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Recent Policy Studies
Economic and Political ThoughtBy Lawrence J. McQuillan, et al., Pacific Research InstituteReport, 09/16/2008
As the most economically free state, South Dakota’s business climate is thriving and companies are relocating and opening plants in the state. A full list of all 50 states and their rankings and the data underlying the rankings can be found in the latest edition of the U.S. Economic Freedom Index: 2008 Report. The Index scores states based on 143 variables, including regulatory and fiscal obstacles imposed on businesses and residents. The states that are the least economically free are clustered in the densely populated states of the Northeast. South Dakota, Minnesota, Illinois and Wisconsin made big leaps in relative economic freedom from 2004 to 2008. An economic-freedom renaissance has been undergoing in the Upper Midwest. States heading in the wrong direction include Texas, Alaska, Delaware, Arizona and North Carolina.
Commerce & Infrastructure
The Political Economy of Post-Katrina Recovery: Public Choice Style Critiques from the Ninth Ward, New OrleansBy Emily Chamlee-Wright, Virgil Henry Storr, Mercatus CenterWorking Paper, 09/16/2008
Residents and other stakeholders in New Orleans’ Ninth Ward communities critique the post-Katrina policy environment. We argue that the criticism emanating from Ninth Ward communities is similar in significant ways to the public choice critique of the state, particularly in its affinity with rent seeking explanations for why government response has been so disappointing. Despite relative government inaction with regards to Katrina, many respondents still held out hope that government policies and programs might bring about recovery. We argue that this puzzle is addressed, at least in part, by an overestimation of government’s capacity (if not inclination) to successfully re-engineer societies from the ground up.
Budget & TaxationBy Rossen Valchev, Antony Davies, Mercatus CenterWorking Paper, 09/16/2008
The purpose of this analysis was to empirically estimate the size and nature of the theoretically suggested negative impact of Federal Matching Funds (FMFs) on the state of Texas’s economic growth and tax revenues. The data strongly supports both of these theories and this has numerous implications for public policy at the state level in Texas. While most state legislators in the United States seem to regard FMFs as free money for their state budgets, this analysis shows that this is certainly not the case. By introducing lasting structural distortions in the local economy, increased FMFs actually decrease economic growth. The optimal fiscal policy for the Texas government would then be to abandon most efforts to receive FMFs and focus instead on state issues.
Foreign Policy/International AffairsBy Anthony J. Langlois, Karol Edward Soltan, Mercatus CenterBook, 09/16/2008
The political project of extending democracy to the global level is seen as the next major challenge for proponents of democracy. This volume considers some of the difficulties which need to be overcome for this extension to take place. The issues discussed include: philosophical and theoretical questions about the nature of democracy and the justification of its values; pressing political considerations, such as the crucial role of elections in democracy promotion; legal developments, such as the role of international law and judicial networks; and the nature of the global political space as democratization brings challenges to the ways in which systems have traditionally been organized. Global Democracy and its Difficulties will appeal to a range of academics, scholars and students who work across fields such a political theory, international law, comparative politics and political economy. It will be of particular interest to those with an interest in the political, economic, legal and moral aspects of democratization.
The Constitution/Civil LibertiesBy Brian C. Anderson, Adam D. Thierer, Manhattan InstituteBook, 09/16/2008
The alternative-media revolution of the last twenty years has smashed the liberal monopoly over news outlets and created a true marketplace of ideas. Rather than fight back with their own beliefs, today’s liberals work relentlessly to smother this new universe of political discourse under a tangle of campaign finance reform and media regulations. Anderson and Thierer debunk the principal arguments made in support of a counter-revolutionary effort, exposing the McCain-Feingold Act of 2002 and recent Federal Election Commission and Federal Communication Commission regulations of the blogosphere and airwaves as devastating muzzles on free speech. A Manifesto for Media Freedom is both a wake-up call for all Americans who care about their most fundamental rights and a strategy to guarantee an unfettered marketplace of ideas.
Budget & TaxationBy Terry Miller, Anthony B. Kim, The Heritage FoundationWebMemo, 09/16/2008
High corporate tax rates are undermining U.S. international competitiveness. The global economy demands that companies be flexible and swift in order to remain competitive. High tax rates deprive companies of both the means and the incentive to take advantage of new market opportunities or technological changes that can improve productivity. Whichever way the American people vote at the polls, it is a fact of the market that domestic and international investors will have the final say on economic growth. A cut in the corporate tax rate will lead to more investment and a growing economy. Failure to act will lead investors to look elsewhere, and the American people will suffer as a result.
