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Some might say the storm has arrived–it’s a question of which category–how about category 5? In 2005, a bipartisan group of Congressmen requested the National Academy of Sciences (NAS)  to carry out an analysis of America’s status in the new competitive arena of science and technology and make policy recommendations based on their assessment. If American science and technology had problems in competing, could these problems be addressed with national legislation? The NAS analysis was done  at a time when the budget for biomedical research had just gone through a period in which the  funding for the National Institutes of Health (NIH), the main source of biomedical research funds, had been doubled in a five year period (1998-2003); because of the seemingly rosy picture that had emerged for biomedical research (but see below), the report focused primarily on math, engineering and the physical sciences. The 2005 report, completed in less than a year after the request was published and entitled Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future: it projected a dim view of America’s future competitiveness, if major, new investments in science, technology, math and science education were not immediately put in place to change the trajectory that science in America had been on for decades, through policies of national disinvestment in research. The emphasis of the 2005 report was that America had become too disengaged in science and technology and the report had an immediate impact which led directly to congressional passage of the  America COMPETES Act of 2007, which stirred debate at both the national and regional levels about how to respond to the challenges facing America in the new global market place.  While some new budgetary priorities emerged as a result of the report, the results fell far short of the recommended priority changes in spending and didn’t respond to the sense of urgency conveyed by the NAS report that largely fell on deaf ears. In addition, what little effort was made to actually fund these emergency needs, got downgraded in the economic recession that clouds our future to this day. Few Americans understand that the last thirty years of disinvestment in research and technology have made it far more difficult to recover from the current, serious  recession than would otherwise be the case. The 2005 recommendations also pointed out the destructive legislation that found its way into the Patriot Act, with its subsequent impact on visa denial for foreign Ph.D. candidates. This is particularly critical for America,  since foreign-born students comprised a big fraction of our doctoral students; getting them to come  to our universities and finding ways to keep them here were important components of the NAS plan. Thus, the public reaction to 9/11 has made the challenge in front of us even more difficult and the need for action more urgent.

To Obama’s credit, the American Re-investment and Recovery Act (ARRA) of 2009 at least partially funded some of the recommendations that came out of the 2005 NAS report. However, the two-year period of ARRA’s influence is now coming to an end and no programmatic energy seems available to build on ARRA, so we are likely to slide back into pre-stimulus conditions, rather than continue to move forward.  Five years after the NAS committee report, the same committee (consisting of scientists, educators and corporate heads) generated the current report of 2010,  Rising Above the Gathering Storm, Revisited: Rapidly Approaching Category 5 which attempts to re-evaluate the issues by summarizing what was done and what still lies ahead of us, if we are going to reverse a significant decline in the standard of living for most Americans.   The last link provided allows you to visit the NAS website and download a copy of the 100 plus page report as a pdf (for free) or you can buy a book of the report for $18. The central concept that all of us must debate is this: to what degree have middle class income levels stagnated over the past 30 years because businesses have changed their model from the Golden Watch (50 years of company service rather than the certain future of downsizing and corporate buyouts) to the golden parachute (businesses take increases in worker productivity and don’t reward the workers, but shift the corporate wealth to reimburse lavish executive salaries and the value of the company stock?).  Alternatively, to what degree have we failed our workers because we are not bringing on new innovative technology jobs that can replace and improve workers compensation and job security? The NAS report focuses exclusively on the latter issue, but we cannot forget or forgive the super capitalism conditions that brought one in seven Americans into poverty.

The report’s center of gravity is that our economy must generate good-paying jobs that rely on high skills and education and that we must stimulate and reward innovation that seeks to generate such jobs. The report emphasizes the fact that over the past few decades investments in science and technology have provided the vast majority of jobs created in our economy, including those created at the bottom of the socioeconomic scale.  To recover our leadership will require  massive investments in how we educate our students in science and engineering, to inspire a new generation of creative, scientific solutions to our problems, while energizing the formation of a new economy, one that takes full advantage of our need to return to scientific and technical innovation within our own borders. The 2010 report emphasizes that we are falling seriously behind from where we once thought we should be. Right now the globalization of our economy heavily favors the Chinese, whose recent wealth, acquired through manufacturing, conforms to the same model that led to our own acquired wealth in the 19th and 20th centuries–that new Chinese wealth is now being invested and re-invested into economic expansion in manufacturing, including the high tech sector of the Chinese and global economy. Right now, China seems to have a lock on manufacturing solar panels and American companies are finding it tough going and hard to raise money to fund their own manufacturing capacity in this young industry. We gave away too much and we lost too much time during the GW Bush administration, whose focus primarily was on the financial sector of our economy and the privatization of government agencies. The culture of our country has become financialized and far too much attention is given to using money to make money, often by the same deceptive methods that led to our economic meltdown. If you want to read an alarming story, the NYT recently reported on the difficulty that American solar panel companies are having getting started and competing with the Chinese.

