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Sunday, June 15, 2014

One out of three isn’t bad when it comes to officials and the economy

Tony Paradiso

This is why I have a deep respect for government. Its understanding of the business community and how the economy works ensures that our nation will remain the world’s dominant economic force.

Consider this prescient perspective: Treasury Secretary Jacob Lew believes we could face a permanent economic downturn if businesses don’t increase investments, we don’t provide better job training and we fail to rebuild our infrastructure. Well, for a government official, one out of three is tantamount to hitting it out of the park. ...

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This is why I have a deep respect for government. Its understanding of the business community and how the economy works ensures that our nation will remain the world’s dominant economic force.

Consider this prescient perspective: Treasury Secretary Jacob Lew believes we could face a permanent economic downturn if businesses don’t increase investments, we don’t provide better job training and we fail to rebuild our infrastructure. Well, for a government official, one out of three is tantamount to hitting it out of the park.

We do need to rebuild our infrastructure to maintain a robust economy, but not for the reason I suspect Lew has in mind. He probably believes the act of rebuilding is a key because it creates jobs. The reality is that those jobs are transient and incapable of creating sustained growth. What’s important is ensuring that the infrastructure itself aids our economic endeavors. And poor roads, rails, shipping and airports can act as economic headwinds.

As for the other criteria, Lew either doesn’t understand how things work or is simply participating in Washington’s favorite
pastime: treating the symptom and not the problem.

Lew calls on businesses to accelerate capital investments.

“American businesses are sitting on historically high levels of cash,” he said. “What we need now is for businesses to come off the sidelines and make investments in our future.”

I have one question for him: Why would they do that? Unlike the government, they aren’t spending other people’s money. Businesses invest when there is a reason to invest. And magnanimously juicing the economy isn’t a valid reason. The sole reason for businesses to invest is to leverage increased economic activity, not to create it.

His comment regarding job training is also off the mark. Training for what jobs – the ones that exist today? Who should be trained – the unemployed? And who exactly is going to perform and fund the training?

We could probably learn a thing or two from Germany’s private-sector job training programs. Germany offers high school graduates the option of a paid apprenticeship. The theoretical education happens in a classroom, the practical training on the job. German companies pay for the training, while the apprentice earns a salary. Usually upon completing the training, the apprentice is hired full time.

Better still, companies don’t focus the training solely on a specific skill. The goal is for the apprentice to understand the whole business. To accomplish this, apprentices often spend time in each department of a company.

The costs aren’t inconsequential. It can range from $25,000-$100,000 for a three-year apprenticeship. For that money, the company gets work out of the apprentice and observes whether the person is a keeper or not. It takes the guesswork out of the hiring process.

Of course, there’s always the risk that the apprentice will bolt after the training. But far more often, as a result of the company’s demonstration of support, the apprentice develops a sense of loyalty.

That isn’t to say we could just transplant the German system. Cultural and systemic differences present challenges. Nonetheless, the concept is worth exploring. But beyond trying something as innovative as an apprentice program, our focus shouldn’t be on where we are today, but where we need to be tomorrow.

I’ve never been a big believer in big government. There are essential services that the government needs to perform – a judicial system, national security, etc. – but much of what the government pokes its nose into benefits little from its involvement.

Education is one such area.

For example, one of Lew’s solutions to the problems inherent in higher education is to reduce tuition costs by shortening the time spent in college.

“We should ask ourselves if earning an undergraduate degree in three years might be a better, more cost-effective option for some students to get their education,” Lew said.

Seriously?

So the problem is that it takes four years and not three to get a degree? Do exceptional students who finish college in three years pay less for it? I didn’t know that.

You know why college costs routinely rise at rates much higher than inflation? Because colleges are run by academics. And academics are the only people who can make the government look like a well-oiled machine.

Someday when you’re bored out of your brain, take a look at the typical administrative overhead at your local college or university. Then ponder the wisdom of providing lifetime job security without consideration for performance. If you still have nothing better to do, consider the wisdom of mandating that professors focus more on getting published than on actually teaching.

I can’t guaranteed you won’t still be bored, but at least you will no longer be confused as to why you need to mortgage your home to send your kid to college.

If the government wanted to serve a truly useful purpose in education, it could do two things: facilitate more vocational training and analyze job trends to nudge our education and training infrastructure toward where the jobs will be five to 10 years down the road and not where they are today.

Tony Paradiso, an author, professor, entrepreneur, and radio and TV commentator, can be reached at tparadiso@tds.net.