Guardedly Optimistic

At last week’s breakfast meeting with all the department chairs and deans, I talked about the enrollment situation for this semester and this year. A substantial increase in the freshmen class, strong quality indicators, and some of the best retention numbers in our history make for a very positive picture. And a Presidential Debate on our campus next fall, further helps enhance the forecast for next year’s entering class. After finishing these comments, I moved on to discuss Moody’s higher education forecast of January 20, 2012. Moody’s is not always upbeat but their forecasts provide a well grounded assessment of what is and what is likely to be. In this forecast, Moody’s notes that for higher education, there will be greater political scrutiny, more sophisticated consumers and donors, increased price sensitivity on the part of consumers, increasing need for institutions to differentiate themselves, and also an increased need to become more efficient. Moody’s notes the “ongoing bifurcation” of higher education with very strong undergraduate demand occurring at the lowest cost, most affordable, extreme and at the highest prestige, highest quality, extreme. They also point out that there is a notable softening in demand for graduate education. We are all aware of the lack of job opportunities in much of teacher education but there is also a softening of demand for legal education and for graduate business education. Add to this the growth of online education and the weakness of the less selective sector of private higher education plus the fact that increased tuition discounting is not sustainable and you have key points in the picture that Moody’s sees and is reporting on. What does it all mean? Is the glass half or more than half empty? Or with a reviving economy, is the picture more positive than it appears. The answer is yes. We have our challenges but we have an opportunity. As an industry, many of us work very hard to differentiate our products. Many of us work very hard to provide a quality education. Many of us are very sophisticated at recruiting, and we also strive to limit tuition increases to the smallest possible increase. On the other hand, tuition discounting is still becoming more pervasive. It may be unsustainable in the long run but in the short run many of us have no choice but to compete. The increasing consumer focus on the tuition rate in the competition between much of private higher education and much of public higher education especially challenges the private sector going forward. And online education clearly challenges all of us by bringing much more competition just a click away. My generation and others in close proximity in age can be sure that higher education as we know it will continue throughout our professional lives. For future generations of administrators and faculty, the challenges, however, are great. If those of us in influential administrative positions try to coast, much of higher education as we know it will be placed at risk. If we continue to differentiate and make changes that reflect changing times, if we continue to respect core values, if we limit tuition increases and maximize efficiencies, if we can operate in an increasingly online environment, we should be OK. My choice is to not be complacent; if you do the same, we can all be guardedly optimistic.

News Overshadowing News

On Friday, February 3rd, I was waiting for the economic update. The jobs picture is a key indicator (even though it is considered a lagging indicator) of economic recovery, and I was looking to see if there were tangible signs that a real and perhaps more robust recovery was underway. But even though I was tuned into the economy, my greatest attention was focused on the decision by the Susan G. Komen for the Cure Foundation decision to cut off funding for Planned Parenthood. There could not have been a worse decision. It was wrong on all levels. First why would an organization focused on a cure for breast cancer cut off funding to a highly regarded organization’s breast screening program? In a nation where we know there is a significant divide between pro-choice and pro-life advocates, why would an organization committed to the cure interject politics into our war against cancer? Did Susan Komen’s hiring of a known pro-life person (and recent anti-abortion candidate for Georgia’s governor) translate into an intolerant policy toward those with a different political ideology but at least as strong a commitment to eradicating breast cancer? I greatly admire how quickly New York Mayor Michael Bloomberg stepped forward to pledge a matching donation to Planned Parenthood of up to $250,000. The total that would be raised of up to $500,000 would almost make up for the reduction from Susan Komen. Our economy is showing signs of life. There were 243,000 new jobs in January and the unemployment rate has dipped from 8.5% to 8.3%. Not terrific but nevertheless a world better than the 9.1% unemployment rate we had in August. And the stock market has also rallied with the DJIA now resting comfortably above the 12,000 level. There are great divides in our country. Our recovery is proceeding but almost certainly, with political cooperation, it would proceed faster. On the issue of abortion, the differences are equally great but can’t we agree that women have a right to choice when the decision involves their own body? Isn’t there still room in our society for people agreeing to disagree? And when it comes to cancer research and cancer care, how dare any organization play politics? February 3rd was a good day. First the economic news and later in the day Susan Komen reversed their position and announced that funding would be restored to Planned Parenthood. If our country is to continue to succeed and if our efforts regarding breast cancer are also to succeed, we need to be both more united and more respectful of individual differences.

