#Sequestration and all the things it does not accomplish

It appears that sequestration will happen. Our politicians have made the decision to test the markets and the voters, and simply walk away. Serious negotiations should have concluded a year ago, but were swept under the rug by electioneering on both sides.

Obviously, the agencies are working very hard to take make headlines of these cuts. Cancelled carrier deployment, long lines at airports... let the drama begin. One might think that responsible administrators would try to work with the cuts and minimize ill effects, but no! This is the theater of the day.

Because sequestration will not occur within the context of an overarching fiscal plan, the cuts are disruptive by design- i.e. there is no strategy to mitigate ill effects. Moreover, the ten year program of cuts can be stopped or even reversed at any moment, so there is no real commitment to rein in spending. Sequestration is not a real strategy to cut government spending; it's designed to be a political scare tactic and nothing more.

The cuts that really need to happen will not happen. Sequestration will not dial down production of hyper-expensive fighters; it won't reduce agricultural subsidies; it won't take one tentative bite out of the fat at the Department of Education and other agencies that have run off the rails for decades; it won't fight the rising cost of health care; and it certainly won't set our entitlement spending on a sustainable path. 

Sequestration is not some principled Coolidge-era shift of economy from public to private; there's nothing being shifted at all and there is no strategy on either side to accomplish that. Instead we'll have just small, disruptive cuts designed for partisan headlines. And those cuts truly add up to peanuts in terms of total federal spending.

Imperfect though it may be, the Simpson-Bowles plan has been on the table for years and could easily lead us out of this silliness, with responsible cuts of significant magnitude.

I guess I just have to hope that the next election is as anti-incumbent as I dream.

P.S. This informative blog post by Rick Newman shows, in good detail, what sequestration does and does not do:

Rick Newman / US News & World Report : Charts reveal likely sequestration effects

#UVa CS Cuts Reveal Lack of Science & Engineering Strategy

The University of Virginia engineering school just announced that it will restrict admissions to its Computer Science (CS) majors and minors programs. This being done not to improve selectivity... but because the engineering schools lacks the faculty to deliver the courses:

http://www.cavalierdaily.com/article/2013/02/computer-science-department-reduces-majors-minors

Sadly, the faculty declines were easily forseeable; I and many other faculty raised concerns many years ago. And the response to Commonwealth cutbacks, post 2008, was simply to pile on more students. There was no commensurate increase in investment in faculty.

These and related developments at UVa have been painful to watch. The University truly  has ~zero strategy within the science and engineering departments to address declines in faculty numbers, salaries, and morale. Most galling, UVa leaders appear complacent due to favorable undergrad rankings... but those are strongly backward-looking and give little indication of where an institution is headed.

The great irony, of course, is that CS is a very marketable degree... it delivers one of the very highest returns on educational investment in all of STEM:

http://www.forbes.com/sites/su...

UVa should take a hard look at what UConn is doing, with its strategic faculty expansion:

http://today.uconn.edu/blog/20...

And then there is Connecticut's $1.5 Billion commitment to STEM:

https://www.ctstemjobs.org/blo...

...which, in light of the recent UVA Board fracas, begs the obvious question: would it even be possible for UVa and the State to work together toward such an important investment?

Unfortunately, UVa's CS department is certainly not alone in struggling with insufficient faculty resources. The Chemical Engineering department and several others are barely able to support student needs, and the undergraduate thesis program has been greatly diluted in recent years due to declining faculty resource and involvement.

On the Subject of Financial Transaction Taxes #FTTs to Fund Education

Recently, there has been some discussion in higher ed circles about applying financial transaction taxes (FTTs) to stock trades and using the proceeds to fund education.

I dislike this idea for many reasons.

It is apparent that FTTs tend to reduce liquidity and force investors into fewer but larger and more bundled trades, which of course tends to increase volatility. This is quite the opposite of what original proponents thought FTTs might do. And in a marketplace as active as that in the US, investors will simply clear their trades elsewhere. Like maybe on an offshore oil platform...

