stimulus

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To Fight The IMF’s Dire Prediction We Need More Government Debt – 10 daily

Published by Anonymous (not verified) on Thu, 04/06/2020 - 2:29pm in

By Warwick Smith

This article was first published on April 15 2020 at 10daily, which has since shut down. I’m reproducing it here now partly to keep a record in case the web site ceases to exist.

Yesterday, the International Monetary Fund (IMF) released the latest World Economic Outlook, in which it predicted Australia’s economy would shrink 6.7 percent this year.

This would be the biggest single-year fall since 1930 at the height of the Great Depression. They expect unemployment to reach 7.6 percent this year and climb to 8.9 percent next year. Despite noting Australia’s very large government spending program, the IMF suggests that greater fiscal stimulus may be needed to avoid even worse outcomes.

Meanwhile, Australia’s major political parties are both stuck in misguided and outdated attitudes towards government debt and deficits. During last week’s parliamentary debate about the $130 billion JobKeeper legislation, Anthony Albanese said, “We are headed for a trillion-dollar debt… It is a bill that will saddle a generation.”

If this dangerous thinking is allowed to dominate both sides of the narrow political divide in Australia over the next few years, then we will see unnecessary hardship and further loss of jobs on the Australian people.

This misguided thinking comes from the notion that the federal government is like a nationwide household and that if we spend too much now, we, as a nation, will have to tighten our belts in the future to pay for it. This may make intuitive sense but much of the true nature of money is not intuitive.

Paying attention only to money and debt often causes people (including economists) to lose sight of the real economy. The real economy is the production and distribution of goods and services. Our material standard of living at any particular time depends almost exclusively on the goods and services we are able to produce (and purchase from overseas) at that time. Is it possible for future generations to send goods and services back in time to pay for the current COVID response expenditure? Of course not, that’s a ludicrous suggestion.

Okay, so if we focus on the real economy and forget about the money for a minute, what are the real future consequences of spending now to support businesses and households? The fewer businesses go broke now, the quicker the recovery and the more rapidly we can get back towards full employment. The closer we get to full employment (and the full use of our infrastructure, factories, equipment, etc) the more goods and services we can produce and the higher the material standard of living we can have.

So what about the trillion-dollar debt then?

We have a very clear historical precedent we can use to shed light on the impact of debt and on the choices that lie before us. The highest level of government debt Australia has ever had was accumulated during World War II.

(Image: Ashley Owen, Stanford Brown)

This debt, 120 percent of GDP, would be equivalent to a debt today of well over two trillion dollars. If Anthony Albanese and Josh Frydenberg are right about the current debt burden, then post-war generations must have really struggled under that debt burden, right?

As it turns out, the opposite is true. The 25 years following WWII are often referred to as the post-war boom. We had strong economic growth, high wage growth, rapidly increasing material standards of living and falling inequality.

During this period governments of both political persuasions ran near constant modest deficits and the level of government debt to GDP fell sharply. This counter-intuitive miracle occurred because governments weren’t focussed on paying off the debt but were instead focussed on productivity and full employment.

Policy thinkers in the Curtin government, trained in the new economics developed by John Maynard Keynes, had seen massive unemployment during the Great Depression and then zero unemployment during the war. They figured that if the government could bring about full employment during the war then they could bring about full employment during peace time. They laid out this plan in 1945 in a remarkable white paper, Full Employment in Australia, that’s still very much worth reading today.

Australia’s unemployment rate, 1901-2001. (Image: Australian Treasury)

Arguably the 20th century’s most influential economist, Keynes said, “Look after the unemployment and the budget will look after itself”. In the 25 years following WWII, unemployment in Australia averaged two percent and, as noted above, government debt to GDP fell sharply, despite governments continuing to run deficits.

The same could be true in the recovery from the COVID-induced recession — if only our politicians could understand it.

Falling debt to GDP while governments run deficits could occur because the combination of economic growth and inflation saw the economy outgrow the debt. The debt was never really paid off, but the Australian economy was fully employed and was producing enough goods and services to provide Australians with an increasingly higher standard of living.

As I’ve discussed elsewhere, Menzies very nearly lost the 1961 election because unemployment was creeping up towards three percent as a result of reduced government expenditure. Menzies, chastised by the result, immediately adopted Labor’s policy of intentionally running a deficit in order to reduce unemployment — and it worked.

