February 20, 2009

Economic Panel Critiques New Stimulus Plan

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With the Obama administration’s new economic stimulus plan released last week, the panel “Advice for President Obama — An Economics Panel Discussion” held yesterday in Call auditorium was very well attended by members of the Cornell community and residents of Ithaca.
The discussion was sponsored by the Institute for the Advancement of Economics at Cornell and was moderated by Prof. Francine Blau, labor economics. According to Prof. Michael Waldman, economics, director of the IAEC, it is part of a series of discussions that the IAEC is hoping to conduct to draw attention to economics at Cornell.
“The panel is a way of highlighting and educating people in the campus about the important issues occurring in the economy at the moment,” Waldman said. The four panelists, Prof. Sean Nicholson, policy analysis and management, Prof. Maureen O’Hara, finance, rof. Eswar Prasad, applied economics and management and prof. Karl Shell, economics, each presented their views, after which there was an open discussion.
Members of the audience had a wide variety of reasons for attending the talk. Ithaca resident Anita Watkins said, “I think solving this economic problem is very complex and I don’t really understand what the possibilities are, so I want to get some more information.”
Others had much more specific purposes, such as Dax Chow grad, who said, “I’m hoping there’s going to be more of an international perspective than what we’ve been hearing from the rest of the things that have been happening on campus.”
Prasad focused his discussion on the macroeconomic/international angle, and said that the Obama administration’s new plan stipulates that raw materials have to be sourced from the United States or a country with which the United States already has a bilateral trade agreement, leaving out countries such as China, India, Brazil and Russia. “The country that has been preaching free trade is going out and doing something that’s explicitly protectionist,” Prasad said. “Thinking about this as a cooperative venture is the way to go; thinking about how tightly the world’s economies are bound together, either we’ll sink or swim together.”
Others came to the talk specifically because they were interested in learning more about the future of finance, such as Suleman Iddrisso ’10, who said, “I’m going into finance so I wanted to know how the stimulus plan would affect my future with a finance career.”
Shell focused on the financial sector, which he believed should be the first priority to restore. However, he said that it is also the most difficult and uncertain. The stimulus, on the other hand, is not as important but is easier to implement. Shell said that he felt the administration’s package, while useful politics, is short on stimulus.
Blau mentioned that one of the purposes of the panel was to educate the audience on the issues and policy solutions, and to this end, the speakers all detailed various aspects of the current economic climate and the Obama administration’s plan to cope with it. O’Hara discussed the banking system, for which the administration currently hopes to set up a public-private partnership to help bail out the banks. “I would prefer to see the government set up a fund to buy the assets. I see little hope that private investors can deal with the problem any better than the Federal Deposit Insurance Cooperation could,” O’Hara said. “I also don’t think we have a political will to shut the banks down.”
Most of the speakers spoke of the stimulus plan in broad terms, but some members of the audience would have preferred to hear more direct advice and information on the impacts of the administration’s plan. Dan Jerke ’09 said, “I would have liked to hear more debate on whether the economists thought the stimulus was going to be effective or not. They talked a lot about the state of the country and the state of the world.”
Sarah Ghermay ’11 agreed. Ghermay explained that she attended the discussion to get an academic analysis of the stimulus plan rather than media analysis, but that she would have also liked to hear about the details of the stimulus plan that would affect her directly, such as what would happen if she bought a car — something the stimulus plan offers concessions for.
Nicholson’s discussion touched a more personal level as he discussed health care policies. According to Nicholson, the health care problems in the United States have existed for years, and now they may just be more difficult to fix. Nicholson suggested that the U.S. needs to achieve universal health insurance, something Obama campaigned for. This would involve expanding Medicare to cover more low-income people as well as mandating that individuals purchase health insurance, and then providing subsidies so people would be able to do so. Several of the panelists also made ties to the Great Depression. Shell said, “I’m afraid that I see some parallels to the Great Depression, especially in terms of the political economy.”
Despite the dire undertone, many in the audience felt that the panel was very informative.
“I loved it; they sharpened the questions I have. I think the problems are so severe that nothing any faculty member could say, nothing the president of the United States could say, should reduce our worries,” said Prof. emeritus Richard Schuler, economics. “We’re in unchartered waters and so what we need to do is inform ourselves about the range of actions and try to take them.”
Still, there may be a light at the end of the tunnel. As O’Hara smilingly said, “For those of you who are students here at Cornell, you will not have to reach retirement age before you get your first job.”