A panel of economists speaking at Fordham University on “The Financial Cliff: The Economics of How We Got There, Where We Are, and Where We Are Going,” agreed on how we got there and where we are, but diverged on where we are going.
The Jan. 30 alumni panel was moderated by Dominick Salvatore, Ph.D., Distinguished Professor and chair, Department of Economics, and featured Sherif T. Assef, Ph.D., FCRH ’81, GSAS ’82, GSAS ’94, managing director, Duff & Phelps; â¨Mary Ann C. Bartels, GSB ’85, GSAS ’92, managing director, Bank of America Merrill Lynch; and Matthieu Royer, GSAS ’94, managing director, Credit Agricole Corporate and Investment Bank.
Without mincing words, Salvatore outlined the 2008 crisis that led the nation toward the financial cliff.
“The Securities and Exchange Commission was asleep at the wheel,” he said. “Anyone who remembers seeing [Christopher] Cox, the head of the Securities and Exchange Commission, testify in front of Congress, could tell you the person was completely incompetent.”
Salvatore said the crisis began in the investment banking sector, which “was not well regulated… and those regulations that existed were not applied.” An atmosphere of “profits at all costs” pervaded, and, while much of the behavior was legal, it was unethical.
Looking at where the nation is now, Salvatore gave a grim assessment, describing the situation as being “somewhere between fiscal cliffs.” Assef concurred, adding that the situation will probably go on for quite some time.
Overall, Assef noted serious concerns as to whether a polarized U.S. government is capable of, or willing to, deal with the county’s most important long-range problem—a looming “explosion in medical costs.”
He made a distinction between current deficits, mid-term deficit outlook, and the long-term outlook of 20-30 years in the future, saying that the current and mid-term debts are largely cyclical by nature and somewhat manageable.
“It’s a problem, but I don’t think its a disaster,” he said.
Long-term, however, he predicted that medical care could wreak havoc on the economy. He said that rising Medicare costs will take away a certain amount of economic choice, and that, as has been noted by other commentators, could lead the country into becoming “an assisted living facility with an army.”
The notion of an implacable government unable to address serious issues was also a concern for Royer, who said that politics can exacerbate the problems when politicians spend most of their time concentrating on getting reelected every two years, and legislating only six months.
Regarding retirement, he said the systems in place are outmoded. Today’s young will be relying a Social Security system that was designed at a time when people started putting money into the system earlier and died soon after retirement.
Bartels said that she was concerned that the lack of good jobs and a general sense of pathos has led many young people to cast a leery eye on education as well.
“What I don’t like hearing is that people are starting to question the price of education, that our students are coming out and they can’t find jobs, so why should they get educated?” said Bartels. “I’m concerned that is going to become a trend, because I learned a long time ago the value of my education. I hope we don’t create a culture where more [young people]want to start work at Starbucks or Chipotle and don’t want to get a degree.”
Despite the aforementioned crisis, Royer said he is optimistic that college graduates will find work, provided they have the skill set employers require.
“Look at what classes you choose, are they directly usable on the day-to-day job that you will be hired for, and if the answer is no, than maybe you need to add a bit more of those and maybe a little less of art history,” he said, before adding, “unless you want to work at Southeby’s.”
To view the event’s Twitter feed, including tweets from GSAS Dean @buschnancy click here:#economicsRT