Foreign Policy/International AffairsBy Ray Walser, The Heritage FoundationWebMemo, 09/16/2008
Venezuelan President Hugo Chávez continues to pursue a course of regional provocation aimed at inflaming relations between the U.S. and Venezuela. Like his iconic mentor, Fidel Castro, Chávez thrives on mounting tensions and confrontation with the U.S. It is through confrontation that he attains political identity and larger-than-merited international standing. Like Fidel Castro, Chávez aspires to build and lead an anti-U.S., anti-Western coalition. Unlike Castro, however, Chávez is in possession of significant petroleum power and has varied sources of international support. There is danger that Chávez, like Castro, will invite Russia to serve as a guarantor of Venezuela’s security and subsequently draw Russia, either willingly or unwillingly, into additional confrontations with the U.S.
LaborBy Scott Dilley, Sonya Jones, Freedom FoundationReport, 09/16/2008
Center-left politicians appear poised to elevate themselves to the highest positions of power in our country, thanks in great measure to campaign warchests filled with funds from employee paychecks. Of course, most of those political “donations” are involuntary, but union leaders expect to see a return on their investment. Recently, FOXNews reported Senator Barack Obama as having stated that, in the event of his election, “We will pass the Employee Free Choice Act,” an act that would banish secret-ballot voting to certify a union. Unions enjoy disproportionate power in lawmaking chambers and in the court of public opinion because of their easy access to money from employees’ paychecks. Taxpayers need to start questioning the financial stranglehold the collective bargaining process has on public budgets. In short, everyone loses: the taxpayer from being overcharged, and society as a whole from having its resources misallocated.
Natural Resources, Energy, Environment, & ScienceBy Jack Spencer, The Heritage FoundationWebMemo, 09/15/2008
Many in Congress have begun to realize that the nation’s energy, economic, security, and environmental objectives cannot be met without nuclear power. This has led to multiple initiatives to restart the industry in the U.S. Unfortunately, many of these plans rely heavily on subsidies and are not sustainable. However, instituting a program to fast-track the notoriously arduous process of permitting new plants would demonstrate Congress’ commitment to nuclear power and provide the regulatory stability that investors need to grow the industry. Furthermore, it would provide a common purpose around which America’s energy-related institutions could organize. And finally, it would provide the information necessary to bring about comprehensive regulatory reform that the nation needs for a nuclear renaissance to take hold.
Health CareBy Daniel P. Moloney, The Heritage FoundationBackgrounder, 09/15/2008
In pursuing health care reform, federal and state policymakers alike need to respect and protect parental rights and responsibilities. Currently, they are not doing so. Kentucky state legislature says, for example, that a girl of 14 is not old enough to consent to sexual activity. Yet public officials, under authorization from Congress, have written rules that allow the girl to enroll in one of a number of federal programs, and this federal law would overrule state law and prohibit the clinic from informing her parents. Parents have the primary responsibility for the welfare of their children, and policymakers must respect their right to make decisions for their children. A central goal of any health care reform, therefore, must be to allow parents to own and control their family’s health insurance. This would allow them to make key moral decisions that affect their children, restoring them to the role that is naturally and rightfully theirs.
National SecurityBy Jena Baker McNeill, James Jay Carafano, The Heritage FoundationWebMemo, 09/15/2008
The threat of an Electro-Magnetic Pulse (EMP) attack against the United States is credible. Such a strike could have a devastating impact on the nation by disabling electrical systems, grinding the economy to a halt, and possibly resulting in the deaths of millions. Yet other than establishing a commission to study the problem and holding a handful of hearings, Congress has done virtually nothing to address the issue. Such inaction could change virtually overnight, however, if Congress held even one EMP Recognition Day.
Foreign Policy/International AffairsBy John J. Tkacik, Jr., The Heritage FoundationHeritage Lecture, 09/15/2008
In the 21st century, Mongolia has taken on a geopolitical importance that it has not had for nearly 1,000 years. Mongolia possesses outsized and largely untapped mineral wealth. It is a vast and essential geographic buffer that diffuses border tensions between Eurasia’s two superstates, China and Russia. But most important, it is a vibrant democracy that continues to grapple with internal challenges. For these reasons, it is in the profound self-interest of the members of the Organization for Security and Cooperation in Europe (OSCE) that Mongolia’s democracy and independence be nurtured. No one expects China to be happy with an inde¬pendent Mongolia, but it is the best way to help keep China and Russia apart. Our goal should be to integrate that isolated land into regional and global security structures, such as (to name a few) the Asia–Pacific Economic Cooperation forum and the OSCE’s Asian Partner for Development Program.
International Trade/FinanceBy Carmen M. Reinhart, Vincent R. Reinhart, American Enterprise InstituteWorking Paper, 09/15/2008
This paper offers an encompassing approach with an algorithm cataloging capital inflow bonanzas in both advanced and emerging economies during 1980-2007 for 181 countries and 1960-2007 for a subset of 66 economies from all regions. From an emerging market perspective, the external scenario of the past few years can be best characterized as “benign:” during the past few years, international interest rates have remained; real interest rates have turned negative on a sustained basis for the first time since the late 1970s; commodity prices have surged. Yet, as of 2007, 85 percent of countries in our core sample have recorded increases in real government expenditures. Fully two-thirds of the 181 countries recorded higher inflation in 2007 than in 2006, and even higher readings are expected for 2008. If this is what is to be expected in good times, where capital bonanzas are plentiful, it is perhaps time to start re-reading Kindleberger.
