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Recent Policy Studies
ImmigrationBy Janice Kephart, Center for Immigration StudiesBackgrounder, 10/28/2008
The E-Verify program is well on its way to fixing a 20-year-old problem of determining legal employment eligibility in a manner employers can support. Arguably E-Verify is the most successful programmatic upgrade to U.S. interior border systems, assisting employers in abiding by the law and weeding out those that don’t. Fast, efficient, and easy to use, E-Verify helps employers have confidence that their hiring choices are within the law and less likely to be disrupted by a worksite raid. Enabling employers to make better decisions about the legality of their hires also helps the federal government better prioritize enforcement tools. Illegal immigrants are dissuaded from applying for jobs that use E-Verify, thus making it less likely — the more prevalent in use E-Verify becomes — that illegals will settle into a job, only later to be arrested and land in deportation hearings that lead to family disruption while simultaneously draining enforcement and immigration court resources.
National SecurityBy Joseph William DeMarco , Hoover InstitutionHoover Digest, 10/28/2008
No part of Harry Truman’s security program troubled Eisenhower more than its cost. So, he set out to develop an overarching U.S. strategy. The key step was an exercise code-named Project Solarium— a collection of three multifaceted task forces drawn from U.S. government specialists, both military and civilian. When Eisenhower left office in 1961, America’s world position was preeminent and the country had achieved something close to “peace with strength”. Eisenhower handed President John F. Kennedy an elaborate, sophisticated system for national security management and strategy. There is no evidence that such high-level strategy meetings occur today, even in light of what has been dubbed the global war on Islamic extremism. The new administration’s strategy must go beyond the customary National Security Strategy rhetoric and embrace what Eisenhower knew to be true: the United States must clearly present concise priorities and well-defined strategy to its people and to the world.
Foreign Policy/International AffairsBy Christopher Starling, Hoover InstitutionHoover Digest, 10/28/2008
Considering that China’s first priority is to sustain its expanding economy, it is clear what its rulers seek from Africa. China’s role in Africa is broad and complex, and it will continue to expand; policy makers in the United States need to take this into account. The news media frequently highlight critical views of China’s involvement in Africa, including charges that Beijing practices neocolonialism or controls Africa’s resources while failing to stimulate African economies. But this is only part of the tale. Africans recognize colonialism and reject it. They want to avoid having to choose sides once again, as they did during the Cold War, or to repeat a cycle of dependency on external actors. China is not interested in exercising sovereignty over foreign countries. Its interests in Africa are primarily commercial.
Foreign Policy/International AffairsBy James J. Hentz, Hoover InstitutionHoover Digest, 10/28/2008
The United States has launched a noble experiment in national security. AFRICOM, the U.S. Africa Command, is an ambitious rethinking of the military’s role not only in Africa but in the world at large. The new separate command for Africa is intended to move beyond Cold War arrangements, which saw the continent divided among three U.S. regional military commands, and to tackle both new and lingering geopolitical problems. Africa Command was created in February 2007 and began initial operations last October; it is scheduled to assume responsibility for all military relationships, programs, and activities in Africa this fall under its first commander, U.S. Army General William E. “Kip” Ward. Will it succeed? To do so, AFRICOM will have to break free of four bad habits of the U.S. government, each of which tends to reinforce the others. So far, it has broken free only of the first: overlooking Africa and its needs.
Foreign Policy/International AffairsBy Paul R. Gregory, Hoover InstitutionHoover Digest, 10/28/2008
To understand the upper circles of power in Russia requires assembling a complex jigsaw puzzle of public statements, rumors, and actions. Having only a few pieces of the puzzle won’t do. And even if all the pieces are present, they remain almost impossible to fit together without some sort of guide. In Russia, perhaps more than elsewhere, the past may be this guide. The facts, as we know them, are that there has been a formal transfer of constitutional power from Vladimir Putin to Dmitry Medvedev, an ostensible power-sharing arrangement whose true nature has yet to be revealed; Russia has become prosperous, largely because of petrodollars; the “commanding heights” of the economy have been renationalized; and democracy and press freedom have withered. Also striking is the remarkable power shift from the private oligarchs of the immediate post-Soviet era to today’s “KGB state,” a powerful creation with a culture unconstrained by law.
