terms of gas mileage (very important given there was a gas crisis a few months earlier), it tended to burn oil continuously which quickly negated the savings on gas. Lemon laws were no doubt inspired by cars like this.

Though I would pay the price for the Vega a second time in terms of trade-in value, I was ready to trade it in ASAP. My next car was a ‘76 Toyota Corolla.  No problems whatsoever; no emotional attachment whatsoever. It took me more than a decade before I would drive another American car, and the vast majority of cars I have purchased or leased since that time were not built in the USA.

I wish Chevy well in its next 100 years and I like some of the cars that they are making today.  But Chevy and GM will always provide a classic business lesson for all of us.  If you take your customers for granted, if you always assume that people will see the USA in their Chevrolet, the customers and your market may diminish or disappear.  In this very competitive environment, complacency will not carry the day in the automobile industry or in higher education nor does it deserve to.

Monday, November 14, 2011

Pride


About a week ago one of my earliest students was appointed superintendent of a very important neighboring school district.  He was a very smart student more than 35 years ago and he is still smart today.  The students will benefit greatly from his leadership and my sense of pride is enormous in recognition of his accomplishments.  I have stayed in touch with this particular alum over the years.  We even played tennis a number of times but I am a better educator and economist than I am a tennis player so the tennis matches were few and far between.

There are also some former students I have lost track of, and then fortunately we are able to reconnect.  A few years ago, a personnel folder crossed my desk for a new hire in the education area.  The person was an experienced high school teacher who was now beginning a new career in higher education.  The name was familiar, though hardly unusual.  And this person’s undergraduate degree was from the institution where I began first teaching as an adjunct while completing my doctorate.  Sure enough when I looked further, he was my former student. He has been a tremendous asset to Hofstra in the decades since he first began teaching on our campus. Interestingly enough, when this person was an undergraduate and my student, he complained that I wasn’t liberal enough for his political positions.  Decades have passed and he is still complaining.  Middle of the road economists have trouble gaining appropriate respect from either the left or the right.

As I think back to the students I taught in my early years in teaching, I can easily identify a now university president, a professor of English, a number of psychologists, lawyers, successful business people, all individuals I have stayed in touch with.  One of my former students is  even a University trustee and a number of years ago, there were actually two of my former students on the trustees. There are other former students that I am not in touch with or have lost contact with and I am sure within this group are many successful individuals. I hope my economics courses made a difference in their education and their lives and I am humbled by the thought that I have had a positive  impact.  I want every Hofstra graduate to succeed but I do care even more about those I know and have worked with personally.

It’s interesting that as a dean and as a provost, I have hopefully impacted positively the education of tens of thousands of students. Knowing that I have been able to play a leadership role for decades and have made a difference on many key issues, brings a great sense of satisfaction.  But in a University, it is ultimately the relationship between students and faculty, or students and advisers, or students and their coaches that make the greatest difference.  That personal touch can help inspire and there is no substitute especially for an undergraduate.  As we look to make the best decisions in a time of  constraint, we should all strongly advocate for keeping   as much of a personal touch in education as we can.

Monday, November 7, 2011

Occupy Wall Street

As I’m walking in a midtown subway station, a group starts yelling “Occupy Wall Street, all day and all night” over and over again.  And this is followed by “We are the 99 percent” also over and over again.  The message is clear whether it is delivered in Zuccoti Park, in a subway station or anywhere across the country.

As I reflect on the movement, I am sympathetic to the calls for tax reform.  There are, in my opinion, federal tax rates that are too low for the income involved, and there are rates that are too high.  And yet many in Washington are opposed to any changes or fine tuning whatsoever.  Many of these same individuals also champion a more balanced budget.  That leaves spending cuts as our sole present fiscal policy tool.  But cutting more in social services or in defense spending in the short term may not be a desirable option.  And, besides, too many spending cuts are counterproductive to a struggling economy. Going back to tax rates, what makes our current structure so perfect (loopholes and all ) that there is significant opposition to any changes?  Were they set with such precision or were they set through a series of political compromises that yielded the present matrix (which may or may not be the best possible matrix for our economy)?  And if we focus exclusively on the top 1% of our population (in economic terms) , which is getting richer and richer over time, are they really paying the taxes they should or does the system  provide them with more than their fair share of benefits?

Periodically, the Occupy Wall Street demonstrators are joined by prominent individuals and celebrities in a strong show of support.  The support leads to more airtime for the demonstration and as such serves to highlight both the person and the movement.  I sometimes  wonder how strongly the celebrities share an on-going commitment to change.  How politically active are they and how involved are they in moving forward the agenda of needed change?  Are some looking for a photo opportunity or to move forward a cause?

I have two other observations.  The demonstrators clearly have Wall Street as their target giving a misleading sense that wealth is concentrated solely in these individuals.  Wall Street  employs many people who are far from wealthy, and there are many areas  outside of Wall Street where the wealth and income of individuals involved is at the top 1% level.  Though clearly there needs to be more transparency in the dealings of financial institutions and more reforms are still needed, the target should be the tax rate structure rather than the street address.

I worry about how the demonstrators will make the transition from protest movement to major political force to be reckoned with.   If the major presence of the Occupy Wall Street movement  is in Zuccoti Park and like places, the movement will have failed.  It needs to transition to a strong political movement.  The Tea Party is not my drink of choice but I give them great credit for not only standing up for what they believe in, but also in impacting the political landscape and the halls of government.  To really be successful, Occupy Wall Street needs to march out of the park and into the 2012 election.