Economic GrowthBy Diana Furchtgott-Roth, Hudson InstituteHudson Institute Economic Report, 09/15/2008
Inflation is declining, but consumers aren’t flooding the malls. The uncertainty as to who will win the election, and what set of policies America will have over the next four years, is dampening investment. Fortunately the strong export sector is keeping the economy going. This week the Labor Department announced that the Producer Price Index (PPI) for finished goods declined 0.9 percent in August. The core PPI, which excludes the food and energy prices, increased 0.2 percent in August and 3.7 percent over the past year. Retail sales in August fell 0.3 percent from the July sales. More importantly, excluding auto sector, retail sales declined 0.7 percent. The trade deficit in July rose 5.7 percent due to high oil prices. However, with falling oil prices, next month’s data release is expected to show a decline in the trade deficit for August. Exports increased 3.3 percent in July, while imports grew 3.9 percent.
Foreign Policy/International AffairsBy Barry Naughton, Hoover InstitutionChina Leadership Monitor, 09/15/2008
Following the 11th National People’s Congress in March 2008, a new economics team was installed in the Chinese government. Unusually complex economic challenges are facing China this year, but in this, China’s is similar to many other economies facing unprecedented global economic shifts. However, China presents an unusual picture of effective and timely policy adaptation (at mid-year, the economic leadership responded with a highly scripted and formalized policy exercise that culminated in a significant loosening of macroeconomic policy) among largely dysfunctional institutional arrangements. Although the effort to set up an effective division of labor among the top economic decision-makers has so far not been a notable success, China’s policy successes are remarkable. They may reflect the urgency of the particular economic challenges facing the country, or they may represent a strength of the Chinese system of unitary coordination and decision-making.
Foreign Policy/International AffairsBy James Mulvenon, Hoover InstitutionChina Leadership Monitor, 09/15/2008
Public evidence suggests that the People’s Liberation Army (PLA) is playing a critical but significantly circumscribed role in Olympics security. While the civilian leadership is clearly driven by an omnipresent sense of threat and an intense desire for unwavering suppression of those who would seek to disrupt China’s debutante party, they appear to also be keenly sensitive to the negative optics of a strong and overt military presence in Beijing during the Games, especially given the events of June 1989. As a result, the Olympics security is largely a police effort, with special support from the People’s Armed Police (PAP) and select, specialized PLA units. To the untrained viewer, these distinctions may be lost, but outside analysts can conclude that the civilian leadership continues to favor a layered defense for domestic security, with police on the front line, PAP in support, and the PLA as a measure of last resort.
Foreign Policy/International AffairsBy Alan D. Romberg, Hoover InstitutionChina Leadership Monitor, 09/15/2008
In negotiations with the People’s Republic of China, Republic of China president Ma Ying-jeou is demonstrating that, while he is obviously going to look out for the full range of interests of Taiwan, he is going to do so in a way that tries to maximize practical results. That means that, if Beijing will cooperate in according Taiwan international status at a level less than full sovereignty, and if it will accept Taipei’s compromises as good faith efforts to work around the immovable object of statehood, Ma will accept the realities of PRC power and influence as well as its ability to block Taiwan from important areas of international activity. Although PRC senior officers have taken note of the recent improvements in Cross-Strait relations, they apparently still feel compelled to express determined opposition to “separatist activities” of “Taiwan independence forces,” and to assert that the PRC is still “not in a position” to stop its military buildup against Taiwan and, indeed, will not be in a position to even study new approaches to the military situation until after a peace accord is signed.
Natural Resources, Energy, Environment, & ScienceBy Paul Bachman, James Madison InstituteBackgrounder, 09/15/2008
The national debate on climate change has been marked by vehement disagreement between those who believe that global warming is a severe problem requiring urgent solutions and skeptics who argue that the scientific evidence on climate change remains inconclusive. Meanwhile, Florida has joined the ranks of states exploring a state-level response. The Governor’s Action Team on Energy and Climate Change (GATECC) is studying the issue. Serious methodological flaws are evident in GATECC’s 2007 Phase I report and must not be repeated in Phase II. The major responsibility for those errors rests with an out-of-state organization—the Center for Climate Strategies (CCS)—that GATECC consulted for guidance. CCS has used the same flawed analyses in other states. Florida cannot afford to ignore the potential adverse impact of those errors, as overstating the benefits and underestimating the costs of the plan is a formula for economic woes.