The dangers of austerity

If we adopt the attitude currently dominant in both Labor and Coalition party rooms that this debt is a burden that must be paid off, we will have the opposite outcome. This could entail implementing so-called austerity policies, lifting taxes and/or cutting government expenditure in an effort to pay off the debt. Both increasing taxes and cutting government expenditure remove money from the non-government sector, right when they need it for the economic recovery.

Cutting government services, including health, mental health, education, research, environmental protection and more in order to pay off government debt will inevitably result in higher unemployment, worse health outcomes and worse economic outcomes. We know, both from sound economic theory and from the lessons of history, that we don’t need to focus on paying off the debt. This means, if we do suffer as a result of government debt repayments, that we are doing so as a political and ideological choice, not out of necessity.

Instead, we should focus on full employment and on the real economy and let the budget take care of itself.

Nomi Prins: Big Banks Got the Sweetest Deal from the Covid-19 Bailouts

Published by Anonymous (not verified) on Thu, 28/05/2020 - 11:20pm in

Listen to this edition of Scheer Intelligence with Nomi Prins and Robert Scheer This post and podcast first appeared on Scheerpost     It’s been over a decade since the 2008 banking meltdown, and yet many Americans are still living with … Continue reading

The post Nomi Prins: Big Banks Got the Sweetest Deal from the Covid-19 Bailouts appeared first on BillMoyers.com.

The Dem’s $3 Trillion Dollar HEROES Act Can Not Brace Us for the Coming Shock

Published by Anonymous (not verified) on Tue, 19/05/2020 - 4:57am in

Tags 

News, Economy, stimulus

The actual number of people who stand to benefit the most from last month’s CARES Act could fit into Dodger Stadium and still have plenty of elbow room to catch any foul balls that might come their way. Just 43,000 of the richest Americans, those making at least $1 million a year, were handed a $1.6 million-dollar average “windfall” by provisions included in the bipartisan bill by Republicans.

Sections 2303 and 2304 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act temporarily suspends a limitation on tax deductions for capital gains and other “nonbusiness income,” effectively handing hundreds of billions of dollars in tax breaks to the wealthiest Americans worth an estimated $80 billion in 2020 alone.

On Friday, Nancy Pelosi and the Democrats introduced a massive $3 trillion-dollar stimulus package called “The Heroes Act,” named in honor of the monies allotted to front-line emergency workers. The new bill also seeks to repeal the egregious provisions included in the CARES Act, which allow hedge fund managers, real estate speculators, and business owners to apply them retroactively all the way back to 2017.

According to a study commissioned by Senator Sheldon Whitehouse (D-RI) from the Joint Committee on Taxation (JCT) at the end of April, less than three percent of the tax-relief benefits included in the CARES Act will go to people earning $100,000 a year. “Relief legislation ought to address the needs of small businesses and workers,” said Whitehouse, “not fleece taxpayers to benefit real estate moguls and hedge fund billionaires.” The Senator introduced a bicameral piece of legislation with Congressman Lloyd Doggett (D-TX) to “unwind” the tax-liability reductions and is part of the Heroes Act.

 

Austerity politics

Despite the clear political advantages of attacking such a grossly unfair gift to the most well-off at the expense of the most vulnerable, the Democrats’ HEROES act actually goes further in undermining the help offered to small business owners by excluding the Paycheck Guarantee Act, which would have assured 100 percent coverage of workers’ wages up to $90,000 a year.

A “mini-rebellion” reportedly ensued among progressives in the House over its exclusion but was eventually squelched by Pelosi, leading to the passing of the controversial bill in a 208-199 vote. In addition, the legislation stamped out efforts to provide monthly recurring relief checks of $2,000 per household, opting instead for a one-time payment in a second round of the $1,200 stimulus checks. Other measures aiming to correct some of the shortcomings of the CARES Act were also rebuffed by the Democratic leadership, such as automatic stabilizers to tie federal aid to economic conditions and logistical improvements for the delivery of funds to individuals.

While the Heroes Act was immediately pounced on by Senate Majority Leader, Mitch McConnell, and other Republicans, who derided it as an election-year ploy with “no chance at becoming law,” the implications of their political infighting for millions of Americans could prove very costly in both the short and the long term.