Important Role of Government

I am today philosophically close to where I was when I was in graduate school. I am a middle of the road economist. I recognize the importance of government fiscal and monetary policy and yet government needs to make sure it doesn’t micromanage where it isn’t necessary, and government needs to make sure that the laws are constructed in the fairest way possible. I’m not sure at this moment that government—all levels of government—are doing all they can do to be fair and to not micromanage. For example, when a major presidential candidate can earn over $20 million dollars per year and not pay more than a 15% tax rate, I question the fairness of the system. I don’t fault Mitt Romney—there is no reason that he should pay more than is required. Nor should he be ashamed either of his earning power and his level of taxation. He is an American success story. I do, however, fault our federal government for creating a tax structure where the wealthiest Americans are so clearly paying a lesser percentage than millions of Americans whose earnings are a fraction of Governor Romney’s earnings. I would never suggest we impose an onerous tax rate for individuals in this bracket and perhaps we should all pay the same percentage, but no one should believe that the system that presently exists meets the fairness test. I’ve written before about defined benefit pension plans. There is no question that they are very beneficial for the recipients but there is also no question that substituting certainty for risk on the part of the pension recipients is made possible at the expense of tax payers. These are the same tax payers who, for the most part, save what they can for retirement without the ability to shelter these monies from the winds of economic uncertainty. What a nice system it is when you win if the stock market rises and you can’t lose if the stock market falls. I would never diminish the defined benefit pension plans for those who already have them. But can we really justify their continuation in the same form going forward? And to prop up these pensions, what are we now not able to do which meet important needs. Are we cutting back, for example, on our support for public K-12 education? Bad decision and bad news for the competitive future of our country. The few times in my life that I have seen momentary price controls, the end results have been serious market disruptions. In a market economy, it doesn’t really work to bypass the market. And now there is mention of government efforts to limit tuition increases. The market already is an effective brake on excessive tuition increases. If the value equation isn’t there for a particular college or university, there are multiple other universities—private as well as public, senior as well as community – to chose from. A dynamic institution striving to make greater use of full-time faculty, or greater merit-based or need-based scholarships, or smaller class size, or new majors in more costly areas, may need a larger than average tuition rate increase. Should institutions making initiatives like this be dissuaded from doing so or penalized for doing so? It makes no sense. And I do understand the high cost of education and the strains that it puts on many families. Competition from lower priced alternatives including on-line degree programs or for profit colleges and universities are better alternatives than price controls. Here is my dilemma and the dilemma for so many of us. Government is a lifeline we all need but when government undermines a level playing field, we are all hurt.

Democracy on the Local Level

Our local school board, of which I am vice president, recently held an open town hall meeting. The meeting was very well attended and the individuals present represented a broad spectrum of local opinion. These are challenging times for many local schools and in fact for many residents in the community. A sluggish economy and high taxes take their toll. But even with the formidable challenges present and the vast differences of opinion, I was impressed by the community and had great respect for all the voices that made their opinions known. In New York, we have a strict tax cap that will impact the school budget beginning next year. A very passionate resident who spoke early in the meeting pushed us to propose overriding the cap. Later in the program there were multiple retirees talking about the impact that the school budget and real estate taxes in general have on their well being. I understand and sympathize with both points of view. If resources weren’t scarce, we could do more in terms of serving the needs of our kids. If taxes didn’t rise, social security recipients who waited two years for an increase would have their purchasing power remain stable rather than being compromised by higher taxes. As the meeting continued, there were speakers who expressed concern about services for special needs children, speakers who questioned why there were defined benefit pension plans for individuals working in the school system, speakers who wanted to know the effect on class size and elective offerings under the tax cap. We reassured parents that special education programs were mandated and would not be trimmed. We talked about the problems inherent in a defined benefit pension plan but no one suggested or would suggest any change or diminution for existing employees. And we reminded the audience that defined benefit pensions were legislated by the state and that the school board had no options other than to adhere to the state requirements. We talked about the modest impact of the tax cap on class size, on elective offerings and the overall breadth and depth of the education we provide. At the end of the town hall meeting, almost three hours later, I think everyone in the audience had a clearer sense of the issues, of the opinion of others, and the fact that difficult questions rarely have black and white easy answers. What happens next? I have confidence that the critical issues are being aired in an open and transparent manner. I have confidence that the community is being well informed and that it has a real voice in the decision making process. And I also have confidence in the school board and especially in my colleagues and the superintendent that at the end of the day, we will make the decisions that are in the best interests of our kids, of our teachers, and of our community. Doing more with less should always be a goal but won’t result in major savings assuming that basic efficiencies are already in place. With mandated costs that are rising faster than the tax cap, there will be an impact and at the margin we will be making changes. But by hearing, listening, working together and striking a balance, I am convinced we will make the right decisions and serve the community well. Now if only Washington could function in the same collaborative way.