Health CareBy Grace-Marie Turner, Galen InstituteStudies, 09/12/2008
Health spending in the United States is nearly equally divided between the public and private health sectors. Of the total, 45%, or more than $1 trillion, was spent through public programs. More than $1.2 trillion, or 52%, was through private spending. In 2007, an estimated 45.7 million Americans did not have health insurance, although official and unofficial safety nets exist to ensure these individuals do receive medical care when in need. Four main problems in the health sector include: 1) the rising cost of insurance and medical care, 2) the large number of uninsured Americans, 3) balancing the demand for new and better medical technologies with cost, and 4) crushing paperwork and regulatory burdens. The challenge is to create a climate that will provide incentives to promote good health and to embrace the changes that will lead to a wiser use of technologies. Innovation and competition, rather than bureaucracy, can drive change.
LaborBy Scott Dilley, Freedom FoundationPolicy Highligter, 09/12/2008
Special interest groups’ desire to win and determine political outcomes has driven the formation of new Evergreen Progress Political Action Committee, which has accepted more than $1 million in contributions from labor unions so far. Public-sector labor unions have several distinct advantages in raising and spending political money. First, they have a captive audience; second, unions can collect their dues or fees using the state’s payroll system; finally, unions negotiate collective bargaining agreements behind closed doors with the same elected officials who receive campaign contributions from the unions. In order to avoid future conflicts of interest, the legislature should seriously consider revising state law to allow more transparency into the negotiation process and to discourage any hint of inappropriate deals. Since these options are currently not available to taxpayers, the only public influence is through registering approval or disapproval of such policies at the ballot box.
Budget & TaxationBy Eric N. Fisher, Buckeye Institute for Public Policy SolutionsPolicy Report, 09/12/2008
Eliminating the Ohio income tax will have three important benefits. First, it will stem our relative population loss and the resulting loss of political clout. Second, it will increase the long-run rate of economic growth in this state. Third, it will encourage our best and brightest citizens to work more, benefiting their own families and our state’s economy more widely. Ohio could phase out its income tax. House Bill 66, which would lower income tax rates by about one-fifth during the next five fiscal years, may well be an important step in the right direction and a good trial run, but t has not gone far enough.
Budget & TaxationBy Seth Cooper, American Legislative Exchange CouncilALEC Policy Forum, 09/12/2008
The U.S. constitution forbids states from placing undue burdens on interstate commerce. However, New York Assembly is trying to break out of these constitutional limits and expand its tax borders into internet commerce. Under New York Assembly Bill (AB) 9807, retailers with no physical presence or employees working anywhere in New York now face tax collection duties, courtesy of the Empire State. AB 9807 requires out-of-state retailers to collect sales and use taxes on purchases made by New York residents. Given the significant constitutional defects of AB 9807 raised in the lawsuits filed by Amazon and Overstock, New York’s new tax law will likely be struck down in court. But, interstate commerce is nonetheless chilled while states and businesses wait for the courts to put AB 9807 out to pasture.
Health CareBy John C. Goodman,, National Center for Policy AnalysisPolicy Report, 09/12/2008
Every federal agency that has examined Medicare has affirmed that we are on a dangerous, unsustainable spending path. There are three underlying reasons for this dilemma: patients receive no personal benefit from consuming care prudently; Medicare providers have no incentive to improve outcomes because they are paid predetermined fees; since taxpayers are not saving and investing to fund their own post-retirement care, today’s young workers will receive benefits only if future workers are willing to pay exorbitantly high tax rates. The following are our proposed remedy reforms: use a special type of Health Savings Account that would allow beneficiaries to manage at least one-fifth of their health care dollars; allow physicians to repackage and reprice their services; incite workers (along with their employers) to save and invest 4 percent of payroll — eventually reaching the point where each generation of retirees pays for the bulk of its own post-retirement medical care.
Budget & TaxationBy Kevin A. Hassett, American Enterprise InstituteOn the Issues, 09/12/2008
Opponents of President Bush’s tax policy often argue that the 2001 tax cuts have unfairly benefited the wealthiest Americans. Yet recent data released by the U.S. Treasury Department demonstrate that this is not the case. Since the tax cuts were enacted in 2001, the tax share of the wealthiest 10 percent of Americans has grown by more than their income share, demonstrating that lower tax rates may improve the progressivity of the system by encouraging work and discouraging avoidance activity.
Foreign Policy/International AffairsBy Ali Alfoneh, American Enterprise InstituteMiddle East Quarterly, 09/12/2008
Almost three decades after the Islamic Republic's founding, former Islamic Revolutionary Guards Corps (IRGC) commanders are infiltrating the political, economic, and cultural life of Iran. While democracies fear external enemies, undemocratic regimes fear their own populations, whose choices and aspirations they suppress by military means. In the short term, a unified and consolidated elite composed of the IRGC officer corps will enable the Islamic Republic to maintain a tough international stance while repressing unrest at home. But the price for such policy will prove high. Not only will it politicize civil society and excite protest, but it will also alienate traditional regime supporters whose hopes are already frustrated. More dangerously, the supreme leader’s sole reliance on the Revolutionary Guards—should the IRGC manage to preserve its cohesion as a social group in Iranian politics—make Khamenei a prisoner of his own Praetorian Guard, paving the way for a military dictatorship.
