In the Nation's Interest
A Walk-Through of CED’s Spring Policy Conference
By Jeffrey Hooke
Vice President & Director of Economic Studies
Committee for Economic Development
CED’s Spring 2014 Policy Conference took place on May 1 and 2 at Washington’s landmark Willard Hotel, and it brought together a fascinating mix of business executives, elected officials, Administration policymakers, and media representatives. Cabinet Secretaries, CEOs, Congressmen and others discussed a broad range of matters affecting CED’s signature issues, including:
• Early Childhood Education
• Affordable Healthcare
• Women and Corporate Board Leadership
• Sustainable Capitalism
• Income Inequality
• Generational Equity and the National Debt
• The 2014 and 2016 Political Landscape (and its likely influence on these issues)
Dozens of CED directors were in attendance, and C-SPAN and CNN televised several panels in order to bring the subjects to a wider audience.
As set forth below, panel participants worked in critical capacities for some of the country’s best known institutions, including:
Black Enterprise magazine
Cone Health (hospital system)
Cushman & Wakefield
McKinsey & Co.
Chair, Council of Economic Advisors
Secretary, Department of Health and Human Services
United States Congress, Reps. Michael Burgess (R-TX) and Jim Cooper (D-TN)
The Atlantic magazine
The Cook Political report
The Economist magazine
The Can Kicks Back (generational equity group)
Catherine B. Reynolds Foundation
New America Foundation
Early Childhood Education
After an introductory luncheon on Thursday, May 1, 2014, the conference “kicked off” with a panel on the “Unfinished Business of Early Childhood Education.” CED has been at the business community’s forefront, for many years, in encouraging government, community groups and the for-profit sector to pay close attention to the benefits of early childhood education. To most, this mandate generally means pre-K youngsters (ages 2-4), but a broader view includes also both kindergarten to third grade (ages 5-8) and the very early years and even pre-natal care As the panelists pointed out, children – particularly from disadvantaged backgrounds – are in urgent need of educational resources, since many lack the familial support of wealthier kids. And, as the scientific literature shows, these resources have to be applied early in order to stave off permanent impairment in the academic progress of children as they get older.
“Day care” is not a synonym for “early education” because most day care facilities lack the proper programs to foster toddlers’ intellectual development. Early education is not strictly “book learning.” As the participants noted, a key part of “non-book” early education is setting a child up so that he (or she) is receptive to acquiring new skills, confronting new challenges and working with others – attributes that play a huge role in promoting success in the 1-3 school years and thereafter.
Studies show that investment in early childhood education provides an economic return of 7:1, a terrific IRR in any situation, but the United States still lags other developed countries in advancing this benefit.
Affordable Health Care
The Affordable Health Care Act (ACA) – and its future ramifications for consumers, businesses, insurers and providers – was the subject of an interesting discussion Multiple constituencies were represented on the panel, such as Aetna and WellPoint (insurers), Cone Health (hospital chain, provider), Merck (pharmaceuticals) and National Business Group on Health (association of businesses). Topics ranged from (i) the ACA’s likely efficacy in promoting preventive care, to (ii) the possible cost implications of ACA, and to (iii) the chances of the law being substantially amended for the purpose of enhancing its acceptance and/or efficiency.
Discussants acknowledged the need for more market-based forces within the law (a point raised by CED some years ago), the heightened probability of further streamlining of ACA’s processes, and the expectation that businesses would soon recognize that the law’s repeal is unlikely.
Women and Corporate Board Leadership
For a number of years, business researchers have observed that women’s representation on the boards of publicly traded corporations (17% of seats) is proportionately far less than their representation in the executive ranks or among recent attendees or graduates of higher education. Despite pressure from women’s business groups and other interested parties, the status quo of male-dominated public boards continues, and the panel reviewed reasons for this situation as well as possible solutions to the problem. A recent empirical study concluded that more women on a firm’s board of directors improves profits, in part by imparting a diversity of thought and opinion to the board’s deliberations However, the study’s conclusions are neither widely disseminated nor broadly accepted by boards at this time.
Publicly traded boards have a habit of ‘falling into the trap” of selecting someone who fits the following three parameters:
• Individuals who are presently CEO’s;
• Individuals who already serve on a public company board; and
• Individuals who know someone who sits on the board that is lookiing for a new member.
No one on the board wants to disagree with his fellow members on these time-honored qualifications, and the search firms helping boards find candidates are reluctant to push for changes totally on their own. So, a woman who aspires to become a board member faces the classic “chicken and egg” problem. She can’t receive consideration as a board member until (i) she is already on a public company board; or (ii) she is a public company CEO (which is a small percent of the CEO population, and far less numerous than board seats themselves).
The panel thought that boards, especially within the nominating committee, had to be more flexible on qualifications and had to be prepared to take what are likely to be minimal risks in advancing diversity at the board level. Furthermore, to expand the female candidate base, women CEOs should consider a greater mentoring – indeed, a sponsoring – role for other female managers, and male CEOs should do the same, or face the possibility that their organizations could lose valuable female managers who feel constrained in achieving recognition.