 

Raiding the castle

The disconnect between reality on the ground and Capitol Hill is staggering. As the Trump show continues and each side of the political aisle takes aim at each other, the economy’s freefall is quickly reaching catastrophic levels.

A recent University of Chicago poll found that 37 percent of unemployed Americans ran out of food in April. Kate Maehr, executive director of the Greater Chicago Food Depository, has “never seen anything like it,” referring to the 60 percent increase in the number of people visiting food pantries that are part of her organization.

Meanwhile, 46 percent of those surveyed confessed to worrying that they, too, might run out of food in the near future if they didn’t find employment soon. Their prospects depend heavily “on whether states can restart their economies without creating new surges in COVID-19 infections,” according to Gabriel Ehrlich of the University of Michigan. His assessment was echoed by the Federal Reserves’ Financial Stability Report last Thursday, which noted the “sharp economic contraction” resulting from the economic shutdowns would “create fragilities that last for some time.”

Fed chairman, Jerome Powell, stated last week that “Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage,” calling out the GOP for “pumping the brakes” on Pelosi’s $3 trillion stimulus bill. Senate Majority Leader, Mitch McConnell said the government should “take a pause here” and evaluate what has been done to this point.

Other Republicans voiced their opposition to the Heroes Act calling it “bloated” and “nothing more than the Democratic policy agenda masquerading as a response to the coronavirus crisis,” according to Rep. Tom Cole of Oklahoma. Only one Republican House member voted against his party and for the Democrat-led bill. Soon-to-retire Rep. Peter King of New York, who has served 14 terms in the U.S. Congress, told Fox News that he “had no choice,” asserting that “New York will absolutely collapse if that aid money is not there,” and adding that this wasn’t a time for politics.

 

Canary in the coal mine

New York City, in fact, provides a clear picture of what is in store for the country as a whole as the crisis motivates the wealthy to escape to safety and the less fortunate are left behind to deal with increasingly deteriorating circumstances. A recent article published by the New York Times delves into data provided by Descartes Labs and others, which analyzed smart-phone data to determine where New York residents had been over a two-week period in February when the pandemic began to unfold in the United States.

Notwithstanding the broader implications of smart-phone data surveillance, the results of the analysis determined that the city’s population declined by almost 5 percent as people with the means to do so fled to second homes out in the country or elsewhere. Peter Bearman, a sociologist from Columbia University, highlighted the contrast in inequality this phenomenon makes clear, stating that “everybody is really aware of the uneven distribution of risk, and the unfairness of having to work to provide services to people who are wealthy enough to avoid providing services for themselves”.

As the crisis deepens and those who don’t have the luxury of riding it out in the Hamptons or some other place are forced to stay behind in an economy in free fall, where unemployment is projected to reach unprecedented levels of 40-45 percent, the pussyfooting and pettiness that has become endemic in the American political system – run by the same class of people running for the hills with their million-dollar tax breaks – will inevitably give way to a mass insurrection by those most affected by their contempt, that not even a pandemic can hold back.

Feature photo | House Speaker Nancy Pelosi of Calif., speaks about the so-called Heroes Act, May 12, 2020 on Capitol Hill in Washington. Saul Loeb | Pool via AP

Raul Diego is a MintPress News Staff Writer, independent photojournalist, researcher, writer and documentary filmmaker.

The post The Dem’s $3 Trillion Dollar HEROES Act Can Not Brace Us for the Coming Shock appeared first on MintPress News.

No Stimulus for the Weary: The US is Now Sitting on an Inflation Time Bomb

Published by Anonymous (not verified) on Wed, 13/05/2020 - 12:28am in

The consequences of the $2.2 trillion stimulus package are being ignored, even by the White House budget office that put it together, admitting that the package had “come together so quickly,” that they had no time “to do the customary modeling of its fiscal impact.” What does appear to have consensus in financial circles is that after this is over central banks will effectively own the governments of the world, including the United States.

When it is all said and done, President Trump’s stimulus checks will carry an inflationary cost many multiples more than their original $1,200 value in the pre-coronavirus economic reality, a reality that probably won’t become apparent until after the election in November. By then the checks will have served their purpose as a political move, not an economic one. When understood from the vantage point of what is in store for the American working classes as we emerge from this red light on main street, Trump’s checks will only add fuel to the inflationary fire just ahead, according to Neal Kimberley, a macroeconomics analyst for the South China Morning Post.