Health CareBy Sally Satel, American Enterprise InstituteOn the Issues, 09/12/2008
The democratization of addiction may be an appealing message, but it does not reflect reality. While anyone can theoretically become an addict, it is more likely the fate of some—among them women sexually abused as children, truant and aggressive young men, children of addicts, people with diagnosed depression and bipolar illness, and groups including American Indians and the poor. But attitudes, values, and behaviors play a potent role as well. Addiction does indeed discriminate. It “selects” for people who are bad at delaying gratification and gauging consequences, who are impulsive, who think they have little to lose, who have few competing interests, or who are willing to lie to a spouse. The idea that addiction does not discriminate may be a useful story line for the public—if we are all under threat, then we all should urge our politicians to support more research and treatment for addiction. There are good reasons to campaign for those things, but not on the basis of a comforting fiction.
National SecurityBy Kim R. Holmes, The Heritage FoundationWebMemo, 09/12/2008
There are certain enduring truths or facts about fighting terrorism that will persist regardless of who becomes president or what the candidates have said during their campaigns. First, some form of forward pressure overseas will need to be maintained against radical terrorist groups and organizations. Second, much of the homeland security apparatus created after 9/11 will continue. Third, international radical terrorists groups will continue to adapt to America’s strategy against them. The biggest challenges for the next president in this regard will be twofold: (1) how to deal with Pakistan, and (2) whether Iraq will continue to improve and, as such, will it be taken out of the terrorist game plan. Finally, the nightmare of weapons of mass destruction marrying up with terrorists will continue to haunt any president, no matter who he is. Yes, there are significant differences between the two candidates; two different directions would be taken. But the most important question for the next president is: Will he continue applying pressure on the terrorists, even when politics makes it increasingly difficult to do so?
Foreign Policy/International AffairsBy Bruce Klingner, The Heritage FoundationWebMemo, 09/12/2008
Rumors that Kim Jong-il suffered a stroke have triggered concerns over the ramifications of instability and regime change in North Korea, particularly in regards to that nation’s arsenal of nuclear weapons. There is the potential for a power struggle among challengers to the throne, which could lead to instability. U.S. policy options are limited to contingency planning for scenarios that run the gamut from further delays in the six-party talks to regime collapse and implosion that draws South Korean or Chinese military units into North Korea to stabilize the situation. United States-South Korean contingency planning withered under previous President Roh Moo-hyun and may not have yet recovered under the new administration in Seoul. Washington should augment trilateral coordination with both Seoul and Tokyo as well as confer with Beijing to prevent miscalculation during a North Korean crisis.
Budget & TaxationBy James L. Gattuso, Nicolas Loris, The Heritage FoundationWebMemo, 09/12/2008
In the wake of this weekend’s federal takeover of Freddie Mac and Fannie Mae, automobile manufacturers in the United States were requesting help from the government as well. The Big Three—General Motors, Ford and Chrysler—are asking for $50 billion in low-interest federal loans to develop alternatives to conventional fossil fuel powered vehicles. The idea has garnered surprisingly broad support from both Barack Obama and John McCain. The proposed bailout, however, would do little to solve the very real long-term problems of the U.S. automobile industry, which include not just fuel inefficiency but large retirement, health, and other costs. Meanwhile, American taxpayers would be left to pay the tab for years of bad business decisions by Detroit. And the cost is unlikely to end there. If Detroit receives a federal handout, more industries would come for their own dollop of aid.
National SecurityBy Jena Baker McNeill, The Heritage Foundation09/12/2008
Both Senators John McCain (R–AZ) and Barack Obama (D–IL) have largely ignored the domestic aspect of homeland security. The U.S. continues to fight the war on terrorism at home, countering both homegrown threats and those who have infiltrated our country seeking to do us harm. Additionally, America is also contending with natural disasters, infrastructure adequacy problems, and immigration and border security problems, among a long list of domestic security challenges. Often the best solution is not more policy but allowing instead for state and local governments, as well as the private sector, to fulfill vital tasks in an efficient manner. Resiliency—the capacity to maintain continuity of activities even in the face of threats—must be an integral component of the next Administration’s policies. The Administration must decrease over-federalization, consolidate jurisdiction over the Department of Homeland Security amongst Congress committees, and institute national programs aimed at developing a cadre of leaders who understand the security and public safety needs of the 21st century.