Health CareBy Frank R. Lichtenberg, Manhattan InstituteMedical Progress Report, 10/28/2008
Rising numbers of Americans have been classified as disabled. In particular, between 1995 and 2004, the number of Americans receiving benefits under two federal disability programs—Social Security Disability Insurance (SSDI) and Supplemental Security Income—rose 30 percent. Policymakers, who face ever-rising costs and severe budget constraints, are searching for ways to reduce expenditures—or at least, to slow their rate of growth. In this regard, measures to keep working-age Americans off disability rolls—for instance, through access to medical innovations—should be particularly welcome. The following report examines whether innovation in one form of medical treatment, prescription drugs, has helped reduce the growth in disability rates. The existence of a significant inverse relationship between disability recipiency and drug vintage implies that, if mean drug vintage had not increased—that is, if people used the same drugs in 2004 that they had used in 1995—the SSDI recipiency rate would have increased more than it actually did.
Budget & TaxationBy Jake Haulk, Allegheny Institute for Public PolicyPolicy Brief, 10/27/2008
Presently weaving their way through the courts, the dueling referenda questions on the County’s drink tax could both end up on the November ballot. But as our analysis shows that should not be allowed to occur. If by some happenstance they are both on the ballot, there are potentially serious conflicts arising out of the vote results. The problems will require extensive court involvement to resolve. To recap, there are two questions possibly up for voters’ consideration. The question crafted by bar and restaurant owners and circulated as a petition under the home rule charter as a referendum question would, if passed, reduce the rate of the drink tax from 10 percent to no more than 0.5 percent. The question crafted by Council would, if passed, increase property taxes in order to repeal, not reduce, the drink tax.
LaborBy Jake Haulk, Allegheny Institute for Public PolicyPolicy Brief, 10/27/2008
Cumulative bargaining outcomes over several decades have produced a wage and benefit package for Local 85 workers that is unsurpassed in the United States. These costs are pushing the Port Authority toward a financial collapse despite increased funding by the state. How has this situation come about? National and Commonwealth labor laws bear the major responsibility, especially the fact that Pennsylvania allows public transit workers to strike, something very few states are willing to do. Without changes and reforms, we will continue to face the same old story. The state will continue to send large sums of money to the Port Authority, some service cuts might occur, fares will be raised, and the taxpayer will eventually get the bill for steadily rising costs at the Authority. It is the price taxpayers always pay because elected and appointed officials cannot stop kowtowing to the transit union.
Transportation/InfrastructureBy Frank Gamrat, Allegheny Institute for Public PolicyPolicy Brief, 10/27/2008
The Federal Highway Administration (FHWA) rejected the plan to toll Interstate 80. Tolling I-80 was the linchpin of Pennsylvania’s transportation funding under Act 44 and was to provide funds for road and bridge repair as well as mass transit. The notion of tolling a federal highway to pay for other projects was doomed from the start. According to an FHWA memorandum, the agency concluded that the plan to toll I-80 did not meet the requirements as set forth by federal law. The federal government requires that toll revenue be used to repair and rehabilitate the road being tolled, not to subsidize other roads or mass transit. Public policy should never be carried out by passing legislation with provisions virtually guaranteed to run afoul of federal law, especially when the ruling of federal officials could have been easily obtained before passing the legislation.
Economic GrowthBy Frank Gamrat, Allegheny Institute for Public PolicyPolicy Brief, 10/27/2008
The Governor remains optimistic about Pennsylvania’s job situation. He compares employment changes in the Commonwealth to the nation as a whole and notes in the August Employment Report that “Pennsylvania’s economy has performed well.” He blames employment losses the Commonwealth has incurred on the national economy and promises to throw more taxpayer money on economic development projects—a strategy he has employed since taking office in early 2003 which has had little, if any, effect on the state’s employment levels. The Governor’s position is that if the state’s jobs are growing it is because of his policies, if the jobs are slowing or shrinking, it is the fault of the national economy. A good PR ploy if you can get away with it.
Budget & TaxationBy Jake Haulk, Allegheny Institute for Public PolicyPolicy Brief, 10/27/2008
Who has the power to set tax rates in a home rule community? A definitive answer to that question will go a long way in determining who retains ultimate sovereignty in communities that have adopted home rule charters: the governing body or the people. This question presents in starkest terms the dispute over the drink tax referendum—a referendum carried out under the provisions of the County’s Home Rule Charter in regard to the number of signatures and the nature of the question (it has to be germane to County government). Opponents of the citizen-led drink tax question cite language in the Home Rule Law that states “the governing body shall not be subject to any limitation on the rates of taxation imposed upon residents”. As matters now stand, three judicial rulings have supported the opponents’ view. Only the Supreme Court remains as a possibility for overturning the earlier rulings.