We need to bear in mind that the main reason why people are even considering FTTs in the U.S. right now is because of the rise of concerns with regard to high frequency trading (HFT). The simple(istic) idea is that the taxes could function as a sort of knob to control trading frequency. But the real culprit for the flash crashes is algorithmic trading, not HFT per se, and there is a big difference. Moreover, there should be more focus on 'circuit breaker' approaches to prevent flash crashes. In any case, this discussion is still very active and the case is certainly not closed i.e. there is no consensus that FTTs would actually improve the situation.  They could actually make it worse by amplifying volatility.

All that aside, what most annoys me about this proposal is that it not only raises big technical concerns but also appears to violate some basic principles: 

(1) We desperately need a much simpler tax code that is far easier to administer. The current code is hideously complex- so much so that the amount of tax you can avoid is proportional to how many lawyers and accountants you can afford. The code is so complex that most of us don't even know what our effective tax rates are. We need a much more efficient tax code, and this proposal would be a big misstep in the opposite direction. And note, it wouldn't have any effect at all on the largest investors who move the most capital- they have many ways around it. If the cost is significant, I guarantee that large investors will simply clear their trades outside US jurisdiction. It's the small investor who would be disproportionately affected. 

(2) I really don't like the idea of having tax sourced and revenue spent in two widely different compartments of the economy. For example, what might makes sense is to have a gas tax that generates revenue to fund road maintenance and better technology to reduce fuel consumption and pollution. That would make sense, and it might even makes sense to opponents of higher taxes... once they are confronted with declining road quality. In other words, we should try to keep costs and consequences as close together as possible, so that it's clearer to voters that they get what they pay for. Ah, transparency! What doesn't make sense is to link two wildly different things e.g. the volatile equities marketplace... and education. The latter is all about low-risk, ultra-stable, predictable, long-term (lifetime) investment. There is an inconsistency of logic. 

(3) The idea that politicians might try to increase funding for something -even education-without actually declaring that to be their intention is totally unacceptable to me. If you want to increase funding for higher ed then say so... transparently. Hiding it behind some abstract tax that is easy for the wealthiest investors to evade and which can have consequences that most people don't even understand, that is irresponsible politics. It's deliberately obfuscatory politics. This is the same nonsense that disturbed me with regard to proposals to fund education via lottery revenue. Frankly, I could care less whether we have lotteries or not- it's a fools tax that I'll never pay anyway. But if a competent politician looked me in the eye and articulated why I need to dig a bit deeper into my pockets to help educate our young people, well then I would support a higher tax. And, like most Americans, I am very bothered that no politicians are stepping up to the plate to articulate the need for better policy and more investment in our kids' preparation.

Open Letter to Virginia Delegates RE: #UVa Rector #Dragas

Here is my open letter to the Members of the Appointments Subcommittee of the Virginia House of Delegates.

~~

Dear Honorable Appointments Subcommittee Members:

Tomorrow morning, you will be visited by several of the University of Virginia's brightest and most idealistic students. They will arrive with much weight on their shoulders, to address you with regard to their concept of Honor at the University. Inspired by this concept, the students will sincerely represent the case against the reappointment of Rector Helen Dragas. I implore you to listen carefully to their comments and study their intentions.

While a faculty member at the University, I saw firsthand the severe consequences of the actions orchestrated by Rector Dragas last year. Within mere hours, the University's reputation and special relationship with its Alumni were dealt a severe blow. I have never witnessed such capricious and damaging executive misjudgment.

Frankly, I believe that I understand the Rector's original intent with regard to seeking leadership more dynamic than it has enjoyed in past decades. However, Ms. Dragas methods were injurious and remain a constant and festering insult to the entire community of the University. Truly, Ms. Dragas' only impressive accomplishment has been her ability to coalesce opposition to herself... among a broad community composed of many diverse interests. And yet, Ms. Dragas remains, somehow unaware or unimpressed that she has become the most divisive character in the University's entire history. One wonders what competent executive would let this happen to the organization they lead.

At this moment, we are faced with the disheartening possibility that Ms. Dragas' managerial incompetence and disregard for community consensus will be overlooked because she has certain financial ties to various interests on both sides of the political aisle.