An economic realignment is unfolding in the wake of the shutdowns prescribed by pandemic response protocols. The coordinated effort to restrict individual participation in the economy spans the globe but is an inherently local matter. While corporations around the world “ride it out” by hoarding their government bailout money in the bond market, regular working people are bearing the brunt of the risk and facing a brave new world on the other side of the COVID Spring, where the distance between them and the richest 0.01 percent will have grown light years further than the recommended six feet.

Shocks to demand elicit certain reactions from the market, whereas shocks to the supply-side call on others. It is exceedingly rare for an economy to suffer shocks on both ends simultaneously, as is occurring at this very moment when both consumers and suppliers are in stasis. 

While governments slash interest rates to keep their borrowing costs low, the unprecedented flood of new money is accumulating in the hands of the wealthiest and most powerful people and corporations, who have parked all of it in bond instruments like a horse at the gate of the Kentucky Derby. As soon as the trumpet is blown and the economy restarts itself, those same trillions of dollars will come rushing out and cause massive inflation, which will only be exacerbated by low-interest rates. In other words, we’re sitting on a time bomb, and it is counting down the last seconds.

 

Expanding the debt pool

The same will hold true for recipients the SBA CARE Act loans, which has expanded the availability of government debt beyond traditional for-profit businesses and brought faith-based organizations into the public money sweepstakes. 

Beginning in 2001, when Geroge W. Bush first proposed a Faith-based and Community Initiative as part of his Presidential Management Agenda, the gradual inclusion of non-profits like churches and synagogues, but also a myriad other religious organization, into direct government assistance programs has continued unabated and the increasingly blurred line between church and state all but vanished once Trump’s Treasury department issued an “Interim Final Rule” for the CARES Act, making payroll protection loans accessible to faith-based organizations.

To put the $2.2 trillion CARES Act in perspective, the bill allocated a paltry 10 percent of the total ($250 billion) for direct individual assistance in a pie that was divided into hundreds of millions of recipients. $500 billion was allotted to SBA-related loans and the rest, or $1.7 trillion, went directly into the pockets of a comparatively minuscule portion of the population. 

From a macroeconomic perspective, the CARES Act only spread the government’s insurmountable debt further out into the economy, which is already more than “twice what it was before the Great Recession” and is set to increase exponentially in the relatively near future.

 

Sooner or Later

The dynamics put in play by the COVID Spring mirrors the conditions that led to the 2008 financial crash and its aftermath, in that a giant ball of financial poison had been festering behind the scenes and then metastasized around the world, ruining anyone in close proximity to a toxic derivative and no access to the FED window.

The toxic asset right now is the piles and piles of U.S. dollars and dollar-denominated assets and instruments saturating the global economy, which is tied to a nation – the U.S. – on a completely unsustainable economic path.

The degree to which inflation hits us is still a matter of debate among economists but many are expecting it will happen sooner or later. They concede that it is not out of the realm of possibility that “persistent” inflation is on the horizon. “We think the trade war has set this very real possibility in motion,” advised RBC economists to their clients. “Covid-19,” they continued, “is likely just pushing it further upfield.”

Ultimately, the pressures of a hopelessly indebted nation populated by a hopelessly indebted citizenry who are being told interacting directly with each other is dangerous sets us up for an Orwellian nightmare that no amount of Trump checks can justify.

Feature photo | Phu Dang, left, the owner of i5 Pho restaurant, gets help from a contractor as he boards up his business in Seattle’s downtown Pioneer Square neighborhood, March 30, 2020. Ted S. Warren | AP

Raul Diego is a MintPress News Staff Writer, independent photojournalist, researcher, writer and documentary filmmaker.

The post No Stimulus for the Weary: The US is Now Sitting on an Inflation Time Bomb appeared first on MintPress News.

