Only time will tell — about a year, actually — if there was a slam-dunk victory at the Economic Symposium: State of the Economy & Outlook for 2015 held at Aquinas College.
The event last week pitted economists from four faith-based colleges in the region against each other — sort of.
A representative from Lighthouse Group insurance, which sponsored the third annual event, joked that it has become an academic version of the annual Aquinas/Calvin/Cornerstone/Hope College Hall of Fame Classic basketball tournament.
However, Jeff Beyer of Lighthouse noted that the economy, unlike basketball, really touches everyone. He gave an example: The historic low interest rates are not good for companies like Lighthouse that must hold cash reserves.
Brad Stamm, professor of economics and chair of the business division at Cornerstone University, began the presentations with a sarcastic joke that he was “disappointed” he was not able to give a more discouraging view of the economy. Stamm said GDP grew at a rate of 3.5 percent in the last quarter and stocks are at “an all time high.” Economic growth is reducing the U.S. deficit to the lowest it has been since 2008, he said, and consumer confidence is “at a seven-year high,” which he noted was not true last year.
“Everyone in this room is $8,000 wealthier than last year,” said Stamm.
Noting that some European economies are still struggling, Stamm indicated they followed the lead of the Obama administration in trying to prop up their economies through spending. He said they are following “the Yellow Brick Road, which is paved with stimulus dollars.”
Stamm’s 2015 prediction was the same he gave for 2014: GDP would grow at a rate of 2.5 percent, held back by economic problems in those European countries.
He said there is a devaluation of the U.S. “human capital” due to the growing per capita decline of religious beliefs and church attendance, especially among young people.
Adel Abadeer, professor of economics at Calvin College and an expert in institutional, cultural and development economics, noted that critics of President Obama blame him for government spending that increased the deficit, but Abadeer said that is “the heavy medicine the U.S. economy needed at the time.”
Now the GDP is growing at a modest 2 percent to 3 percent, said Abadeer, and while the unemployment rate has declined recently, he said there was barely an increase in actual employment. About 1.5 million jobs were lost from 2008 through 2014, and he noted that the “new normal” for unemployment in the U.S. is 6 percent — although it once was 4 percent.
Americans are lucky interest rates are so low, said Abadeer, but he is concerned about what will happen when interest rates increase.
Abadeer said he sees the GDP increasing at a rate of 2.5 percent to 3 percent in 2015, mostly due to the impact of the boom in oil production within the country.
Todd Yarbrough, professor of economics at Aquinas College and an applied microeconomist with an emphasis on state and local government, focused many of his comments on the “historic” low rate of personal income taxation in the U.S., which he said has significantly reduced revenue. He said that drop in tax revenue is largely to blame for the huge deficits, while at the same time, there has been more government spending.
Yarbrough said the largest tax reductions have been for the wealthiest Americans, noting that it began in the 1960s. Later in the program, Stamm suggested Yarbrough was proposing a tax increase on the middle class, and “any suggestion of raising taxes is untimely.”
Yarbrough replied he was “talking mainly about the top rate” of income tax. He also noted that California has raised income taxes and now has a government surplus and a growing economy.
John Lunn, professor of economics at Hope and an expert in microeconomics and economic theory, said Americans “want lots of services but we don’t want to pay for them.”
One of the long-term issues affecting the economy, he said, is that real GDP growth per capita has fallen. He quoted another economist who believes it is not likely the U.S. will return to the GDP per capita growth rate of the 1980s. The level of education of American workers stopped increasing around 2000, he said, and some believe these negative factors may not improve for at least 20 years.
Lunn identified himself as a member of the baby boomer generation, which is entering retirement. He said one economic factor that is not at all speculative is the demographics in America: Life expectancy is increasing and the percentage of the population 65 or over is the highest it has ever been. The trend we face as a nation, he said, is “fewer workers to support (through their taxes) more retirees,” who will be drawing Social Security and using Medicare.
The demographic reality is a difficult thing to adjust to, said Lunn, and he noted there are also a lot of problems to be addressed in the public pension liabilities in America. Public pensions are not subject to the same rules and regulations as pensions in the private sector, he said, and there are probably “a number of public pension funds in trouble that, on paper, don’t appear so now.”
Lunn said American policy is to focus only on the immediate short-term problems in the economy.
“Longer-term solutions to problems is not something we do very well here,” he said.
In a question and answer session at the end, Yarbrough responded to a question about trickledown economics by noting there has also been a “striking stagnation in wages” even as GDP was growing. He said he believes that cutting taxes to grow the economy has been “disproven.”