Budget & TaxationBy Eric Montarti, Allegheny Institute for Public PolicyPolicy Brief, 10/27/2008
In a stunning stretch of logic and reason, the County Executive—the same County Executive who has gone to great lengths to convince the public that new taxes on drinks and car rentals were enacted to provide dedicated funding for mass transit—now wants to use any excess from the taxes to fund road and bridge projects in the County. However, the section of Act 44 creating the County’s authority to levy the taxes is called “Taxation for Public Transportation”. It does not say they are taxes for “transportation”. There is a difference and it is a very crucial one. If the Executive and Council succeed in using the excess funds for purposes beyond mass transit, it will continue the trend in county government by lawsuit that we have previously documented—a trend that displays a willingness to pass and circumvent existing laws when the Executive and Council find it expedient.
LaborBy Jake Haulk, Allegheny Institute for Public PolicyPolicy Brief, 10/27/2008
For months we have been watching a marathon bargaining impasse between the County Executive and the Port Authority Board on one side and the Amalgamated Transit workers on the other. The impasse is characterized by union intransigence over retiree health benefits and a threat by the Chief Executive to force the system to shut down through the creation of a massive revenue shortfall by withholding matching funds needed to gain the release of state assistance. The Executive has stated forcefully that if the union does not make substantial concessions on legacy costs and other issues, he will not release County funds being generated by the new drink and car rental taxes. The Chief Executive and the Board need to ask the Governor and legislative leaders to back them in a new strategy that will weaken the monopoly power of the union and return more management discretion and control to the Board and the executive director.
Budget & TaxationBy Jake Haulk, Allegheny Institute for Public PolicyPolicy, 10/27/2008
With all the problems air carriers face with high fuel costs and a looming recession, slapping them with a 48.5 percent increase in per passenger costs at Pittsburgh International is probably the most counterproductive move the Airport Authority could make. Amazingly, that is what they have just done, approving a budget that includes revenues generated from a $5.43 per passenger cost hike from higher terminal charges, a big jump in ramp fees and substantially greater landing fees. The pattern of sticking it to chosen sectors of the business community in order to fund the County’s ailing fiscal situation is a very disturbing development. A drink tax and a car rental tax were put in place to fill a budget void. Then $20 million dollars that would have helped lower costs at the airport went into County coffers. This trend needs to stop now.
Crime, Justice & the LawBy Michael E. DeBow, Gary J. Palmer, John J. Park, Alabama Policy InstituteReport, 10/27/2008
One of the most dangerous, and rarely discussed, exercises of raw power is the issuance of expansive court decrees. Consent decrees have a profound effect on our legal system as they constitute an end run around the democratic process. Such decrees are particularly offensive when certain governmental agencies secretly delight in being sued because they hope a settlement will be reached resulting in the agency receiving more money than what the legislative branch or other funding source would otherwise have deemed justified. Thus, the taxpayers ultimately fund the settlement enacted through this undemocratic process.
Budget & TaxationBy Jack M. Mintz, Cato InstituteTax & Budget Bulletin, 10/27/2008
With credit markets in disarray and the United States facing a possible recession, Americans are looking closely at the economic proposals of the presidential candidates. Luckily, there is a reform option available to the next president that would generate stronger economic growth and is easy to implement. Corporate tax reform that lowers the rate and achieves a more neutral burden across business activities could boost capital investment, aid the adoption of new technologies, and increase the capacity of the economy to grow. The United States has one of the highest effective tax rates on corporate capital in the world at 36 percent, which compares to an average of just 19.5 percent for 79 other countries studied.
The Constitution/Civil LibertiesBy Peter Berkowitz, Hoover InstitutionHoover Digest, 10/24/2008
The Supreme Court has decided that foreign nationals captured overseas and detained abroad as enemy combatants have a constitutional privilege to challenge their detentions in U.S. civilian courts. Lost in the controversy over Justice Anthony Kennedy’s 5–4 opinion in Boumediene v. Bush is the majority’s remarkable contention that it was compelled by “fundamental separation-of-powers principles.” Kennedy’s opinion—joined by Justices Stevens, Souter, Ginsburg, and Breyer—may be many things: a foreseeable continuation of the court’s expansion of alien-enemy-combatant rights in Rasul v. Bush (2004) and Hamdan v. Rumsfeld (2006); a bold affirmation of the justices’ sincere beliefs about the requirements that flow from American moral values; or an authoritative sign to the world that the Supreme Court will zealously enforce human rights against executive overreach even in areas such as foreign and military affairs where traditionally it has been most deferential to executive power. But a vindication of separation-of-powers principles it is not.
