Oct. 29, 2012
Economists discuss policies, recession on eve of election
Cornell economist Francine Blau '66 asserted that "investments in education are a link to economic growth" at a panel discussion on "Economics, Public Policy and the Election" Oct. 26 in Ives Hall.
Blau, the Frances Perkins Professor of Industrial and Labor Relations and Labor Economics, discussed education as an investment in human capital.
"The days in which people could [earn] good incomes and be in the middle class without many skills and without much education are past," Blau said. "If we want to have a prosperous middle class, the answer is better education."
The panel, part of the 62nd annual meeting of the Cornell University Council and the Cornell University Board of Trustees, was moderated by Kevin Hallock, the Donald C. Opatrny '74 Chair of the Department of Economics.
Blau said education issues have not been talked about much in the current election campaign, even though state and local funding for education have been hit in the current recession.
Historically a leader in education, the United States now ranks 14th among advanced industrialized economies in the percentage of 25- to 40-year-olds with higher education, Blau said, citing an Organization of Economic Cooperation and Development report.
Having lower-income parents also reduces the chances a young person in the United States will get an education, the report stated.
"If you focus on younger people, the rest of the developed world has caught up to us and maybe surpassed us," she said. "India and China have huge populations now of highly educated people, and we've already seen a huge incidence of programming jobs going to India."
Maureen O'Hara, the Robert W. Purcell Professor of Finance in the Samuel Curtis Johnson Graduate School of Management, discussed the national deficit and "the business side of the equation when you look at this election."
While the median household income of about $50,000 has not changed since President Obama took office in January 2009, O'Hara said, "there is one thing that is different. Corporations are currently sitting on $1.7 trillion in cash. We're not investing that money; we're not hiring people with it. In a recession there is uncertainty, and businesses have not been as willing to invest. … That's the bad news. The good news is, they have $1.7 trillion."
Greater expenditures during a recession, such as Medicare prescription benefits, add to the national debt, O'Hara said, and "businessmen care about the deficit."
Obama wants to reduce the current $16 trillion debt responsibly, using "savings from ending wars," O'Hara said. The total expenditure during 10 years in Iraq and Afghanistan has been $1.2 trillion. "There is money there that can be put to work," she said. "Also, when the economy gets better, tax revenues will increase."
Both candidates "envision changes in the tax plan," she said. Mitt Romney "says he will lower tax rates by 20 percent across the board, and he'll enclose a cap on deductions" in addition to moving some federal programs and expenditures to the states.
Eswar Prasad, the Nandlal P. Tolani Senior Professor of International Trade Policy in the Dyson School of Applied Economics and Management, talked about the global economy, including China and the eurozone. He said there is "a general climate of uncertainty" about the U.S. economy during this recession, leading up to the election.
When asked to comment on his outlook for the Fed, Prasad said: "A good academic economist is never going to predict interest rates or exchange rates."