Despite the fact that the U.S. free market system provides a level of material prosperity that is envied throughout the world, there is a growing sense that the U.S. economy is slowing and that income (and wealth) disparity among Americans is rapidly rising. As the panelists noted, the media mentions these points with greater frequency, the Obama Administration raises concerns, and a dense economics book (by an obscure French professor) on the subject is now a New York Times bestseller.
Regarding the economy’s progress, the corporate executives on the dais indicated that enhanced employment levels for the U.S. lower-and-middle-income population are related to employees getting the education (and skill set) that matches with employer needs. Nonetheless, the “disconnect” between the education system and private industry persists, and many Americans lack the right tools, even after completing K-12, or even college On-the-job training also is a priority for industry to keep workers’ skills up-to-date in a globally competitive economy, in which domestic companies often have the option of offshore outsourcing of manufacturing and service positions However, many U.S. firms appear to be holding training budgets steady, when a more practical decision might be to raise the resources dedicated to training.
On the subject of U.S. employment and global economic growth trends, the panel debated whether the recent results reflected (i) deep-set structural problems within the United States, or (ii) normal reactions to the deep cyclical recession started in 2007. On a related topic, the hesitancy of U.S.-based firms to increase domestic investment (compared to previous recessions) was observed by the panel, and participants noted the statistical differences. Higher business investment boosts employment, but the panel suggested that the capital spending/R&D lag in this recession might be ascribed to greater uncertainty among business leaders in fathoming future government objectives regarding taxes, regulation, and monetary policy.
The Honorable Kathleen Sebelius, Secretary of Health and Human Services
The Obama Administration Cabinet member gave a spirited talk on early childhood education, one of CED’s key initiatives. She stressed that providing young children with a solid foundation of educational skills and ambitions was a critical element in fostering their achievement in later life. She noted the Administration’s goals in this respect, and she referred to the Birth to Kindergarten Agenda that has been an administration objective. Local governments and communities can also make contributions. Business, as noted earlier in the conference, can play a constructive role as well, by dedicating resources to education and publicizing its importance, according to the Secretary.
Boomers, Millennials and the Looming Generational Slowdown
Millennials, also known as Generation Y, are considered the group of individuals born from the early 1980s to the early 2000s (Baby Boomers, in contrast, are birth years, 1946-1964, and Generation Xers from the early 1960s to the early 1980s). Social Security and Medicare are two of our largest social programs, and citizens pay into both systems for most of their working lives. Although sometimes trumpeted as a saving program, Social Security functions essentially as a pay-as-you-go operation, and a few Millennials note, quite rightly, that Baby Boomers are taking more out of the systems than they paid in. This situation contributes to a larger national debt, and to uneasiness among Millennials that they will receive the same Social Security payments as their parents. Indeed, close to half of Millennials polled thought Social Security will be unavailable to them when they reach retirement age.
The panelists pointed out that some Millennials acknowledge the inequity, but larger groups of them have yet to galvanize into a political movement that could push for either a renovation of these programs or a reduction of federal debt. Many Millennials are too tied up with work to get politically involved, or pay little attention to retirement-type issues. The presence of Millennials at the voting booth (around 21% participation) is far less than Baby Boomers, and elected leaders thus face little pressure to respond to Millennial concerns on “bread and butter” matters.
Insiders Look at the Political Campaign Landscape
Fans of Sunday morning talk shows were in for a treat, as four “inside Washington” journalists handicapped the upcoming 2014 mid-term elections and the more distant 2016 Presidential race. The 2014 consensus was the Republicans holding the House and gaining a slim majority in the Senate. Contributing factors were:
• Lower mid-term turnout of young Democratic supporters;
• More Democratic Senate seats being “up for grabs’ than Republican seats; and
• Lingering voter dissatisfaction with Obamacare (ACA), even as many agree with specific provisions in the law.
The 2016 Presidential race should favor Democrats, according to the panel. Trending demographics help the party and work against the GOP in 2016. The panelists discussed the broad tactical plans of both parties, and they handicapped the likely primary entrants. Hillary Clinton was the obvious front-runner on the Democratic side, but two of the panelists suggested she was not yet 100 percent decided on jumping in. Jeb Bush polled highest among Republicans, but the journalists projected his decision to enter at just a 30 percent chance. Should Secretary Clinton not run, the Democrats have a sizable list of candidates, which the panel reviewed in “sound bite” fashion.
Jason Furman, Chairman, Council of Economic Advisors
Dr. Furman presented a thorough exposition of the Council’s considerations on U.S. income inequality. First brought to prominence by the Occupy Wall Street movement, the notion of rising income inequality is gaining more steam in mainstream circles, and the Council has studied closely research in the field, including the work of Thomas Piketty, the economist who wrote the aforementioned New York Times bestseller. The Council’s investigation confirms that U.S. income inequality is on the rise and it poses a number of reasons for the phenomenon.
Reversing structural causes for the inequality could take substantial time, but there are mechanisms to take aim at the problem in the intermediate term, according to Dr. Furman, such as increasing the minimum wage and boosting the Earned Income Tax Credit, both of which support people who have jobs that pay low wages. Dr. Furman took a few questions from the audience, and his answers showed the depth of the Council’s interest in this area.