What is ahead for the American economy? Martin Feldstein, president emeritus of the National Bureau of Economic Research and George F. Baker Professor of Economics at Harvard University, visited the University of Maryland’s Robert H. Smith School of Business last week to address this question. In his comments to faculty and students, Feldstein stressed that today’s slow growth rate would continue into 2014 but that the long-term prospects for the U.S. are bright, so long as the large and growing national debt is curtailed.
From 1982 through 1984, Feldstein was chairman of the Council of Economic Advisers and President Reagan’s chief economic adviser. More recently, in 2009, President Obama appointed him to be a member of the President’s Economic Recovery Advisory Board. Feldstein was on campus last week as part of the school’s Center for Financial Policy’s Distinguished Speaker Series, co-sponsored by the undergraduate finance fellows program.
Dr. David Kass, Tyser Teaching Fellow in the finance department, said: "It was a great honor that Professor Marty Feldstein accepted my invitation to speak at the Smith School ... The health economics evening seminars that he led when I was a doctoral student at Harvard were excellent and well attended, with frequent steak dinners at the Harvard Faculty Club providing food for thought. They helped give me a strong foundation not only for my dissertation, but also for my subsequent research in health economics.”
Speaking to a full house in the Van Munching Hall’s Howard Frank Auditorium, Feldstein laid out his prescription for the U.S. economy:
Although Feldstein felt that the stimulus of 2009 fell short of what was ultimately needed to provide a robust economic recovery, he pointed to fundamental, structural strengths in the American economy that will underpin future growth: an entrepreneurial culture, developed labor markets, a growing population, natural resources, and world-class research and development. Currently, weak economic growth (with the exception of housing), a low savings rate, and a slow increase in employment mean that the slump will continue into 2014.
Feldstein prescribed a healthy dose of re-structuring in the short and long term. In the short term, he advocated for the lowering of tax rates and the reduction of some tax expenditures in order to induce a short-term stimulus. In the long term, Feldstein suggested the goal should be to reduce or keep level the debt-to-GDP ratio, which is currently projected to increase.
Following the lecture, faculty and students had the opportunity to ask Feldstein questions. Topics ranged from the U.S.’s status as the reserve currency of the world and the role of small business in the American economy, to emerging market predictions including the impact of China’s relaxing of the one-child policy.
“It was an enlightening and thoughtful presentation and I’m glad I had the opportunity to hear him speak in person,” said Nadine Payne, MBA Candidate 2015.
The Smith School’s Center for Financial Policy provides research and education on financial policy issues for business, government and academia. For more information, visit www.rhsmith.umd.edu/cfp.
The Smith Finance Fellows programs are comprised of seven select, one year experiences for finance majors. More information is available online.