Ave Maria Business

What’s up with the economy? What can we do about it? Part 3

The root cause of the debt problem: lack of saving

To give future generations the standard of living we enjoy, we need to save (and productively invest) nearly a third of GDP.  Today we save half as much.  Families save very little, and have been saving less and less for 30 years.  Government saves very little – it actually dissaves a lot.  The specter of bankruptcy for Social Security and Medicare are a fruit of this national lack of prudence.  Technical fixes won’t be more than more-or-less temporary patches unless the country, as a whole, saves more.

Government can begin by giving good example.  Not all spending is equal.  Not all government spending is bad.  Not all government spending is good.  Some spending is more valuable than other spending.  Spending to improve productivity – on education or infrastructure – is more valuable than other kinds.  We need to be courageous and generous.  Current beneficiaries of government generosity need to look hard in the mirror and perhaps accept smaller benefits.

But families can’t assume that they can blame Washington.  A family that doesn’t save 10% of its income is not being responsible towards itself or towards the country.  We need to learn to live more sober, simple, detached lives – or we’ll force our grandchildren to live lives of penury.

Working with others, working for others

Suppose I work for one day in exchange for a given wage.  Insofar as this transaction is viewed as just an economic transaction, it can be judged as an exchange of labor for pay according to which there is the good of efficiency in my work and the good of profit for the owner.  However, these goods are not absolute goods.  The actors involved, the owner and myself, are not ultimately ordered to economic ends but to the more universal good of human flourishing.  As such, these subordinate goods must always be conducive toward the higher common good of the state or community of which we are parts. This understanding of the common good helps to see also that labor and economic transactions are not opposed to nor even neutral towards the nature of the human person.  That man is ordered to a common good and called to freely direct himself in this way is a function of his spiritual nature (intellect and will), and it is this which enables him to transcend himself in love.  Man in virtue of his intellect is able to see another as another self and thereby to direct his action to the good of the other simply.  This is what JPII so often refers to as the “gift of self.”   Thus, at the very root of the economic transaction there is more than the exchange of labor and wages.  There is, in fact, the value of the service itself by which the laborer is given the opportunity to work towards the good of the owner, the owner is given the opportunity to provide a good for the worker, and both receive the opportunity to act for the common good of the community.

POST #2

Career Opportunities in Accounting

Did you ever stop to think about the Boston Red Sox baseball team as a business?  If you did or did not, they are and require all of the same business support as any other company.  All MLB, NFL, NHL, NBA, etc. teams are businesses and they all have accountants.  The varied job opportunities opened to accountants may be summarized into three major areas: public accounting, private accounting, and government and not-for profit accounting.

 

Public Accounting

Public accounting firms provide auditing, tax, accounting, and consulting services to businesses and individuals. These firms range in size from single practitioner to large international firms with hundreds of offices worldwide and thousands of professionals. Accountants in these firms work with a variety of companies and gain wide exposure and experience. At the same time, the job often involves pressure, travel, and seven-day workweeks.

            Areas Within Public Accounting

CPA firms generally offer the following types of services: auditing, income taxes, accounting and review, and consulting services.

            Auditing

Auditing is the most important function of the certified public accountant. International CPA firms and many national CPA firms devote a large percentage of their time and resources to financial statement auditing. Auditing fees account for 45-50% of their total revenues.

            Taxes

CPA firms perform many tax services for their individual and corporate clients, including preparation and review of tax returns, tax planning (the legitimate avoidance or deferral of taxes), and tax litigation (appearance before a court or an administrative body on behalf of their clients).  Specializing in income tax preparation and planning is a very viable career path since taxation has such a pervasive effect on business decisions and on all aspects of our personal as well as professional life. If you want to work in the area of taxation, you may want to earn the E. A. (Enrolled Agent) designation or a master’s degree in taxation.

            Accounting and Review Services

CPA firms, both large and small, perform a variety of accounting services for their clients. These services range from maintaining accounting records to performing compilations, that is preparing financial statements without providing any assurance on them. A form of limited assurance can be provided by a “review” which is more limited in scope than a full-blown financial statement audit.

            Consulting Services

The fastest growing area for CPA firms is management consulting services, formally known as management advisory services. These services can cover such wide-ranging fields as computer systems, management information systems, marketing, executive recruiting, personal financial planning, and budgeting techniques, etc.