Carnomics

I’m a car person as you may have gathered from previous blogs. But it actually makes good sense to be an economist who also happens to be a car person given the important role that the automobile industry has played and continues to play, for good or bad, in our economy. Right now it is certainly for good. It is once again a very positive time in terms of the domestic automobile industry and all three key manufacturers—Chrysler, Ford, and GM – are doing well, having demonstrated impressive growth for the 2011 model year. Automotive News reported that “U.S. light vehicle sales were up 10 percent to 12.8 million in 2011 after a similar rise the year before.” And the promise is there of even better times. Just look at three key domestic products introduced at the 2012 Detroit auto show. The three, in alphabetical order, are the Cadillac ATS, which has the promise of making the kind of impact on the entry luxury market, presently led by the BMW 3 class, that has never before happened with a domestic product. My brother had a Cadillac Cimarron. Saying the car was forgettable was the nicest thing that anyone could say about it. It was better than the Vega that I bought which was the pits but it was on the low side of mediocre which made it a strong catalyst for foreign cars sales. The second is the Dodge Dart which is a genuinely attractive, well designed compact car. It should be able to compete effectively with both foreign and domestic competitors in a way that the Dodge Caliber never could. And the third is the Ford Fusion. The Ford is a very attractive competitor to the Camry or the Accord. It looks better than both of the other cars and many other competing brands, and seems to have the functionality and the quality to be a major player in the major arena of car competition. There are other cars in the wings from all three manufacturers that have the promise of being just as successful and the evidence is clear and, in fact increasing, that Detroit can compete successfully with the best cars around the globe. At the same time that I am watching the latest Detroit success story unfold in the form of all these impressive products, I have also been reading and have just finished “Once Upon a Car: The Fall and Resurrection of America’s Big Three Automakers- GM, Ford and Chrysler” by Bill Vlasic who is the Detroit Bureau Chief of The New York Times. The book starts at a time (2007) when light vehicle sales were 3 million above where they are today and is must reading for a very comprehensive overview of what went wrong and what ultimately happened to these three automobile titans. What went wrong, and this was just a few years ago, was just about everything—building cars that weren’t responsive to what customers were looking for; building too many overly similar cars (with Mercury and Pontiac being just two examples); too many different platforms, engines, etc. around the globe undermining economies of scale; and labor costs including fringe benefits (and health care programs) that created a clear and very serious economic disadvantage. The failure was across the board— arrogant, isolated management together with myopic labor and this book chronicles it all in a well written fast paced and thoroughly absorbing volume. What went wrong was just about everything, and what is going right now is just about everything which I hope continues into the foreseeable future. The US government deserves great credit for engineering much of the turnaround (specifically the saving of GM and Chrysler), and the car companies (led by Ford) deserve great credit for designing a comeback which demonstrates the strength still inherent in American manufacturing and the US economy. We should all celebrate this success story but also remember for the automobile industry and all industries including higher education, that success taken for granted is just the first step toward devastating failure.

Film Ratings

Last year at this time, as a result of a snow storm, my family and I spent over two days at Newark Airport and ultimately returned home without ever getting on an airplane to take a scheduled vacation in Hawaii.  Newark is a nice airport but it can’t compare to spending time in paradise.  This year, we decided to stay local and all in all it was a very low-key relaxing week with lots of much appreciated family time.  Also lots of time for movies and shows.  So within the last ten days, we have seen Alvin and the Chipmunks, Sherlock Holmes, Mission Impossible, TinTin and Snowy, Bonnie and Clyde, The Artist, My Week with Marilyn, Ridiculous Broadway, and War Horse.  And what was my favorite?  Well the reality was I enjoyed all of the above.

Having enjoyed all the films and the shows does not mean, however, that I didn’t have favorites.  The Chipmunks was pure fluff, a cute but slightly ridiculous story; however even a provost can’t help but appreciate three talented chipmunks. The stunts and special effects on Mission Impossible were spectacular.  I always enjoyed Mission Impossible when it was a TV series, and the movies have just elevated the intrigue, the stunts and special effects to movie perfection.  The characters made Sherlock Holmes and TinTin very worthwhile action movies.  Sherlock Holmes also had an interesting sense of humor and had no resemblance whatsoever to the Sherlock Holmes/Basil Rathbone films I watched faithfully on TV.  And TinTin had Snowy, my idea of the ideal dog (though the dog in The Artist also comes close to meeting that ideal).  Bonnie and Clyde was Broadway fluff—an engaging pair of stars with lackluster songs and  featuring a continuing combination of loves songs/scenes followed by bloody violence.  Whatever happened to “make love, not war”?  The show was entertaining, had great staging with real Bonnie and Clyde news stories flashed on the background scenery but it was in no way memorable.  Ridiculous Broadway was great fun—especially the parodies of Les Mis, Fiddler, and Lion King—but once again nothing memorable. 