Jan Kregel: Why Stimulus Cannot Solve the Pandemic Depression

Published by Anonymous (not verified) on Tue, 12/05/2020 - 5:13am in

Jan Kregel: Why Stimulus Cannot Solve the Pandemic Depression

Published by Anonymous (not verified) on Tue, 12/05/2020 - 5:13am in

The Country Is Gone but At Least We Don’t Have a National Debt

Published by Anonymous (not verified) on Wed, 06/05/2020 - 4:07pm in

Senate majority leader Mitch McConnell insists that economic stimulus should either halt or slow down due to concerns about the deficit. What kind of world, he asks, will our children and grandchildren inherit? Not a good one if he gets his way.

A Special Circle of Hell Awaits

Published by Anonymous (not verified) on Fri, 17/04/2020 - 10:34pm in

By taking a wrecking ball to independent oversight, Trump has made the presidency into a dictatorship. At this point, writes Robert Edwards, the only recourse we will have left to save our democracy, repair the institutions of government, and restore accountability to the American people, is to vote in November to save "the soul of this nation." Continue reading

The post A Special Circle of Hell Awaits appeared first on BillMoyers.com.

As One of the Largest Bailouts in History Looms, “Crisis-Ridden” Corporations Reap Record Profits

Published by Anonymous (not verified) on Thu, 16/04/2020 - 3:07am in

Hospitals overflowing with sick and dying patients. Overworked staff risking their lives wearing garbage bags as makeshift protective equipment against an invisible but deadly virus. Refrigerated containers left outside medical facilities, filling with the dead. Mass graves being dug in the city. It is like something out of a horror movie. But it is very real and is happening right now in America. “We are doing the best we can,” Derrick Smith, a certified registered nurse anesthetist in New York City told MintPress last week, “but people are dying left and right, no exaggeration.” “I’ve never imagined or seen our healthcare system take such a beating before,” he said. “This is something that none of us have ever really seen.”

Despite leaving nearly every other sector of the economy in ruins, the COVID-19 pandemic has been a windfall for the for-profit healthcare industry, which is expecting to make dazzling profits off of the crisis. For example, UnitedHealthcare – the country’s largest insurer, controlling over 50,000 doctors – is predicted to announce yearly profits of over $21 billion later today. That is according to former healthcare industry director turned industry whistleblower and reform advocate Wendell Potter, who yesterday accused the conglomerate of some highly unethical practices in order to cut corners.

Just as the pandemic was first hitting America, Potter says, UnitedHealthcare began strongarming its doctors into accepting pay cuts of up to 60 percent in an effort to nickel and dime employees and ensure they were operating with the minimum number of staff possible. As a result, even patients at in-network hospitals risk receiving surprise bills after being treated by out-of-house medical professionals, seeing as UnitedHealthcare does not directly employ enough staff.

“Patients are getting crushed financially because of UnitedHealth’s actions. And, believe it or not, some doctors may as well,” Potter says, concluding that, “As ER docs & other physicians risk their lives treating COVID-19 patients, UnitedHealth is playing games to rake in profits.”

Other big corporations winning big from coronavirus are Amazon and videoconferencing software Zoom. Amazon CEO Jeff Bezos has seen his fortune swell by over $24 billion, while Zoom founder Eric Yuan’s fortune has more than doubled of late, up to $7.4 billion.

At least the healthcare industry is doing something productive as it rakes in huge profits. Other corporations stand to make billions even as their businesses are completely idle.

 

Free rent and welfare… for corporations

Filming has been suspended, movie theaters closed, Disney’s stores and hotels are shuttered. Disneyland is gathering dust, the once teeming theme parks now eerily silent. The company has furloughed 43,000 staff. And yet Disney’s stock price is rallying; from $85.76 per share in March to over $106 today, shareholders have seen the value of their holdings increase by 20 percent. The reason? Because of a quarter-trillion dollar bailout of the hotel and entertainment industry that will see the largest corporations like Disney plied with cash, even as ordinary Americans will have to wait up to five months for a meager $1,200 government check. People without a bank account – i.e. the poorest in society – will be the last to receive aid.

Along with the hotel industry, USA Today suggests that large airlines are the “big winners” from Trump’s bailout package. This, despite the fact that industry is hemorrhaging money. Virtually nobody is flying, and airlines have had to refund huge numbers of travelers. Yet stockholders in big airline corporations are smiling, thanks to news of a similar bailout. Since April 3, American Airlines shares have rallied from $9.39 to $11.94 today, a 27 percent surge. The government also rushed through laws ensuring that airlines will not have to pay rent for the next six months. Needless to say, there has not been similar legislation for American citizens laid off or self-isolating due to COVID-19.

