Stand Up Guy

Stand Up Guy

By Francis X. Gilpin

Associate Editor

Don't confuse Robert G. Dederick with a dismal scientist. He'd fit right in at Ybor City's Improv.

The retired chief economist for Northern Trust Co. recently entertained a roomful of financial professionals and their spouses at a holiday dinner in downtown Tampa. Dederick had plenty of wry economic predictions for 2006.

Dederick lives outside Chicago, where Northern Trust is headquartered. In the nation's heartland, he says things are pretty good.

"Now, it's not a boom," Dederick cautions. "I don't call it a boom until my son has a job. He's not there yet. But he's beginning to think about it."

Whether Dederick's son finds gainful employment and the economy stays robust will depend on corporate America, says his father. Will business accept the baton from the American consumer, who has been carrying it since the tech bubble burst five years ago?

"American consumers still have the desire, the will to live beyond their means," he says. "That's the great thing about Americans. Give them income, and they will spend. Don't give them income and they'll spend. You know, they'll borrow and then they'll spend."

Dederick says the business sector is increasing its spending and will continue to do so in the coming year.

"We're constantly hearing about the American businessperson being worried," he says. "They're worried about sales. And they're worried about labor costs. 'Oh God, we're paying these people $6.75 an hour? God Almighty!' And they worry about the Chinese, and they worry about the Indians.

"And they worry about Sarbanes-Oxley. They worry they might get caught," Dederick adds. "And yet they've been spending. Makes you wonder what they'd do if they weren't worried."

Dederick, 76, doesn't sound like a Harvard Ph.D. who served the late President Ronald Reagan as undersecretary of commerce for economic affairs.

Most successful entrepreneurs are manic-depressives, says Dederick. We should admire their manic phases, and hope they go through one in 2006. "The people who made money are the people who are willing to take risks," he says. "And most of us aren't that way."

Dederick says he predicted the great bull markets of 1980s and 1990s. Northern Trust, for which he still consults, made a lot of money from his foresight. Dederick did not. Lacking funds, he, too, could have borrowed and put his margin account where his mouth was.

"Making money is really a feature of a person's personality," he says. "Most of us are really risk-adverse."

Not waiting for input from his audience of chartered financial analysts at the University Club of Tampa, Dederick posed 10 questions to himself. He then answered, in the accent of his native New England, using an occasionally scratchy microphone.

"Will business carry the ball as the household sector, which includes housing, subsides as a driving force?" he asks. Continued growth in the demand for products and services should lead to higher capital spending by American businesses, Dederick says. "If they do, we'll run another couple of years," he says. "The expansion will run another couple of years, minimum."

What else could go wrong before then?

"The housing bubble could burst," says Dederick. "You notice that? I didn't say there might be a housing bubble. I said there's a housing bubble. You get near the water, you get housing bubbles.

"The whole damn country is overextended. We're the richest country in the world, and yet we spend 6% more than our income. Isn't that remarkable?"

Political leaders in Washington, D.C., are as afraid to tackle the country's big problems as their constituents are unafraid to wield a credit card, according to Dederick.

High taxes are not among those problems.

"Why did supply-side economics come out and be so important? Why did people take that so seriously and think that was the Holy Grail?" asks Dederick, recalling the Reagan era. "Because, at that time, we had a marginal tax rate of over 70%.

"But, when you get your tax rate down to 35%, what the hell difference does it make? What difference does it make, if you go from 35% to 30%?"

Social Security, which President George W. Bush tried to put on the national agenda in 2005, is tomorrow's problem, he said. Health care is today's problem. But Congress understandably feels no sense of urgency about the latter, Dederick says.

"The end solution to medical care is rationing," Dederick says. "There are two ways you can ration. One is by using the price system and the other is to use queuing, get in line.

"You use the price system, and you know the poor don't get it. You use the queuing system and that means the rich people have to get in line with the poor. 'C'mon now, you're not going to do that to me. I didn't make these big bucks to stand in line with him.'"

Dederick likes President Bush's choice for Federal Reserve chairman. But Dederick sounded mildly dismayed that Ben Bernanke, after graduating from his alma mater, went down the street in Cambridge to get a doctorate at the Massachusetts Institute of Technology.

"He had 1590 out of 1600 on his SATs. He went to Harvard, for God's sake, summa cum laude at Harvard!" says Dederick. "That's almost the equivalent of all Bs in my time."

Dederick is more concerned about retiring Alan Greenspan, whom he has known for 35 years. What is Greenspan going to do with himself while his wife, television network correspondent Andrea Mitchell, still works?

"She has places to go, people to see, things to do," says Dederick. "She can't be going with him to the zoo on Thursday."

Greenspan's golden years notwithstanding, Dederick is generally confident about the future. "I think we'll probably slide through," he told his Tampa audience. "The big Mo will probably keep us going, through 2006. Beyond that, I could tell you. But, frankly, I'm not being paid enough."