5 Pieces worth a Moment of Your Time 2/5/2010

1. Fiscal Scare Tactics

These days it’s hard to pick up a newspaper or turn on a news program without encountering stern warnings about the federal budget deficit. The deficit threatens economic recovery, we’re told; it puts American economic stability at risk; it will undermine our influence in the world. These claims generally aren’t stated as opinions, as views held by some analysts but disputed by others. Instead, they’re reported as if they were facts, plain and simple.

Yet they aren’t facts. Many economists take a much calmer view of budget deficits than anything you’ll see on TV. Nor do investors seem unduly concerned: U.S. government bonds continue to find ready buyers, even at historically low interest rates. The long-run budget outlook is problematic, but short-term deficits aren’t — and even the long-term outlook is much less frightening than the public is being led to believe.

So why the sudden ubiquity of deficit scare stories? It isn’t being driven by any actual news. It has been obvious for at least a year that the U.S. government would face an extended period of large deficits, and projections of those deficits haven’t changed much since last summer. Yet the drumbeat of dire fiscal warnings has grown vastly louder.

To me — and I’m not alone in this — the sudden outbreak of deficit hysteria brings back memories of the groupthink that took hold during the run-up to the Iraq war. Now, as then, dubious allegations, not backed by hard evidence, are being reported as if they have been established beyond a shadow of a doubt. Now, as then, much of the political and media establishments have bought into the notion that we must take drastic action quickly, even though there hasn’t been any new information to justify this sudden urgency. Now, as then, those who challenge the prevailing narrative, no matter how strong their case and no matter how solid their background, are being marginalized...

2. If Colleges Worked Like Health Care

Correctly viewed, a modern university is a prepaid, staff-model, pedagogic group practice – the educational analogue of a staff-model health maintenance organization, or H.M.O., like the Kaiser Permanente Health Plan. Like H.M.O.’s, which are prepaid an annual capitation for all of an insured person’s medically needed services, universities are prepaid one annual tuition fee for all the pedagogic services going into the education of the student.

But suppose universities operated instead on a piece-rate compensation basis, like the current health system. They would then be merely a pastiche of different pedagogic profit centers, each with its own fee schedules and ownership patterns.

Professors would rent office space from the university and then each function as their own profit centers. They would equip their offices with computers to present graphic illustrations to students during office hours or surf the internet with them, charging not only a professional office-visit fee, but also a PC usage fee.

A “comprehensive initial consultation on a senior thesis,” for example, might cost anywhere from $150 to $300, depending on the student. Drafts and redrafts of the thesis would be read by the professors multiple times. Ditto for assigned papers.

The faculty in the natural sciences and engineering would own the laboratories used by their students and charge a facilities fee for each use, along with a professional fee for faculty supervision and set-up costs.

The English department would operate the for-profit University Rehab Inc. for remedial English, to purge students of their untoward use of words such as “like,” “you know” and “Oh my God!” – albeit it not of the equally untoward “as it were.”

Students would be charged a professional lecture fee for every class they attended along, of course, with another facilities fee, like an operating-room charge in a hospital. Every time a student sought out a teaching assistant during office hours a charge would be incurred. Thus, muddled lectures by the professor actually might yield additional revenue.

If universities conducted their business in this fashion they, too, might provoke endless rancor and suspicion, endless lawsuits and, sooner or later, much government regulation on how they conduct their business. It may be the reason universities prefer to function like staff-model H.M.O.’s.

And has this approach produced poor quality, as physicians devoted to the hallowed fee-for-service system have so often alleged of H.M.O.’s? It does not appear so, as universities do compete fiercely for students and faculty on their overall reputation.

In any event, parents all over America and, indeed, all over the world dream of sending their offspring to these prepaid, staff-model pedagogic group practices. These parents can’t all be wrong.

3.Muddling Out of Freefall

NEW YORK – Defeat in the Massachusetts senatorial election has deprived America’s Democrats of the 60 votes needed to pass health-care reform and other legislation, and it has changed American politics – at least for the moment. But what does that vote say about American voters and the economy?

It does not herald a shift to the right, as some pundits suggest. Rather, the message it sends is the same as that sent by voters to President Bill Clinton 17 years ago: “It’s the economy, stupid!” and “Jobs, jobs, jobs.” Indeed, on the other side of the United States from Massachusetts, voters in Oregon passed a referendum supporting a tax increase.