Exploring the Idea of Wind Insurance as a Pilot Program: Why a Half-Way Step Could be Very ExpensiveBy Eli Lehrer, Competitive Enterprise InstituteWebMemo, 09/12/2008
As the House of Representatives and Senate move towards a conference on proposals to reform the National Flood Insurance Program (NFIP) members of Congress and staffers have raised the possibility of adding a “wind insurance pilot program.” The problems: a pilot program could actually cost taxpayers more than a larger program; only a handful of states—all of them on the Gulf and Atlantic Coasts—would benefit; any wind insurance program would destabilize the already shaky NFIP. Congress should approach proposals for a national wind insurance pilot program with extreme skepticism and forbearance.
The Constitution/Civil LibertiesBy Ilya Shapiro, Cato InstituteBook, 09/11/2008
Now in its seventh year, the Cato Supreme Court Review, which comes out every September, brings together leading national scholars to analyze the Supreme Court’s most important decisions from the term just ended and preview the year ahead. Cases critiqued in the 2007-2008 edition include major Court decisions on the Second Amendment, the rights of enemy combatant detainees in Guantánamo and Iraq, the applicability of international law in state criminal proceedings, the regulation of political parties, and the biggest cases in decades in the areas of securities, patent, and energy law.
Foreign Policy/International AffairsBy Arnold C. Harberger, D. Sean Shurtleff, National Center for Policy AnalysisBrief Analysis, 09/11/2008
Both the United States and Colombia will benefit from the competition and economic efficiencies gained from the Colombia Free Trade Agreement. Almost 90 percent of Colombian exports have enjoyed tariff-free access to U.S. markets since 1991, due to the Andean Trade Promotion Act. But American exports do not get the same privileges. Thus, ratifying the Colombia trade agreement would mostly benefit the United States by making 80 percent of U.S. exports to Colombia duty free immediately and by phasing out the remaining tariffs over 10 years. Due to political realities, full trade liberalization will only happen through incremental changes. Well-designed free trade agreements serve this function. Although imperfect, they create trade and foster an environment for economic growth by exposing firms to greater competition.
National SecurityBy Hassan Mneimneh, American Enterprise InstituteMiddle Eastern Outlook, 09/11/2008
Al Qaeda is not a cohesive organization with centralized governance. Instead, it is a diffuse network of “franchises” bound primarily by a rigid reductionist ideology and broad strategic outlook. The lack of institutional capacity for sustained action, inherent to the nature of the diffuse network, drastically limits the likelihood of al Qaeda translating its ultimate utopian (or dystopian) dream into reality, but the carnage and dislocation it has inflicted in recent years demonstrate amply that the problem cannot be reduced to one of law and order. Although the next generation of al Qaeda is unlikely to succeed where its predecessor has failed in igniting a meaningful global jihad, it will nonetheless be steeped in ideology and trained in tactical maneuvers, and may deliver more sporadic operations that will pose a grave threat to international stability and to the United States in particular.
EducationBy Paul DiPerna, Friedman Foundation for Educational ChoiceSchool Choice Issues, 09/11/2008
This scientifically representative poll of 1,200 likely Maryland voters measure public opinion on a wide range of K-12 issues. Two messages emerge from the poll’s findings. First, Marylanders say they are not familiar with various school choice ideas and reforms. Awareness of school vouchers, charter schools, and (especially) virtual schools is pretty low. A second finding indicates that voters, regardless of their political party, like having an array of school choices. They value private schools particularly. Democrats and Republicans alike favor a publicly funded scholarship granting system through the use of business tax credits. There are moderate levels of favorability for other school choice reforms, regardless of party identification. One out of six Marylanders rate Maryland’s public school system as “good” or “excellent” and more than three out of five voters are content with the current levels of public school funding.
National SecurityBy Daveed Gartenstein-Ross, Kyle Dabruzzi, Manhattan InstitutePolicing Terrorism Report, 09/11/2008
The 9/11 attacks sounded an alarm in fire departments across the country: suddenly, they would need to decide whether they had a role to play in preparing for, and preventing, terrorist attacks. A growing number of fire departments concluded they did, and are now leveraging their existing capabilities to enhance the effectiveness of local counterterrorism operations. State and local political leaders should encourage this trend; rather than relinquishing counterterrorism to local law enforcement and the federal government, they should seek to integrate their fire departments, which have unique capabilities for safeguarding the homeland, into overall security planning. Such integration should improve public safety across the board.
Budget & TaxationBy Alex Brill, Alan D. Viard, American Enterprise InstituteOn the Margin, 09/11/2008
Lawmakers have generally ensured that average tax rates rise with income to achieve a progressive distribution of the tax burden. The incentive effects of the tax system depend, however, on marginal rather than average tax rates. The effective marginal tax rate (EMTR) is the change in tax liability that occurs when an additional dollar of income, here taken to be labor income, is earned. EMTRs play a key role in governing incentives to earn income. They are affected, sometimes in relatively subtle ways, by a variety of features of the tax system. For example: credits, deductions, income floors, exemptions, and refundability can raise, lower, or shift tax rates considerably; subsidizing goods that are not work related generally leads to inefficiency and distortion; work-related costs should be deductible if administratively feasible. To minimize disincentives, it is desirable to keep EMTRs low for all taxpayers.