While the government insists there will be some strings attached to one of the greatest corporate bailouts in history, it is clear that, just like in 2008, they will not insist on transformative changes within the industry.

Indeed big questions are not even being asked. How many hotels are offering their empty rooms to the homeless or to people needing to self-isolate away from family members or housemates? How many have offered to be turned into makeshift hospitals? In France, the nationalized high-speed rail service is ferrying the sick around the country from coronavirus hotspots to hospitals with free beds. Couldn’t unused planes be doing the same thing in the United States? And if the government is essentially going to buy out every hotel or airline in the country, why not nationalize them outright and use the future dividends from a profitable industry to pay for better schools, roads and fund social programs? Why not at least stipulate that all corporations taking money accept workers on their boards or pay all employees at least $15 per hour? Does it not make sense that a public health emergency requires a public healthcare system?

Unfortunately, it is abundantly clear for whom the government works in the U.S., and this is underlined by the lack of questioning or conditions on the bailout. Once again, it appears that big business will get bailed out and the people are getting sold out.

Feature photo | Vice President Mike Pence and President Donald Trump meet with pharmaceutical executives in the Cabinet Room of the White House, March 2, 2020, in Washington. Andrew Harnik | AP

Alan MacLeod is a Staff Writer for MintPress News. After completing his PhD in 2017 he published two books: Bad News From Venezuela: Twenty Years of Fake News and Misreporting and Propaganda in the Information Age: Still Manufacturing Consent. He has also contributed to Fairness and Accuracy in ReportingThe GuardianSalonThe GrayzoneJacobin MagazineCommon Dreams the American Herald Tribune and The Canary.

The post As One of the Largest Bailouts in History Looms, “Crisis-Ridden” Corporations Reap Record Profits appeared first on MintPress News.

Converging Crises Part II: Survival Rule Number One is Don't Eat Your Young

Published by Anonymous (not verified) on Wed, 01/04/2020 - 6:27am in

Tags 

stimulus

Here's an act of self-harm that is spreading from coast to coast. Stanford University is "pausing" all faculty searches. "Provost Drell will permit hiring processes to continue if 'discussions have taken place with the finalist about terms of the offer,' or if a formal offer has been extended to a candidate for a faculty position, but any pending offer for a staff position must be put on hold immediately.  On August 31, 2019, the end of the university’s fiscal year, Stanford reported its endowment was $27.7 billion."

That's the author's sequencing, not mine. Drell is tossing out a lot of faculty time and effort, for starters. She's throwing people who almost got jobs back into a terrible job market. And for how much savings--one year of payroll for how many new faculty?  Unknown.  (Update: On April 1st, UC Berkeley announced their own hiring freeze, counting $100 million in covid-related costs, on a $3 billion base).

Another example, from Brown University at the other end of the financial spectrum.  Their provost   is not canceling searches already "well under way," but has frozen future hiring other than "a very few critically strategic hires in the year ahead."  A number of very wealthy elite universities are following suit (Emory, Columbia, Penn . . ): see Bryan Alexander's growing spreadsheet and also this very long one.

Here's a third case, from a state system with 23 campuses and over 450,000 students.

 "All open searches are to be stopped"-- unless the top 2 campus officers agree that it's "vital." They are now the sole originators of searches, "if they deem it necessary." How many searches are cancelled--hundreds across all  campuses? We don't know.

Translation for all three, and the other freezes  now occurring: "we expect the ship to take on water in the coming storm.  So first we'll throw early career researchers overboard."

Note two other features. These senior officials don't offer financial modeling to explain or justify the freezes. Second, these are top-down decisions, devoid of shared governance. They identify no consultation with the units affected. A full range of operational answers aren't produced. What will this do to your major? to your students graduating? to their learning? to department functions? How will this affect your research, short, medium, and long term? What does this do to your doctoral program? How does it affect doctoral education in any particular discipline. There's no information.

