In the past few weeks, the financial crisis has gone from Wall Street, to Main Street, to the Ivory Tower. Across the country, university officials are making statements about the impact that the financial crisis is having on their respective institutions. Alongside shaky assurances of financial health, there are allusions to departmental “streamlining,” spending freezes and cuts.

If you think about it, the stock market and education system have developed a very intimate relationship. Universities receive income from tuition, returns on endowments, and public funding, minus whatever they offer in financial aid. The amount of financial need is a function of economic conditions. As unemployment rises and asset prices fall, financial aid eligibility increases.

As financial need increases, the amount of aid universities have available simultaneously falls. First, the returns on university endowments are inherently tied to the markets. Second, private donations diminish: economic crises and charity do not play well with each other. Third, as tax revenue falls, public funding dries up.

Another problem that arises in a financial crisis is that universities cannot compensate rising costs by raising tuition. Last year, when the economy was still booming, tuitions were hiked by 6 percent on average. But to raise tuition now would only further burden families and just lead to more who need financial aid. According to Cornell President David Skorton, “it likely will not be possible to sustain the rate of rise of tuition in future decades that we deployed in past decades.” Note the use of the word “deployed.” At any rate, thank God, because $200,000 is a lot already.

The financial crisis also affects the number one prescribed form of “financial aid”— student loans. First, prospective students may be less likely to take out large student loans given the greater uncertainties in the job market. Second, if credit dries up, either the money won’t be there, or interest rates will be higher and repayment terms harder.

Student loans are already becoming harder to obtain. A few weeks ago, Citibank terminated its loan program for graduate students at Harvard. Apparently Citibank has realized that Harvard graduates are being fired, not hired, these days. This is part of a more widespread phenomenon: According to Finaid.com, a total of 168 education lenders have exited or suspended their participation in federally-guaranteed student loan programs, and 36 lenders have suspended private student loans. Appallingly, one of these former lenders is the Commonwealth of Massachusetts.

As it becomes more difficult to afford college, whether because of unfavorable student loan terms, or diminished financial aid, this has important implications for access to education.

If people stop going to college and we aren’t producing enough Bill Clintons and Barack Obamas — in economic terms, if the private return to education falls below the social rate of return on education — this puts the future of our country in jeopardy.

Economic models reveal that the key to economic growth is technological development and improvements in human capital. These both come through education. Although a financial crisis may be an opportunity to streamline university operations for greater efficiency, it is no time to cut any departmental research opportunities either. Cuts may save money in the short term, but such cuts are likely to mortgage our economic future.

I wonder if we can apply a lesson learned during the (first?) Great Depression. During the Depression, governments across the world cut spending. If money is not flowing into the coffers, across-the-board cuts appear the logical response when facing a fiscal downturn. But today, we acknowledge that fiscal outlays should naturally increase during a depression to pay for stabilizers like unemployment payments, welfare payments, and other benefits. These are akin to increased financial need that universities are likely to expect. Thus, government expenditure and university expenditure should naturally increase during a recession.

Instead of looking at the situation in only a myopic viewpoint, governments today consider (or should consider) a “Full-Employment Budget Balance,” which measures the difference between what government tax revenue and expenditure would be if the economy were not in a recession. What a government seeks to do is maintain a constant Full-Employment Budget Balance over the long-term.

Our nation’s colleges and universities must consider a “Full-Enrollment” Budget Balance. In bad economic times, universities should tap deeper into endowment returns or increase debt. We can expect that revenues will be boosted again in good times. Certainly universities have seen their fair share of the good times. According to Bloomberg, the average American university with endowments above $1 billion saw their endowment grow 18.1 percent from 2006-7. Despite a pattern of such high growth, most universities spend 5 percent or less of their endowments.

Over a week ago, Yale President Richard Levin assured students and faculty that all would continue as normal. He acknowledged that fluctuations in the normal economic cycle were expected, and the University will maintain a stable environment throughout these cycles. It seems like Yale has it right. Granted, they also have a huge endowment (which grew over 28 percent from 2006-7) to cushion them.

When President Skorton addressed the State of the State of Cornell last week, he emphasized that Cornell was “not in a financial crisis,” although he offered veiled suggestions of spending cuts. A main tenet of President Skorton’s address was a laudable commitment to sustain need-based financial aid. But despite the strong rhetoric, there was a troubling implicit disclaimer: only as long as the University’s fundraising campaigns continue to be successful. I have already suggested that this is not likely to be the case.

Our private universities have a moral imperative to spend more of their endowments in a fiscal downturn. A recession poses great challenges to the future of our country, not just the GDP-of-small-country sized endowments of our nation’s top schools. For the same reasons, taxpayers and our elected officials shouldn’t see education as the first thing to cut from state budgets. I cannot believe that the financial crisis occurred only weeks ago, and the State of New York is already cutting funding to state schools!

The U.S. has sneezed, and the entire world has caught cold. Higher education is not immune to the current epidemic. But cutting spending today could have a major impact tomorrow.

As Obama warned in the last presidential debate, education “has more to do with our economic future than anything …” If the U.S. hopes to get out of this recession and remain the leader of the world, education must be strengthened, not cut.

Dmitri Koustas is a senior in the School of Industrial and Labor Relations. He can be reached at dkoustas@cornellsun.com. The Bull Market appears alternate Thursdays.