Budget & TaxationBy Chris Edwards, Daniel J. Mitchell, Cato InstituteBook, 09/10/2008
This book explores one of the most dynamic and exciting aspects of globalization—international tax competition. With rising mobility and soaring capital flows, individuals and businesses are gaining freedom to work and invest in nations with lower tax rates. That freedom is pressuring governments to cut taxes on income, investment, and wealth. Like other aspects of globalization, tax competition is generating intense political opposition. Numerous governments and international organizations are fighting to restrict tax cuts. Edwards and Mitchell challenge those efforts, arguing that tax competition is helping to advance prosperity, expand human rights, and rein in bloated governments. The authors argue that the U.S. economy can be revitalized by embracing competition and overhauling the federal tax code. They discuss how current tax rules suppress wages and investment and describe the tax changes needed for workers and businesses to succeed in the fast-paced global economy.
Health CareBy J.P. Wieske, Christie Raniszewski Herrera, American Legislative Exchange CouncilBook, 09/10/2008
Legislative interest in health insurance and health care reform is at an all-time high. This Guide is meant to identify the issues and help you sort through the solutions that work, as well as the public policies that do more harm than good. We explain who the uninsured are and what can be done to address that problem. Plus we have summarized various issues facing state legislators, highlighted actions already taken by states, and offered solutions. We have also included a glossary that explains a number of industry terms. We invite you to use this Guide as a starting point for your deliberations and proposals.
Natural Resources, Energy, Environment, & ScienceBy Daniel R. Simmons, American Legislative Exchange CouncilBook, 09/10/2008
Many of the state Attorneys General want to know of reliable sources for information on climate change. This is exactly why we produce this publication—to provide an informational resource that state legislators can turn to for reliable information on climate change. At a time when state legislators are bombarded with the distortions, half truths, and downright wrong assertions about climate change, now more than ever state legislators need good information on these issues.
EducationBy Alabama Policy Institute, Alabama Policy InstituteResearch Study, 09/10/2008
The time has come for Alabama to seriously examine why above-average efforts at educating our children have produced such dismal results. Our data show that some schools perform quite well at below-average spending, while others spend substantially more and get far less for their dollar. Indeed, it appears that aggregate per-child spending may even be counterproductive in some cases. Merely increasing school budgets does not appear to be the solution to improving Alabama’s public schools. Several possibilities could explain these results. One of the most likely reasons for this disparity is that the intellectual and cultural development of children by variables outside of the school—such as their families—are much stronger predictors of success in the classroom than school funding.
Budget & TaxationBy Brian M. Riedl, The Heritage FoundationWebMemo, 09/10/2008
The Congressional Budget Office (CBO)’s new 10-year baseline shows steep Social Security, Medicare, and Medicaid spending costs driving the budget deficit upwards. The published CBO baseline shows manageable 10-year budget estimates based on unrealistic assumptions that Congress requires the CBO to include in its baseline. Therefore, the CBO also provides a set of alternative budget assumptions that can be used to build a more realistic baseline. This realistic baseline shows that, while tax revenues should begin recovering next year, entitlement spending is projected to drive the budget deficit to $577 billion by 2013 and $969 billion by 2018. The best way to get the budget under control is by reforming Social Security, Medicare, and Medicaid and bringing down their 7 percent projected annual growth.
Foreign Policy/International AffairsBy Lisa Curtis, The Heritage FoundationWebMemo, 09/10/2008
The United States-India civil nuclear deal cleared its toughest international hurdle this past weekend when the 45-nation Nuclear Supplier’s Group (NSG) developed a consensus on approving civilian nuclear transfers to India for the first time in over three decades. The NSG decision marks a significant victory for those who welcome India’s rising global economic and political influence and the contribution New Delhi will make toward improving stability and security in Asia in coming years.
Budget & TaxationBy Joseph Henchman, Kevin W. Benedict, Chris Atkins, Tax FoundationAmicus Brief, 09/10/2008
The North Carolina Supreme Court is considering the case of Heatherly v. State, brought by the North Carolina Institute for Constitutional Law, a non-profit legal foundation. In a friend-of-the-court brief filed in the case, the Tax Foundation urged the Supreme Court to reverse a lower court ruling and hold that the North Carolina Education Lottery generates tax revenue, not “profits.” The Tax Foundation had previously filed a brief with the North Carolina Court of Appeals, which sustained the law in 2-1 vote.