One section of the report provides factoid summaries that, by themselves, should ring alarm bells or evoke disgust that we should ever have let ourselves get so far behind, particularly since we seem to get politically distracted by thirty years of cultural wars.  As I read each factoid in the report, I couldn’t stop, as each new summary  seemed more telling than its predecessor, though there are many more in the publication. Here are a few (the numbers at the end are the references which can be obtained from the pdf article).

• Thirty years ago, ten percent of California’s general fund went to higher education and three percent to prisons. Today, nearly eleven percent goes to prisons and eight percent to higher education.1
• China is now second in the world in its publication of biomedical research articles, having recently surpassed Japan, the United Kingdom, Germany, Italy, France, Canada and Spain.2
• The United States now ranks 22nd among the world’s nations in the density of broadband Internet penetration and 72nd in the density of mobile telephony subscriptions.3
• In 2009, 51 percent of United States patents were awarded to non-United States companies.4
• The World Economic Forum ranks the United States 48th in quality of mathematics and science education.5
• Of Wal-Mart’s 6,000 suppliers, 5,000 are in China.6
• There are sixteen energy companies in the world with larger reserves than the largest United States company.7
• IBM’s once promising PC business is now owned by a Chinese company.8
• The legendary Bell Laboratories is now owned by a French company.9
• Hon Hai Precision Industry Co. (computer manufacturing) employs more people than the worldwide employment of Apple, Dell, Microsoft, Intel and Sony combined.10
• Only four of the top ten companies receiving United States patents last year were United States companies.12
• United States consumers spend significantly more on potato chips than the government devotes to energy R&D.13
• In 2000 the number of foreign students studying the physical sciences and engineering in United States graduate schools for the first time surpassed the number of United States students.15
• Federal funding of research in the physical sciences as a fraction of GDP fell by 54 percent in the 25 years after 1970. The decline in engineering funding was 51 percent.16
• Manufacturing employment in the U.S. computer industry is now lower than when the first personal computer was built in 1975.18
• In the 2009 rankings of the Information Technology and Innovation Foundation the U.S. was in sixth place in global innovation-based competitiveness, but ranked 40th in the rate of change over the past decade.19
• China has now replaced the United States as the world’s number one high-technology exporter.20
• According to the ACT College Readiness report, 78 percent of high school graduates did not meet the readiness benchmark levels for one or more entry-level college courses in mathematics, science, reading and English.64

On and on it goes as the list grows larger with no entries in which we are number one, unless you want to include our per capita expenditures on health care or the fact that we have a deficient k-12 education system in science, with   many science and math teachers who lack accreditation in the discipline. Yet, we spend more per student on education than any other OECD (Organization for Economic Cooperation and Development) country, but we continue to fall behind in math and science. Are teachers are the problem? I say parents are the problem combined with a popular culture that downplays science and technology, while emphasizing pop cultural icons. The problem is our modern culture. Perhaps it will take further erosion of our standard of living before science can be implemented as it was when Sputnik was first launched in 1957. As the committee says in their report “The United States appears to be on a course that will lead to a declining, not growing, standard of living for our children and grandchildren.”

The committee’s top recommendation is to generate 10,000 new teachers trained in math and science and get them out into the k-12 school systems to benefit the students. Move American students to the best students in science and math education in the world. Also proposed is to “Strengthen the skills of 250,000 current teachers by such actions as subsidizing the achievement of master’s degrees (in science, mathematics, or engineering)
and participation in workshops, and create a world-class mathematics and science curriculum available for voluntary adoption by local school districts throughout the nation.”