The US economy is in a mess – even if growth has resumed, and bankers are once again receiving huge bonuses. More than one out of six Americans who would like a full-time job cannot get one; and 40% of the unemployed have been out of a job for more than six months.

As Europe learned long ago, hardship increases with the length of unemployment, as job skills and prospects deteriorate and savings gets wiped out. The 2.5-3.5 million foreclosures expected this year will exceed those of 2009, and the year began with what is expected to be the first of many large commercial real-estate bankruptcies. Even the Congressional Budget Office is predicting that it will be the middle of the decade before unemployment returns to more normal levels, as America experiences its own version of “Japanese malaise.”

When America reformed its welfare programs for the poor under Clinton, it put conditions on recipients: they had to look for a job or enroll in training programs. But when the banks received welfare benefits, no conditions were imposed on them. Had Obama’s attempt at muddling through worked, it would have avoided some big philosophical battles. But it didn’t work, and it has been a long time since popular antipathy to banks has been so great.

Obama wanted to bridge the divides among Americans that George W. Bush had opened. But now those divides are wider. His attempts to please everyone, so evident in the last few weeks, are likely to mollify no one.

Deficit hawks – especially among the bankers who laid low during the government bailout of their institutions, but who have now come back with a vengeance – use worries about the growing deficit to justify cutbacks in spending. But these views on how to run the economy are no better than the bankers’ approach to running their own institutions.

Cutting spending now will weaken the economy. So long as spending goes to investments yielding a modest return of 6%, the long-term debt will be reduced, even as the short-term deficit increases, owing to the higher tax revenues generated by the larger output in the short run and the more rapid growth in the long run.

Three things can make a difference: a second stimulus, stemming the tide of housing foreclosures by addressing the roughly 25% of mortgages that are worth more than the value the house, and reshaping our financial system to rein in the banks.

Most Americans, however, are focused on today’s downturn, not tomorrow’s. Growth over the next two years is expected to be so anemic that it will barely be able to create enough jobs for new entrants to the labor force, let alone to return unemployment to an acceptable level.

Unfettered markets may have caused this calamity, and markets by themselves won’t get us out, at least any time soon. Government action is needed, and that will require effective and forceful political leadership.

4. Why Workplace Equality Initiatives Aren't Helping Women

Companies say they treat men and women equally — but in reality, they don't. Our recent gender-parity survey of more than 1,800 business people worldwide, conducted in association with HBR.org, shows that in fact, employees are disappointed with the way their company handles the issue of gender parity — the attempt to treat men and women equally in the workforce. Nearly 80 percent of women and men say they are convinced of the benefits of gender parity at all levels. But only about 20 percent believe their companies actually put meaningful resources behind it.

Most companies simply fall down in the follow-through. Almost three-quarters of respondents say their companies launched initiatives like flex work programs and mentorships, but fewer than 25 percent feel they are effective: employees just don't see enough women in leadership positions at their company. Fully 60 percent of survey respondents say they are not solicited for their opinions on gender parity by their companies. The dismal metrics get worse: Less than 20 percent report that their companies effectively utilize gender parity metrics to track progress. Only 14 percent say they had effective gender parity training or workshops. Just 8 percent believe their firms effectively tied incentives and compensation to gender parity.

Both men and women agree that women are still seen as better caregivers in their personal lives and tend to make more compromises in their career. The survey clearly shows that the time taken out for motherhood — and the resulting lost experience — is still a root cause of inequality in promotions, especially in "up-or-out" firms. Over time, working mothers disappear from higher management ranks in almost every industry. Result: Women constitute 50 percent of America's workforce, but in 2009 represented only 3 percent of Fortune 500 CEOs.

The survey sends a strong message: if companies want to help more women climb the corporate ladder, they have to go beyond flex jobs or flex hours. Instead, they need to develop less rigid promotion processes and career paths — and actively promote and "de-stigmatize" flexible career arcs within the organization. For companies, the pay-off can be huge: not only will they double their talent pool of leaders as more women return to the workforce in senior positions; they will also retain more male and female employees in the long-run and slash retraining costs. That will require bringing down barriers — and breaking through the glass ceiling.