Natural Resources, Energy, Environment, & ScienceBy Lani Cohan, H. Sterling Burnett, National Center for Policy AnalysisBrief Analysis, 09/10/2008
Federal mismanagement of United States forests has increased the number, size and cost of wildfires over the past decade. Historically, the national forests have been logged to provide lumber for commercial activities, to promote forest recreation, species protection and management, and to prevent wildfires. In recent decades this has changed. Pressure and lawsuits from environmental lobbyists have prevented or delayed both commercial and salvage logging, turning many of our national forests into tinderboxes. The government should introduce market competition in the management of the nation’s forests. Some forests, or portions of some national forests, could be sold outright to the highest bidders. Alternatively, some forests could be managed by private organizations in return for fees. Private forest owners and managers would have the incentive to minimize wildfires and improve forest health.
Regulation & DeregulationBy Ira T. Kay, Steven Van Putten, Cato InstitutePolicy Analysis, 09/10/2008
The economic slowdown and the active political season are generating calls for imposing new regulations on executive pay. The presidential candidates of the two major parties have lashed out at what they perceive to be excessive pay for certain executives or for corporate executives in general. Such populist sentiments are often based on misunderstandings about the role of corporate executives in the economy and the vigorous competition that exists for these highly skilled leaders. In the past, federal regulatory efforts based on such misunderstandings have generated unintended consequences, which have damaged the economy and hurt the ability of the market for executives to self-regulate over time. Before additional regulatory and legislative efforts are unleashed, policymakers should examine the rationale for current pay structures and the strong links between executive pay and corporate performance.
EducationBy Andrew J. Coulson, Cato InstitutePolicy Analysis, 09/10/2008
Would large-scale, free-market reforms improve educational outcomes for American children? That question cannot be answered by looking at domestic evidence alone. Though innumerable “school choice” programs have been implemented around the United States, none has created a truly free and competitive education marketplace. Existing programs are too small, too restriction laden, or both. To understand how genuine market forces affect school performance, we must cast a wider net, surveying education systems from all over the globe. In more than one hundred statistical comparisons covering eight different educational outcomes, the private sector outperforms the public sector in the overwhelming majority of cases. Moreover, that margin of superiority is greatest when the freest and most market-like private schools are compared to the least open and least competitive government systems (i.e., those resembling a typical U.S. public school system). Given the breadth, consistency, relevance, and decisiveness of this body of evidence, the implications for U.S. education policy are profound.
Economic GrowthBy Steven J. Davis et al., American Enterprise InstituteWorking Paper, 09/10/2008
Unemployment inflows fell from 4 percent of employment per month in the early 1980s to 2 percent or less by the mid 1990s and thereafter. United States data also show a secular decline in the job destruction rate and the volatility of firm-level employment growth rates. We interpret this decline as a decrease in the intensity of idiosyncratic labor demand shocks, a key parameter in search and matching models of unemployment. According to these models, a lower intensity of idiosyncratic shocks produces less job destruction, fewer workers flowing through the unemployment pool and less frictional unemployment. To evaluate the importance of this theoretical mechanism, we relate industry-level unemployment flows from 1977 to 2005 to industry-level indicators for the intensity of idiosyncratic shocks. Unlike previous research, we focus on the lower frequency relationship of job destruction and business volatility to unemployment flows. We find strong evidence that declines in the intensity of idiosyncratic labor demand shocks drove big declines in the incidence and rate of unemployment. This evidence implies that the unemployment rate has become much less sensitive to cyclical movements in the job-finding rate.
Monetary Policy/Financial RegulationBy Charles W. Calomiris, Stanley D. Longhofer, William Miles, American Enterprise InstituteWorking Paper, 09/10/2008
Despite housing’s importance to the economy and worries about recent financial and economic turmoil traceable to housing market difficulties, little has been written on how distress in the housing market, measured by foreclosures, affects home prices, or how these variables interact with other macroeconomic or housing variables such as employment, housing permits or sales. Employing a panel vector autoregression model to examine quarterly state-level data, our paper is the first to systematically analyze these interactions. Our estimates provide a useful benchmark. Based on the past experience of the housing cycle, even when one proverbially bends over backwards to inflate estimated foreclosures and take account of possible nonlinearities in their effects on house prices, there is no reasonable basis from past empirical relationships for believing (as many commentators do) that the housing wealth of consumers has fallen or will fall by a substantial amount.
Health CareBy Devon Herrick, Ariel House, National Center for Policy AnalysisBrief Analysis, 09/10/2008
Public officials and health care experts have recently suggested a number of reforms to reduce the cost of individual health insurance. However, most of the proposals fail to address the contribution of mandated benefits to the high cost of insurance in many states. Differing regulations and mandates among the states cause wide variations in individual health insurance rates. Protection from interstate competition allows lobbyists to impose expensive mandates. Allowing residents to purchase coverage across state lines would create more competitive insurance markets. In addition, letting insurers experiment with different designs to create innovative and cost-effective health plans will decrease the number of people who cannot afford care.