You can’t have well-trained science teachers without increased scientific research in the universities that train them, so the committee supports the doubling of math and science research expenditures over a seven year period. Although the committee’s proposal was attempting to emulate the doubling of the NIH budget, those of us funded through NIH have discovered that after the doubling, GW Bush constrained the growth of NIH thereafter to an annual rate of 1%  and today, the budget of NIH is roughly where it would have been without the period of doubling, but  maintained on the traditional growth rate of 6% per annum. In other words,the NIH budget is now as imperiled as it was in the 1990s, with hundreds of quality research grants that go unfunded and our research enterprise reduced to grant writing. Some relief came from ARRA, but that is ending now and we will soon back to the days of less than 10% funding in many areas of NIH and a very bleak picture for research opportunities–even in biomedical research. The highest level of % GDP funding for NIH took place in the med 1960s and once the “threats” of Sputnik were deemed to be over-rated, funding for basic science research, even in medically related fields began to decline as a % of GDP. Obama has sworn to reverse the decline in research emphasis, but it is not clear whether the climate we are currently in will allow any new priorities to be implemented. The election we are facing could well postpone, if not outright kill any new initiatives to increase the scientific competitiveness of our American enterprise.

Those that remain in the financial sector probably feel OK about the country. These financial giants are not investing in rebuilding America, but seem content with continuity in creating new financial bubbles. In addition, they like the fact that America has a very big military and can protect the country and themselves should significant problems arise. So, the fact that they are making big bucks, means that nothing serious has to be done, except that Obama probably has to go, since he is the one force that meddles too much with the industry. The only healthy way to solve America’s highly risky future is to take over the banks, force them to make loans that help rebuild the country, provide incentives for American firms to keep jobs in America and expand the technological and innovative side of their manufacturing. If a company decides to relocate, then give the workers of that company the opportunity, with low interest Federal loans,  to buy the company and continue supporting the jobs. After all, we allow leveraged buyouts by rich people, why not leverage buyouts for the workers. This is not a serious breach with the policies we have in place today, it’s just adding a little more force to the arm twisting. Yes, you could describe this as an extension of socialism, but does anyone believe that government support of big business with tax breaks and subsidies is not a form of socialism. Are we that afraid of a word, especially when it’s something we already have in play?

What almost no one understands, including those that vigorously support or oppose the injection of more science into our educational and research objectives is that science itself is politically divisive. The right-wing of this country, including many in the financial sector, believe that too much influence that comes from science introduces a fifth leg of the governing stool and that it has the potential to completely swamp the politicians who want to remain in control and keep America as a playground for the wealthy. We have met the enemy and it is us!

RFM

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If you have a son or daughter between the ages of nineteen and twenty-nine, looking for work, trying to restart their career or trying to catch on in another location, you have undoubtedly learned first-hand how difficult it is for them to get a job, or if one does find work, how much the jobs being offered these days are dead-end positions, with little chance for advancement and a limited future compared to what one might have experienced in any other recession in memory. Perhaps you are fooled by the numerous job postings for positions that don’t really exist because they have already been filled by an internal candidate. Universities have a lot of these “jobs posted.”  If you find yourself in this position, you have an extra motivation for being outraged at how we have handled this deep recession and how unfairly we have distributed the burden of this costly, wasteful and corrupt financial meltdown. It is an outrage that we have allowed the Wall Street financiers who created this fiscal crisis, to reward themselves with huge bonuses, using the justification that “we deserve it because we are making money again.” The reality is that without the Federal funding they received, none of them would be making money and many of them might not have made their mortgage payments on time.  A huge component of our taxpayer-financed bailout for Wall Street was given to those who were speculating in the market and did not deserve the rescue they received, anymore than we would think of compensating someone who lost their mortgage while betting on the roulette table in Las Vegas. But those are the types that got a lot of our money. I think Naomi Klein referred to this as the biggest class transfer of wealth in history, moving gigantic sums of money from the middle class and poor to the rich.

A gripping story, describing three generations within a family (the Nicholson family in Grafton, Mass) who experienced three different transitions in our economy, including the post-WW II, post-Vietnam and today’s recession, was published a few weeks ago in the New York Times. For the millennial generation of 18-29, the unemployment rate, officially at 14 percent, approaches the level  for that group during the Great Depression. But, now add to that the 23 percent that have stopped looking for work, based on Bureau of Labor statistics, and you come up with a whopping unemployment rate of 37 percent, the highest it has been in more than three decades and within the range of the 1930s. For young adults seeking work today, this is their Great Depression. Adult unemployment in the Great Depression reached about 20% of the work force (though numbers for this period are not as accurate as today’s; some numbers that are higher for unemployment during the depression did not include classifying workers in emergency work, like the temporary work created by Federal jobs programs, etc as being employed).

