The Federal Stimulus Package and State Universities

BY: LINDA STAMATO

As advisors to President-elect Barack Obama work to finish an economic recovery blueprint to form the basis for legislation early in the new year, one can’t help but worry about the growing amount of the bailout, $775 billion most recently reported, and the purposes to which it will be directed. It appears that the omnibus two-year spending plan will cover five main areas of spending and tax breaks: health, education, infrastructure, energy and support for the poor and the unemployed, and that it is expected to have elements that seek an immediate impact as well as those that constitute investments for the future.

We need to put people to work, certainly, and try to rebuild our nation’s neglected infrastructure; we have to invest in ways that are wise, i.e., targeted, smart, green, and essential. We need to fix our health care problems, heal our social and economic divide and restore our damaged social compact. We need to take steps to spur long-term economic growth. Not least, we need to exercise careful stewardship of the stimulus funds.

We need to be creative, even inspired, in how we think about this.

New Jersey and New York leaders are talking about efforts to spur the economy by providing jobs. Regional officials hope for more housing vouchers for the poor and for block grants to rebuild playgrounds, sidewalks and police forces. The nation’s governors are asking the president-elect for funds to assist their economies with the focus heavily on infrastructure. Specifically, the governors ask for $136 billion for projects already on the books and ready to break ground (e.g. a new Tappan Zee Bridge; a tunnel under the Hudson River to Penn Station; a Nassau hub retail and entertainment cluster around a revamped Nassau Coliseum; upgraded sewer plants),and $40 billion for increased Medicaid costs, and, generally, for monies for people who have a likelihood of spending it quickly in order to get the economy moving again.

We need to think in broader, more lasting terms.

There are as many ideas -for putting the national economy back in shape as there are people who criticize them. Finding respectable, credible, and reasonably objective ideas is essential. Few fit this category as well as Michael E. Porter of the Harvard Business School. In fact, David Brooks, opinion columnist for the New York Times, singled out Porter’s overview of America’s long-term economic challenges in a recent issue of Business Week. . Porter’s perspective on the federal stimulus emphasizes investments that are particularly valuable for New Jersey, focusing not only on the immediate–as our governor, and others, appear to be doing at the moment–but on the future that is in jeopardy if we don’t.

Investing in higher education, and, particularly in public higher education is, for Porter, a critical part of the strategy to get us where we need to be.

Porter says that the United States has prospered because it has enjoyed a set of unique competitive strengths. Two have particular relevance to New Jersey: Porter acknowledges that the U.S. has provided an unparalleled environment for entrepreneurship by starting new companies, and that the U.S. also has the world’s best institutions for higher learning. Higher learning has equipped students with highly advanced skills and has acted as a magnet for global talent while also playing a critical role in both academic and commercial innovation.
Yet, what has driven America’s success, Porter believes, is starting to erode — beginning with a series of policy failures that have offset and, in some instances, nullified its strengths. Porter believes that these failures have become particularly alarming as other nations have become more competitive. More threatening than competition, though, Porter believes, is the lack of a coherent strategy for addressing our nation’s own challenges.

Higher education is an essential player in that strategy.

For the last several decades, there has been no serious or sustained plan to improve access to U.S. colleges and universities, that is, to make them affordable to more citizens. Porter indicates that America now ranks 12th in college or higher educational attainment for 25 to 34 year-olds and that we have made no progress in this ranking in the past 30 years. This trend is ominous in an economy in which skills must justify high wages. And, Porter observes, instead of mounting a serious program to provide access like the GI Bill or the National Science Foundation programs of earlier years, “Congress grandstands over the rate of endowment spending in our best universities.” At least it did until very recently!

Porter is not alone in thinking that we have to get beyond this limited thinking if we are to keep America competitive. If we go on the way we’re going for another 25 years, we won’t have an affordable system of higher education. Patrick M. Calla, president of the National Center for Public Policy and Higher Education found that published college tuition and fees, adjusted for inflation, increased 439 percent from 1982 to 2007, while median family income rose 147 percent.

Joseph Stiglitz, economist and Nobel laureate, also sees an important role for institutions of higher education in recovery plans. America has great assets such as a productive labor force and the best universities in the world. These strengths, coupled with a sensible and fair economic stimulus package, and judicious regulations, will help our economy recover. As Stiglitz sees it, the critical pieces of the puzzle are educating workers for the right job such as the so-called green jobs that reduce energy use and global warming emissions and improving information technology at public and private institutions, colleges and hospitals.

Accordingly, federal stimulus money going to the states ought to include a giant share for state universities. “We can’t weaken the link higher education institutions have in the social mobility chain,” Porter says. “If they don’t have the funds, the increased demand for their services can’t be met.”

Stimulus money is not neutral. We need to articulate the right goals, for sure, but the means or the implementation is critical. While job creation, for example, is clearly a significant part of the picture, without investing in universities to educate and re-educate the workforce, we could be creating jobs and have an insufficient of skilled (trained and educated) folks to fill them.
If universities continue to increase rates, effectively pricing students out, then the country needs to invest in keeping costs affordable. Public universities need support in order to expand classes, improve campus infrastructure, and accept more students. As public universities are being cut back by their states–drastically in some cases– enrollment cuts are imminent. The University of California is threatening to cut system-wide enrollment by 10,000 students, for example, if the state doesn’t provide more money. Here is where federal stimulus funds could be used well.