Please consider what the University needs most at this juncture, as financial pressures continue to rise on our students and their families. These are difficult times for higher education, for the University, and for many families who sincerely believe in the value of an excellent college education. To move forward on its path toward affordable excellence in the Commonwealth, the University very much needs a solid relationship with *you* in Richmond. Clearly, Ms. Dragas is not the right person to mediate that relationship: she cannot capably represent your concerns to the University, nor the University's concerns to you. Ms. Dragas simply isn't the right person to mediate that important conversation.

I ask that you listen very carefully to the students tomorrow. You will identify in their voices the idealism that brought you to Richmond to work for a better future for your constituencies. Please respect the ideals that they express, and recognize within yourselves those similar ideals. And please consider the egregious affront to those ideals that Ms. Dragas has come to represent.

Most Sincerely,

Keith Williams
Visiting Professor
University of Virginia

Higher Ed's Administrative Cost Problem

American higher ed continues to struggle with questions about what amount of administration is optimal. Obviously, this issue is front and center because headlines highlighting the problems of escalating tuition and poor job prospects continue to appear. Many faculty feel that administrative cost is to blame. Are they right?

Recently, the Chronicle published a little article discussing the scale of administration, relative to faculty and enrollment size:

Chronicle: How Many Administrators are Too Many?

Here are my stray thoughts on this matter. As usual, I tend to see this as a much bigger-picture issue than simply deciding what number of administrators is the right number.

Inevitably, the market for any product or service contracts and then expands and then contracts etc... and so the optimal administrative structure is elastic and adaptive. Outside of academia, excessive administrative burden is addressed quite directly and ruthlessly: management positions are consolidated, and redundant or outmoded positions go away. What if academia did that?

An adaptive administrative structure is apparently rather foreign to academic institutions that were configured around very long-term (~30 yr), ultra-stable, conservative investments. Academia wasn't designed to grow rapidly... in stark contrast to a typical American company that pursues several percent growth, year-over-year. So many of the problems we see in higher ed stem from this issue: we saw very large spike in enrollment beginning in the 90s, facilitated by artificially low loan rates, and higher ed simply wasn't built to accommodate the influx. Higher ed wasn't designed to scale rapidly nor to respond to the bubbles we've seen in the employment market e.g. in the tech sector. And various politicians have naively assumed that we can simply drop more and more students onto our campuses and assume that their tuition would pay for the needed infrastructure and all would be well. If only it were so simple!

There are very large burdens associated with growing our schools. To borrow some manufacturing lingo, we've had to do much more than simply expand: we've had to retool. Entire degree programs have vanished or been supplanted by entirely new fields of study. The academic mission has greatly expanded and (in the view of many) defocused. And the upfront infrastructure cost per added student is apparently much worse than it was, say, in the 60s. For every student that we add to the rolls today, we need to add a *lot* more infrastructure and administration. 

Today's academic hierarchies are the opposite of elastic and adaptive. Obviously, the hierarchy is now much more "I" shaped than "A" shaped: it has large steps of responsibility and salary as you go from adjuncts to junior TT faculty through all the ranks to senior leadership. E.g. at my institution, there are junior TT faculty hired in the ~$60k range, and then there are Deans making 5x that, and a President making more than 10x that. That's what I mean by "I" shaped. And this "I" structure isn't only about salary, of course; it is about the responsibility that these individuals carry. A typical $60k junior TT faculty member is probably expected to bring in ~$100k or so per year, if anything; meanwhile, the $400k administrative had better bring in many tens of millions or (s)he is out. And there is a vanishing in-between.

All of this has a very negative impact on academia's ability to adapt and reconfigure. In a flatter hierarchy, there is the possibility for the more adaptive people to migrate between adjacent ranks and thus help the whole organization adapt much more fluidly to market conditions. So, for example, if there is a decrease in demand for law degrees, then that part of the structure can contract and those individuals can go support other areas. I don't think we have nearly enough of that adaptive capability in academia at present... at least not in our administrative hierarchies.

The obvious paradox is that academia needs to figure out how to become more adaptive to short-term trends, while also preserving the long-term leadership and vision. This is a very difficult problem, but there are some good solutions, and perhaps academics could learn a lot from the millions of business models that have been explored by the markets over the years. 