Academia has long let financial factors dominate or simply ignore educational ones, to the long-term detriment of education. Administration becomes a transmission belt in which a crisis in the outside world immediately becomes a crisis in the institution. In addition to hurting education, this kind of management robs the institution of agency. It also fails the essential public job of countercyclical actions that resist the cycle of  shutdown--consumption crash--job loss--no money--more closures.

But wait, you say, this is the Great Depression 2.0.  3.3 million new unemployment claims last week, all sorts of back-of-the-envelope fun being had by Fed economists, etc.. Shouldn't the funding collapse override all other factors? 

No. Hell no. A thousand times no.

Managers must always think about the welfare of their whole institutions, which means considering multiple factors when allocating funds. In this case, that includes how a cut or a freeze will affect

  1. immediate institutional solvency
  2. long term institutional solvency
  3. the university's immediate operations, like teaching and research
  4. the university's long term operations, like teaching and research
  5. university personnel (sunk effort, effectiveness, fairness, morale, continuation, recovery)
  6. the disciplines represented in the university
  7. the overall profession of college teaching and research

That's a short list, and you can see an item like (5) can be broken out into many parts. The items at the top are not more important than the rest.  Managers don't really get to pick one or two of these and ignore all others  But that is what Provost Drell and Chancellor White et al. are doing: only getting to (1) or (2) on a  long list, and not to the rest--to impact on courses, curriculum, departmental health, student access, success, food and housing, not to mention the continuity of the professions that keep universities alive.

Drell and White aren't to blame for the defective managerial culture in higher ed nationally, but they are enacting it here. Universities have long dealt with present fiscal crises by sacrificing the future: in addition to their epic passages of deferred maintenance and the like, they have addressed chronic financial shortfalls by hiring temporary faculty rather than permanent ones or by hiring no new faculty at all.  They have not invoked items (3) through (7) above and said to their legislatures, governing  boards, senior managers, wealthy donors, etc., "we cannot offer quality instruction, which in universities always includes a research dimension, by adjuncting more than X percent of our faculty."  (X was traditionally 1/3rd averaged across the sector.)  They have not said this. The long-term results have been

  • massive shrinking of the tenure-track job market
  • destabilization of doctoral study (doing intellectual as well as personal damage)
  • transformation of advanced study into precarity
  • endangerment of the quality and continuity of academic disciplines

Management is an intellectually challenging practice, at least when done right. And doing it well is crucial to the health of academic life. Although I'm very aware of the university's many negative legacies and practices, I'm also an institutionalist, a bit churchy in my sense of the value of universities as intricate and animating systems. I also grew up on Michel Foucault, who, for all his pessimism about the deployments of law, rights, and liberal institutions to impose rather than check power, saw sovereignty as partially replaced by governmentality, in which various powers engaged in the disposition of all the elements of a system, in some kind of efficacy.  I have a lot of respect for the difficulty of the administrative job and for people trying to do it well.  But that is not what is happening here.  Managers are now getting set to wreck another academic generation, having failed to rebuild the public university employment base after the last big crisis in 2008.

A few concluding policy thoughts:

  • Tenured faculty need to bring this repeated sacrifice of the rising academic generations into the sphere of institutional politics.  This means strong objections to pauses, freezes, closures, and future downgradese.  We need to fight this, and design alternatives. 
  • Universities must demand new federal stimulus funds-- beyond the $14 billion (on a nearly $60 billion request) that POTUS signed last week--specifically to maintain the academic workforce. See Michael's post for context and argument. Another giant federal stimulus bill is going to have to happen in the next few weeks. The main point of stimulus funds is sustaining employment.  Given the employment crisis in the society at large, universities should be increasing hiring and trying to employ more people, to ease the pressure on other sectors. Universities should use the crisis to absorb unemployed PhDs from former years and put them to work in the jobs these graduates of our doctoral programs sacrificed years of their lives to do.  More tenure-track employment will also upgrade instruction such that the undergrads we've sent home are more likely to come back. See MLA Executive Director Paula Krebs' excellent short piece on this topic.
  • The federal government should allocate bailout funds to universities only on the condition that they reverse hiring chills and freezes, maintain their workforces, and try the countercyclical economic work of expanding them.

We don't need another massive hit to a higher ed system that was already weaker in 2020 than it was in 2008. We can't take another bloodbath in the academic job market. We need a New Deal for higher ed, starting with the doctoral job market.

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