Among the millennial generation, a college education helps, but the unemployment rate among college-educated young adults is currently at 5.5%, or nearly double what it was on the eve of the Great Recession in 2007. That is the highest level by two percentage points, since the bureau began keeping records in 1994 for those with at least four years of college. A college degree is no longer an insurance policy against prolonged unemployment. We have hollowed out our economy and exported many good paying jobs to China, India, Ireland and many other countries. In contrast to the ease with which an American company can move to another country, in Germany for instance, it is much harder, because any country proposing to move must make certain that they have employee retirement, benefits and alternative job training taken care of and many firms in that country have governing boards that have 50% of membership elected by the employees. Companies faced with these obstacles often give up thinking about relocating to take advantage of cheap labor in another country.

So far there are no signs that things are getting better for any group of workers in our economy, quite independent of their level of education. Indeed, recent economic forecasts suggest that our economy will contract before it expands, as stimulus money runs dry and nothing is available to pick up the slack.  Europe’s decision to introduce an anti-Keynesian fix to their problems, beginning with Greece, is compounding the issues we face in reaching for a more global and balanced economic recovery. So what happened?

A major fault line in our economic recovery strategy was the insufficient level of the stimulus package we engineered to soften the blow of the collapse. If we had invested somewhere between two and three times what we did invest as our stimulus package, we surely would have been seeing more light at the end of the tunnel by now (too much of the stimulus package was in the form of tax breaks, which are often not used or used late). Very likely, we would have started seeing new job growth through a stronger nurturing of the new economy we will require,  as new businesses could have been generated based on the richest resource we have–our scientific and technological skill level, which now lies fallow because of poor investment decisions and too much money spent on propping up banks and corrupt financial institutions. This unfortunate outcome, the lack of a sufficient Keynesian response to our financial collapse, has left us with rich bankers and unemployed young people. Is that an even sensible trade? Where will our economy come from that we need in order to generate good-paying jobs that can fill the void and the reduce the vast unemployment debt we have accumulated as the biggest obstacle for our future? Right now we seem to be content to let the bankers get away with it and allow our young people to suffer. They are paying the real cost of this economic disaster.

The youngest member of the Nicholson family, caught in exactly this circumstance, remains optimistic about his future, a very different outlook compared to those who went through the Great Depression in the 1930s. Let’s hope we can right our ship in sufficient time to reward his optimism and start generating the new economy by investing in the one area where we stand a chance of regaining leadership–the art and science of saving our planet and learning to live within the limitations of  finite planetary resources. Are we that stupid? Have we been out-Foxed? Is corporate power too much for us to resist and prevent us from reshaping our economic foundations? I don’t think so, but these numbers for the unemployment among young people must become more broadly known and right now the traditional media that we rely on for news refuses to get down and dirty in the places we need in order to flush out and reveal the truly suffering class, our youth, who are currently spared from despair by their innate optimism. How much longer can that last? It would be better for all of us if it didn’t last much beyond tomorrow because it is fixable.

As a companion to the worst recession since the Great Depression, we have a political and financial system that got embedded in the army and acquired the art of generating financial bubbles. Those same people that gave us our bubbles, including the dot com and the sub-prime mortgage fiasco, have given us a solution by a massive transfer of wealth that has yet to be recognized as such. Scott Nicholson’s good paying job went into buying a Goldman Sachs executive a new house and a new boat and a twenty five year lease on an expensive boat slip in Long Island.