I am *NOT* saying that we necessarily need to become Zynga and selling credits online, or start fracking in our campuses or something like that! We simply need to look at how to make the whole organization a more adaptive and versatile, while also protecting the most valuable aspects of the long-term academic investment. Perhaps that means outsourcing contract and finance management or such; or maybe we simply need to look at the most rapidly inflating expenses and address those with minor structural changes. In any case, it's time for academia to put *everything* on the table except quality of instruction. And if this isn't done from within academia, then it will be done by politicians. And then there is no guarantee that the result will be something that upholds the long-term value of a higher education.

Dumb Platinum #Supercoin Idea Just Won't Go Away

There is an amusing idea going around that the Treasury could mint a trillion dollar platinum supercoin and use it to exceed the debt ceiling, thus effectively sidestepping Congress and any constitutional concerns about the ability to exceed the ceiling.

I initially thought the idea was a wry commentary on the absurdity of the political problems surrounding the debt ceiling. But no! Some people actually take this **** seriously...

Can a $1 trillion coin end debt ceiling crisis?

Since our media thinks it appropriate to propagate this nonsense, I'll just interject that the coal standard is more sensible. At least then we could prop up the value of the currency by producing energy... and a consumable currency has the advantage that it makes people want to spend it! Hey, if you're really worried about inflation....

I am kidding.

But seriously... the notion that the Treasury could perform this legal maneuver without massive repercussions is laughable. We might as well sprinkle fairy dust across the land or send PDFs of million dollar bills for people to print at home.

Let's be clear: we don't need an obscure legal trick to permit Treasury to go over the ceiling. The ceiling can already be exceeded, and the only consequence is that the matter might be litigated in Congress... a very lengthy process that might result in a slap on the wrist. What, you think it'd be as bad as the Nixon shock?! Big deal.

These legalities of what Treasury should or shouldn't do in the short term don't matter one iota. What really matters is global confidence in our bond system. Those who invest in our bonds need to know that we have the basic mathematical competence to live within our means. And doing that is really not complicated: the Simpson-Bowles plan is a realistic, sensible framework. All we need now is national leadership which cares more for our children than themselves. We don't need fairy dust or platinum coins or clever legal tricks... we need back-to-basics common sense and responsibility.

Academic R&D and the #FiscalCliff

The Chronicle of Higher Education recently published the comments of Michael McRobbie, President of the (R&D strong) Indiana University, on the vulnerability of academic research to the fiscal whim of Washington. The article and discussion may be followed here:

The Multibillion-Dollar Threat to Research Universities

Indeed, it's not a pretty picture for academic R&D, and we were already in a rut, well before this confluence of "fiscal cliff" events formed.

Nevertheless, there are several strategic initiatives that research universities can pursue, to ensure that they recover from what events may unfold over the coming months and years:

First, universities must diversify their sources of research funding. As long as I have been involved in academic research, faculty around me have relied almost exclusively on NSF, NIH, DOE, DoD, and the like. All of those sources are tied together by the short-sighted whim of Washington, and it is high time that academics who do R&D start thinking about how to supplement those funds and assist faculty with development of other resources. (And to make matters worse, I find that many junior faculty don't even know how to pursue funds from the traditional sources)

Second, academia needs to become a lot more engaged in the process of electing government leadership and finding strong advocates for research support. Academics generally regard lobbying as a negative thing, but... the time has come to get better plugged into the process.

Third, I worry very much about the junior faculty who've been through the rough patch in funding and may see more of the same, or worse. When I was a junior faculty member, there was *zero* adjustment made to tenure review standards despite the fact that funding probability was single-digit during those years (and hasn't really recovered since then). If the funding picture becomes particularly bleak then, you know what, maybe it's time to weight the teaching of our junior faculty just a wee bit more than how much funding they bring in. Mark my words, schools that don't adapt to the funding climate will lose a lot of talented people. That is short-sighted.

Fourth, on the topic of finding funds for research, I believe that our universities need to focus a lot more on center-level research funds, rather than the usual single-PI grants. There are many reasons for this but one of the most important, from my perspective, is that it's just become far too difficult for junior faculty to land the really prestigious career awards etc. And even if they do, they are generally receiving a lot less funding than they would have a few decades ago.

I have many more ideas about this but I confess I am frustrated by how little our academic administrations listen to the ideas. the usual assumption is that we should simply continue with business as usual, even as Rome burns.