April 16, 2004

Presidential Economic Advisor Friedman '59 Speaks

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After attending an informal luncheon with 35 students from the Johnson Graduate School of Management, Stephen Friedman ’59, President George W. Bush’s assistant for economic policy and director of the national economic council, addressed a full Statler Auditorium yesterday to speak about the country’s economic situation. Friedman was appointed to his current position in Dec. 2002.

His economic experience includes working with Goldman Sachs & Co. for 28 years, serving as co-chair for two years and chair for two years. Friedman then became a senior principal at March & McLennan, where he stayed until his political appointment.

Friedman’s address came on the second day of the two-day “Managing the Future” summit at the business school. Robert Swieringa, the Anne and Elmer Lindseth Dean of the Johnson Graduate School of Management, said, “Most of Thursday is really looking to the future.”

Opening his address, Friedman said that he spent his time as an undergraduate split between Teagle Hall and various sororities. “My time was extremely well spent,” he joked. In his introduction to Friedman’s lecture, President Jeffrey S. Lehman ’77 recognized the speaker’s athletic accomplishments at Cornell.

He was inducted into the Cornell University Athletic Hall of Fame in 1984 for his success as a college wrestler. Friedman, whose wife Barbara Benioff Friedman ’59 is vice chair of the Board of Trustees, serves on the Athletics Advisory Council.

The Friedman Strength and Conditioning Center and the Friedman Wrestling Center, the first facility in college athletics to solely house wrestling, were named to honor the family’s significant gifts to the University.

Friedman spoke about the many levels of the American government system from an insider’s view. Comparing it to other organizations, he said, “there is none more complex than the U.S. government.”

Each of the many committees and interest groups “sees one aspect of the elephant,” he said. Because there are so many departments within the government, Friedman stressed the importance of “a coordinated approach” to tackle all political and economic issues.

Friedman then turned to create “a snapshot of where we are today” in business. He spoke about the many “bubbles” that have popped over the past few years, including the stock market dip in 2000, an “excess of business optimism” that led to dangerous capital spending and the collapse of the job market.

The wars in Afghanistan and Iraq, according to Friedman, “weighed on business confidence.”

He claimed that despite the “dire effect” of corporate and accounting scandals, the employment crisis is starting to turn around. Even though there is some recovery, Friedman said, “labor is clearly not yet satisfactory.”

The majority of Friedman’s address focused on the need for strong federal fiscal policies and the importance of keeping America’s economy flexible. After the Jan. 2003 tax cut, Friedman said, business capital spending improved, causing an increase in consumer confidence and spending. This resulted in a more stable stock market, which is now helping to strengthen the labor market.

“We have that vibrancy” to recover from a “nearly catastrophic series of body blows,” Friedman said as he touched upon the economic effects of the terrorist attacks.

Friedman then discussed what he sees to be some of the weaker parts of the American economy. He first mentioned the “lawsuit burden,” the harmful economic repercussions of having high administrative costs in a very litigious society. Friedman also said that the cost of health care has resulted in a decreased efficiency in the industry.

“Efficiency … is back where American industry was 25 years ago,” he said. We must work on “finding that combination of incentives and stimuli” to make health care as efficient as a Fortune 500 company, he said.

Friedman said that there does not have to be a tradeoff between health care quality and efficiency. Rather, he suggested, “they go hand in glove.”

He also mentioned the need for a new energy plan so that businesses are not driven offshore for cheaper energy.

Finally, Friedman spoke about the need for a globalized economy. “This administration has a very strong free-trade orientation,” he said. “Anything that puts up barriers runs the risk of having retaliation. We want to avoid … a tit-for-tat world,” he explained.

The address continued with a few minutes about education in America. Friedman said, “The living standard [is] tremendously correlated to the level of education” a person receives. He said that while graduate and higher education in America are “the gems of the world,” our country’s lower levels of public education are weak.

“We have a major challenge,” he warned.

“Economic forecasting is an enormous challenge,” Friedman said regarding the summit’s title. Because “the pendulum always swings too far one way and then too far the other way … people get overly optimistic and then they sink into a trough.”

In his introduction, Lehman called the summit’s speakers a “cavalcade of great thinkers.” Earlier in the day Walter LaFeber, the Andrew H. and James S. Tisch Distinguished University Professor spoke on “Globalization and Globalizers.” Jay Walker ’77, Founder and Chair of Walker Digital, LLC and Founder of Priceline.com followed LaFeber with an address. Warren Staley MBA ’67, Chair and CEO of Cargill, Inc. lectured on the topic “The Future is Now: Building a Global Sustainable Enterprise.” Abby Joseph Cohen ’73, Managing Director and Chair of the Investment Policy Committee at Goldman Sachs lectured on “U.S. Companies and Markets back in the Global Flow.” Later in the afternoon, there was a panel discussion on “Entrepreneurship in the 21st Century.”

The final address was by Jeffrey Immelt, Chair and CEO of General Electric Company and this year’s Robert S. Hatfield Fellow in Economic Education.

Archived article by Melissa Korn
Sun Senior Writer