Some targeted investments can meet specific needs: more and better prepared nurses, for example, resources for community and technical colleges, and resources for universities to purchase needed equipment. Computers, for example, and other equipment for research are enormously important investments that can stimulate the economy, aid the institutions, and promote research and development in one fell swoop.

Fostering home grown innovation, state universities serve not only as incubators for technological development but they can provide avenues for the creative use of information technology. State universities can help ensure the competitiveness of U.S. technology-based businesses by keeping on the cutting edge, serving as repositories of federal funding for basic research, training many more engineers and scientists, and investing directly to stimulate commercial inventions. We need investment in high-level science and technology, and a greater effort to spur the spilling over of this research into ventures aimed at driving new industries. We must have a willingness to experiment and to innovate in the use of technology as well as in the creation of it.

In “The Venturesome Economy” (Princeton University Press, 2008) Amar Bhide, author and professor at the Columbia Business School, makes a corollary point, and argues for upgrading community college programs in order to enable them to experiment with new developments in technology.
Federal and state funding for research can create well-paid jobs while expanding knowledge. Investment in elementary and secondary education will feed this research with the essential good minds and able bodies, scientists, researchers, mathematicians, engineers, physicists, chemists, and yes, even a few writers and historians, so that we can document and learn from our past, present and future mistakes.

In two blogs, written before the economy visibly imploded, I made the case that becoming “green” and “smart” in order to improve New Jersey’s economic prospects was unlikely to happen without some targeted investment in higher education and, particularly, in the state’s research universities. And, last year in another blog, I lamented the fact of distorted federal spendingeven before we were considering investments in infrastructure. I criticized the federal omnibus appropriations bill, for example, for its failure to support essential funding for the nation’s growth –and for the pork spending the legislation contained: 800 earmarks, adding up to more than 10 billion dollars.

Looking at one area of science, the impact was as clear as it was lamentable. The Fermi National Accelerator Laboratory,the nation’s premier center for probing the mysteries of the universe had to lay off more than 10 percent of its employees as a result of the budget cuts mandated by Congress. And, as a result, Fermilab’s collaboration in an international project to design and build a linear collider stopped along with the nation’s contribution of $160 million to ITER, a test fusion reactor that is intended to develop a new commercial energy by emulating the process that powers the sun. Other critical science projects were put in limbo. We got earmarks instead.

Our priorities are clearly off. We need to get back on track with the federal stimulus spending and, to make an obvious point, to insert no earmarks–none–in this two-year plan, or any other for that matter. Trust in government has to be an essential element in the construction and implementation of federal spending.

As we plan a massive spending effort, political leaders, business leaders and civil society have to begin a respectful and informed dialogue about the challenges facing this nation. Recently, forty college presidents–including Rutgers president, Richard L. McCormick–board chairs, and leaders of educational associations signed a letter to President-elect Obama asking for about 5 percent of the expected stimulus funding–40 to 45 billion dollars–and indicated their preferences for funding through the states, as a part of the stimulus package.

It is good to see this effort being made. It should be made clear, though, that if federal stimulus funds are to be distributed by the governors of the states, that distribution should follow the strategy driving the stimulus spending; as with the “no earmarks” policy, there should, of course, be no “tree ornaments” in state spending of the federal dollars and there should be no “equalizing” or “politicizing” of funds. Commitments ought to be made on the basis of expanding enrollments, for example, demonstrable research-project-related equipment needs, or updating technology for campuses that directly relate to teaching and research needs.

New Jersey has an unfortunate history of funding “others” in order to gain political support for the necessary, demonstrated need, determined by merit and peer review.

In the effort to get funds to essential projects, it is necessary to jump-start the economy and to ensure that funds are not simply spent without care. Stimulus planners should also turn to the three principal institutes funded by the federal government, where many good ideas have been rejected for lack of funding. These ideas could be ready to launch. I refer to the National Science Foundation, the National Institutes of Health, and, yes, the National Endowment for the Humanities because, after all, the nation’s soul needs as much support as its infrastructural, scientific, and technological advancement.

One of the most important points in the open letter, beyond the immediate economic stimulus and infrastructure needs, is a call for the new president, the states, the business community, and education stakeholders from all sectors, to collaboratively ” develop a 20-year vision for educational attainment as part of an ambitious national strategy to ensure our continued competitiveness and security in the context of a global economy.” It’s not enough to recognize the urgency to improve education and its outcomes, raise graduation rates, prepare teachers better, and to build human capital in science, engineering, and mathematics. What is required in the present economic crisis is an investment in human capital, and the creation of “a long-term plan to serve the nation by enhancing public universities’ critical role in creating jobs, increasing graduates, enhancing the quality and skills of the workforce, and assisting in national technology and energy initiatives through research.”

“If we are honest with ourselves,” Professor Porter says, “We would admit the U.S. is not making real progress […]. Efforts by both parties are largely canceling each other out.” We need a strategy to direct our spending to “priority investments that also put money into the economy, such as educational assistance and logistical infrastructure, rather than, say, to tax rebates.” With a strategy we could stop counterproductive and expensive practices such as farm subsidies and spending earmarks.
Porter asks, “Is such strategic thinking possible, given America’s political system?”

It had better be.

We need a strategy for the stimulus plan(s), one that gives higher education a critical role in rebuilding the nation and the funds to make college more affordable for our future workforce. This strategy must come now. We need policies to assure we stay on track. Higher education must become and remain a vital partner in advancing and sustaining the nation’s economic well-being.

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