 

 

Private Industry Accounting

If an accounting graduate does not want to go into public accounting, he can go into management and private industry accounting. Unlike public accounting, private industry accounting has no rigid minimum requirement. In private industry accounting, you work for one company and gain in-depth knowledge and experience in the accounting for that company. You prepare the financial information necessary to help management plan and control company activities. Thus, besides preparing financial statements for external reporting, you will also be working on many internal accounting reports, such as budgets and cost analyses, for the use of management.

 

Government & Not-For-Profit Accounting

The goal of the accounting department in a typical government agency is to function within the budgetary constraints mandated by the legislature. Government accountants also monitor the appropriation of funds and awarding of contracts to private agencies that must follow governmental regulations.

            Federal, State, and Local Government Agencies

More than 100,000 accountants in the U.S. work for the government in federal government agencies such as the General Accounting Office, the Internal Revenue Service, the Security and Exchange Commission, the Defense Contract Audit Agency, etc. Many others work in state government agencies such as the Franchise Tax Board, the Board of Equalization, the Employment Development Department, etc.  At the municipal level, there are also many job opportunities for accountants. These government jobs often offer high or at least competitive starting salaries, good fringe benefits, and better job security. Also, there is not the same degree of pressure on the job like in the public accounting or private industry, making it easier to combine job and family demands. However, the disadvantage with a government job is that it is often difficult to move back later on to public accounting or private industry.

            Not-For-Profit Organizations

Not-for-profit organizations are not organized to realize a profit on the goods or services they provide as their basic activity. Instead, they exist to provide goods or services considered socially desirable by and for the general public, a community, or its members. There are about 1.2 million tax-exempt organizations in the U.S. today and they cover the gamut of civic, religious, social, professional, scientific organizations, hospitals, schools, colleges, universities, and voluntary health and welfare organizations, etc. They range in size from local agencies to large organizations of national or international scope.

The next post for accounting will be the career paths available as an accounting major.

Business and the common good

In the tradition of Greco-Roman thought, the polis was equivalent with the highest good in the sense that it safeguarded and promoted the common good.  Here “common good” was understood in its richer sense of the human flourishing of the many.  As this view of the common good was corrupted and watered down to a material conception, the state came to be seen as the highest good only in terms of promoting economic prosperity.  In these terms, business and economics were first enabled to be isolated from human perfection.  The good of the state was now separated from the good of the individuals except in an accidental manner. 

The cultivation of virtue, the pursuit of truth, these are things that may be good for the individual, but they are not part of the political (seen as economic) good.  Thus, the economic must be alienated from these. On the other hand, when the common good is conceived as something immaterial, it is understood as that which “by its very nature, both unites individuals and ensures the true good of each” (JPII, Letter to Families, 10).  Given that the political good is the most universal, most common of goods in the human city, economics, which is concerned with goods that are by nature less communicable, must be subordinated to the transcendent good of the persons.  In concrete terms, this means that, while business transactions and institutions can be judged in their own sphere according to their proportionate functional end (providing for material needs), that sphere must always be subordinate to, and therefore ultimately judged only in the light of the whole political sphere of which the economy is only a part.

What’s up with the economy? What can we do about it? Part 2

The cause of the problem with jobs: Housing and Debt

In a previous post, I suggested that the economy is in bad shape because businesses are pessimistic, and they are pessimistic partly because job creation has been so poor.  An even bigger contributor to business pessimism is they high level of household debt, especially debt related to housing.  Because of the massive drop in housing prices (and the frantic pace of lending a few years ago), about a quarter of American households owe more on their mortgages than they own in their house. It is calculated that the amount of “negative housing equity” is $1.15 trillion. 

Until the rate of foreclosures goes back to normal, until the rules for refinancing are clarified and made more friendly to homeowners, until people are able to able to crawl out from under the mountain of negative equity, spending won’t recover, businesses won’t be confident and won’t contribute to economic growth, and banks won’t be safe.

A big step towards recovery, then, would be a fairly drastic but temporary reform to the bankruptcy code that would allow and encourage people to substantially reduce their debt burden.  This would impose huge costs on the banking sector.  But banks are holding nearly 10% of GDP, nearly $1.4 trillion, in cash that they won’t lend and they won’t distribute, while at the same time they foreclose on millions of homes.

AMU Business: a competitive program

AMU students compare very well with their peers in other institutions.  That is the result of the ETS’s Major Field Test, taken by Ave Maria Business seniors this week.  The results are flattering: our seniors did particularly well in Quantitative Business Analysis (96th percentile) and Economics (89th percentile) and they scored well in Accounting, International Issues, and Marketing.  This test is used by 585 institutions, and the latest version has been taken by 80,708 students.  