And now memorable begins. My Week with Marilyn, could only have been better if it was MY week with Marilyn and if it starred the real Marilyn Monroe.   Although she didn’t quite have the seductive face and perfect gestures and timing of Marilyn at her best, Michelle William’s acting was great and at a distance, she had the look and shape of the real Marilyn.  A movie without special effects or animation but a film at its best, easily transporting me to a different place and time.  Not profound but still a must see movie.

War Horse was a triumph.  The film is terrific, and as I had earlier indicated, the Broadway show is also a triumph.  For my older daughter, the film was better than the show.  She loved the background and vivid details of the film.  I loved the film but still prefer the Broadway show.  For me the story seemed more intimate and real on the stage, and the fact that the horses on stage were totally lifelike puppets made it all the more impressive.  Another must see film. 

And the winner is The Artist.  The film about the transition from silent movies to talkies gave me a real insight on the effectiveness of a silent film.  And the story of the silent screen star, who doesn’t believe that talkies are here to stay until it is too late, is clear and compelling in intimate detail even without words.  The Artist is my number 1 must see movie of this season.

Now admittedly, seeing all these films and shows does not make one a better provost or a better economist. What it does, is help create thoroughly enjoyable family time. And even without going to a warm climate, it made for an outstanding holiday break.  Plus, a second career as a movie or film critic might be worth exploring.

The SAT Scandal

I just finished listening to the Sam Eshagoff interview on 60 Minutes.  Before I comment on the interview, I would like to commend 60 Minutes for decades of worthwhile news and human interest coverage.  60 Minutes remains a leading example of TV at its best.

I am not as positive about either Sam Eshaghoff or ETS.  I’m not sure that Sam has learned his lesson or that he understands the seriousness of what he did.  He does understand he got caught and that seems to have caused some regret.  But anyone who believes that he “saved the lives” of students with awful records by taking the SATs for those students so they could get into schools that were otherwise unachievable, but doesn’t understand that he likely adversely impacted the lives of students who presented honest records but were not accepted because of space taken up by cheaters, doesn’t comprehend the seriousness of his actions.  Students need to be judged on their work; an awful record should not be neutralized or turned into a positive because the student and/or his or her family could pay for what the Nassau County Attorney General rightly calls “an academic hired gun.”  Sam may call his actions saving a life, I call it criminal fraud. That Eshagoff doesn’t get jail time makes sense to me but that his sentence is tutoring economically disadvantaged students on test taking, at what seems to be at his convenience, is too lenient given the fraud involved and the righteous attitude of saving lives presented during the TV interview. Does he realize how wrong and how serious his actions were?

The attitude expressed by ETS on 60 Minutes also needs work.  To be told we should not “overreact” to a system that lacked even minimal security is disconcerting.  I would agree that the vast majority of test takers are honest and therefore that the vast majority of test scores are accurate assessments of test taking capability.  But there clearly is and has been cheating.  That there hasn’t been more cheating does not  seem to be due to the efforts of ETS; rather it is a reflection of most people being honest.  Cheating needs to be dealt with firmly on all levels.  The ETS test taking procedures are being tightened up and that is a positive sign.  But the policy where no action is taken by ETS after the fact against a known cheater leaves much to be desired in my mind.  Basically it says since we didn’t catch you in a timely manner, you get a free pass and are able to enjoy the fruits of your ill gotten gains.  It may take substantial time to catch up with some criminals, including those guilty of white collar crimes. But does it really make sense to say that since we didn’t catch you at the time you took the test, you are free of all repercussions? I don’t think so.

I hope the investigations continue and that as many as possible of the individuals who wrongfully took exams for others are caught and held accountable.  And I hope that ETS is able to tighten procedures and restore the confidence we had in them. As educators we work hard to ensure that academic honesty is maximized.  Part of our mission is to make clear to our students the importance of honesty and its key role in our value system.  But part of our responsibility is also exposing cheating when it takes place and making sure there is accountability.  And I think we all would agree that we can and should do more on both counts.