According to Lou Dubose, editor of The Washington Spectator (highly recommended), here is what the banking industry visited on our economy: $14 trillion in lost household wealth; 8 million jobs gone, not yet returned or even on the horizon (thus the need for brand new ones); 200 community banks closed and more than $14 trillion in bailouts accompanied by a staggering increase in deficit spending needed to keep the economy out of a depression (it just wasn’t enough to give us a good jump start). The credit default swaps that swamped our economy were created by speculators that didn’t actually own the stock in question. What they made was a bet about whether one stock might default and another investor gave them  credit default swap insurance against that happening. Neither investor actually invested in the company per se. By the time credit default-swap trading destroyed the economy, 90 percent of the traders were speculators and many of them were banks. Furthermore, it was the Wall Street bond lawyers who wrote the “Commodities Future Modernization Act” that Phil Gramm held up as the wave for our new future in 2000. With the final regulatory constraints out of the way, over the counter derivatives went from $100 trillion in 2000 to $600 trillion when the economy collapsed in 2008–that was 10 times the GDP of the entire world! Graham was Wall Street’s operative in the Senate, but the bill had strong support from Clinton’s Treasury Secretary (Larry Summers–now in charge of Obama’s National Economic Council). Not surprisingly that bill also had the strong endorsement of Alan Greenspan. The same people who engineered our financial meltdown are now engineering our recovery. Any wonder why we are not seeing anything close to a recovery? Is there any doubt why the recovery that was engineered for us to enjoy is not enjoyable at all? Obama hired the wrong team. We need a new one. For starters, I would recommend Joseph Stiglitz.

RFM

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In the same vote that brought us healthcare delayed, the Senate reconciliation bill brought us a new edge of  progressivism,  delayed far too long in the form of a new Federal program governing student loans for college.  Hidden in the healthcare reconciliation bill passed by the Senate last week, the government took over the entire student loan program, eliminating banks and providing projected savings to the government of about $ 87 billion over a ten-year period.  Obama signed the bill into law yesterday, so that beginning July 1, 100% of college loans will be given and administered by the government. There is a slight improvement in the interest rates, from 8.5 to 7.9% over the bank route, though that does not seem like a giant breakthrough opportunity for debt seekers. But, we did it, we nationalized student loans and the persistence of Fire Dog Lake in promoting this bill may have been central to its passage, by use of their sign-up sheet. The savings from this arrangement will be used to fund more Pell grants and allow them to be indexed to inflation for the first time ever.  A shortage of Pell grants in recent years will be fixed by this bill so that 100% of qualified applicants can receive support. Whereas Pell grants used to cover 75% of college expenses in years past, that number is down to 35%, so pegging the program to inflation should help keep the loan program viable for students. In time, about 8 million students are projected to have their college chances significantly improved and avoid dropping out because of insufficient funds.

This bill sailed through the house, but got blocked in the Senate where all good things come to an end. But the clever tactic of including it in the reconciliation process (part of the savings from the new student loan bill will help pay for the new healthcare insurance bill) dropped it into the can-do box under the radar screen.

Student loans began with the Federal Family Education Loan Program, created in 1965. Under Clinton, the Department of Education began its own direct loan program and most schools would sign up for one vs the other (bank vs Fed), not both. At that time, the Federal Government would set the rates and terms. Once at 20% of all student loans, as our economy went south, the percentage of direct Federal loans has grown, now at about 35% and soon to be 100% of all new student loans. Banks can still give loans, but they will not be secured by the Federal Government and will presumably be prohibitive in cost–so be wary!

Loan repayment schedules have been improved. The new bill will limit payments to 10 percent of discretionary income and forgive balances after 20 years. But these changes only apply to loans taken out by new borrowers on or after July 1, 2014. They are not retroactive.

Public-service workers on the income-based repayment plan can have their remaining balances forgiven after 10 years. That’s the same as the old law.

Now the major challenge in front of us, is to make a new economy that provides jobs for college graduates and doesn’t reduce them to competing for the same jobs that high school graduates get in line for. So far there is too much of that going around, especially for an “advanced” “civilized” “modern” society. That is the mother of all assignments for the weekend. How to build a better economy. Here is my first suggestion: any business that is going to be sold by its owners or downsized by a Private Equity firm, is given first opportunity for purchase to the employees, who with government help to secure loans, can assume ownership and try to run the business as a profitable enterprise. Remember that one problem we have is what I call the “Microsoft Problem.” That is too many corporations trying to emulate Microsoft’s unseemly profit margins and as a result, workers pay has stagnated and they did not financially gain as their company productivity went up: savings from that source went into CEO pay and company profit margins to elevate the value of the stock. The golden parachute appeared and the gold watch went in the toilet.   Worker ownership should be less concerned about profits and more concerned about jobs and products. And, we know where the creativity for the place is typically found–yes in the workers. Remember the high financiers of today’s corporate world, understand a leveraged buyout, but don’t know how to make things. Making things is the key to an industrialized society with equitable wealth distribution. Everybody has a skill. We need to get all those Chrisitan militia people back to work as well. They are getting a little scary out in the hinterland.

RFM

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