I think this is a remarkably good result.  Our performance against the rest of the country speaks very well of our seniors.  This is the first time we administer this test, and 18 seniors took it.  I think that they did so well because of our focus on business as a practical discipline and our emphasis on the fundamentals of business.  And no doubt, they did so well because of what the rigor of our Core Curriculum does for students’ analytic abilities.

“Why major in accounting?”

With the newly approved Accounting major and minor at Ave Maria University, the question is, “Why should students major in accounting?”

Perhaps the American Institute of Certified Public Accountants (AICPA) summarized it best in its newly issued pamphlet: “Accounting: The One Degree with 360 Degrees of Possibilities”: “You may already have an idea about what you want to do for a career. Then again, maybe you’re not so sure. Either way, there’s one degree that gives you the education to succeed at just about anything in the business world. It’s an accounting degree. Accounting opens doors in every kind of business coast to coast. It can give you the foundation you need to go on and become a CPA. It can prepare you to become a partner in an accounting firm, to pursue a career in finance or corporate management, to work in government, or even to become an entrepreneur. In fact, no matter what you decide to do, having an accounting background can open doors wide.”

The reason accounting may be the best route to a successful business career is because accounting has always been considered as the language and basic tool of business. It has always concerned itself with determining how a business is doing and the bottom line. But over the last two decades, the field of accounting has been changing dramatically in response to such explosive trends as the computer revolution, increased government regulations, frequent tax law changes, the globalization of business, and the on-going downsizing and restructuring of corporations. In this increasingly complex and competitive business environment, accounting skills are very much in demand and accounting has become a dynamic career. Accountants have assumed the prestigious role of financial experts, system professionals, management consultants, budget analysts, etc. The demand for accountants appears to be growing and outstripping supply. Job opportunities in today’s business climate are better than ever for accountants.

Coming up in a future post: career opportunities for accounting majors.

Getting our Priorities Straight

At AMU, what we are trying to do is to bring the economic dimension of human life back in its rightful place under the full understanding of human flourishing in light of the hierarchy of human goods.  In modern times, the economic realm has been turned into an absolute sphere independent from and incommensurable with non-economic dimensions of life.  The ultimate purpose of business and economics is seen as the fulfillment of the material needs of our existence.  Since these needs are viewed as independent of higher goods, economics is judged definitively in terms of this end. This outlook on economics creates an obvious problem: the apparent lack of grounding for an ethics or morality of business.  While many have responded to this problem by rationally justifying a kind of “business ethics,” this ethic is always contained within the limits of the reductive economic sphere.  As such, morality is ultimately judged according to utilitarian functions.  “Yes, honesty, diligence, benevolence are all good things in economics.  But they are good because economy functions better when the transacting persons are trustworthy, when the workers are self-disciplined, when ill-will does not interrupt the attainment of the economic ends, etc.” What is necessary first in order to escape this reductionist view of business is the recovery of the ancient view of a hierarchy of goods based upon the nature of man.

What’s up with the economy? What can we do about it? Part 1

The Biggest Problem: Jobs

We are missing some 13.4 million jobs.  Unemployment costs the economy lost output and it costs families lost income.  It also afflicts people with a loss of a sense of self-worth and increases divorce rates and crime rates.  Unemployment makes people lose job-market skills and personal habits of discipline and planning.  America can’t afford to have this many unemployed people. 

The economy has to produce 125,000 jobs every month – just to keep up with the growth of the labor force.  But if we want the economy to recover, we need to produce more, many more jobs.  If we want full employment by the next election, we’d need to produce about 400,000 new jobs, every month, for four years. 

400,000 new jobs a month is not impossible and not unusual for recoveries.  But we haven’t been even close to that rate of job-creation in the last four years (the average since the recession ended has been 150,000).  It is clear that something has to change drastically.  The key is to restore business confidence.  Small employers and large employers have to become convinced that it makes sense to bet on the growth of the economy. 

A big step towards restoring business confidence would be to make fairly drastic revisions to the regulatory burden.  Businesses need to feel that government is on their side, encouraging competition, growth, and risk-taking, not second-guessing, limiting, or restricting economic activity.

Perhaps a more important step would be to put an end to regulatory uncertainty: businesses need to know what the rules of the game are, what taxes they will have to pay, what health-care costs they will have to face.  Bi-partisan cooperation, especially when it comes to reforming the tax code, needs to be quick, substantial, and effective.