Natural Resources, Energy, Environment, & ScienceBy Henry I. Miller, Hoover InstitutionHoover Digest, 10/24/2008
Last summer witnessed an outbreak of food poisoning linked to a bacterium called Salmonella saintpaul. These incidents are only the tip of a vast iceberg. Each year, food contaminated with microorganisms is responsible for 76 million cases of food poisoning and 5,000 deaths in the United States, according to government estimates. If consumers can’t be protected by growers or processors or even irradiation, what can protect them? There is technology available today that in theory could both inhibit microorganisms’ ability to grow within plant cells and block the synthesis of the bacterial toxins. In the wake of the recent Salmonella contamination, will the organic lobby rethink its opposition to biotechnology? Will it begin to appreciate the ways in which this technology can save lives and advance their industry? Will it permit science, common sense, and decency to trump ideology?
Monetary Policy/Financial RegulationBy Dino Falaschetti, Michael J. Orlando, Hoover InstitutionHoover Digest, 10/24/2008
Financial regulation has always represented a unique set of challenges, both in principle and in practice. Those challenges have only increased with the pace of financial innovation. Even before the Wall Street crisis emerged, the Treasury Department had proposed to modernize the nation’s financial regulatory system in response to advances in financial services. Perhaps most important, that proposal set up a debate over the bounds of authority for our financial regulators, a debate only intensified by the financial storm that began last year. The independent Federal Reserve System (the Fed) is sure to remain a desired feature of our financial regulatory landscape. Determining the Fed’s ultimate scope of policy obligations must be done with great care. Expanding policy objectives is likely to increase pressure from narrow interests, jeopardizing central bank independence.
Economic and Political ThoughtBy J. R. Shackleton, Institute of Economic AffairsBook, 10/24/2008
There may be legitimate reasons why employers wish to pay men and women differently. Discrimination for the sake of it is, however, highly unlikely. If women are paid less than men, why not make some men redundant and only employ women, thus increasing profits? One would expect this process to lead to a reduction in the pay gap – indeed, the process could go on until the gap was eliminated. If there really is a pay gap between men and women caused by discrimination then shareholders will pay a heavy price! So, discrimination is not a good candidate for explaining the difference between the wages of men and women. Perhaps supply factors are more important.
Budget & TaxationBy Chris Edwards , Cato InstitutePolicy Analysis, 10/24/2008
Revenue poured into state governments as the U.S. economy expanded between 2003 and 2007, prompting the nation’s governors to expand state budgets and offer the occasional tax cut. But now that the economy has slowed and revenue growth is down, governors are taking various actions to close rising budget deficits. This ninth biennial fiscal report card examines the tax and spending decisions made by the governors since 2003. It uses statistical data to grade the governors on their taxing and spending records – governors who have cut taxes and spending the most receive the highest grades, while those who have increased taxes and spending the most receive the lowest grades. Three governors were awarded an “A” in this report card – Charlie Crist of Florida, Mark Sanford of South Carolina, and Joe Manchin of West Virginia. Eight governors were awarded an “F”.
National SecurityBy Thomas Donnelly, American Enterprise InstituteReport, 10/24/2008
In the words of Theodore Roosevelt, “We have a great duty to perform and we shall show ourselves a weak and poor-spirited people if we fail to set about doing it, or if we fail to do it aright.” Shawn Brimley’s recent Mediating between Crusaders and Conservatives called this quote to my mind. Brimley’s piece advances the original future-land-force-structure argument to its ultimate and proper point: what do we think about America’s employment of its military, and most particularly the U.S. Army and Marine Corps, over the next generation? At its indivisible core, this is a debate about American purposes in the world. We may be forced to live in a world where American power is curtailed, and American principles rejected. We may indeed be defeated, but let the enemy impose his will upon us, if he can; let us not yet choose to be defeated.
WelfareBy Nicholas Eberstadt, American Enterprise InstituteBook, 10/24/2008
Since its inception in 1965, America’s official poverty rate (OPR) has been the single most important statistic used by policymakers and concerned citizens to evaluate success or failure in the nation’s ongoing struggle against material need. The OPR was originally intended to track an absolute level of poverty over time by comparing a family’s reported pretax income against a corresponding poverty threshold. But for the past three decades, the OPR has reported trends that are jarringly inconsistent with other statistical indicators of material deprivation. What is the reason for this curious discrepancy? Eberstadt suggests that the OPR’s most serious problem is its implicit assumption that poor families will spend no more than their reported annual incomes—in other words, that their income levels are an accurate proxy for their consumption levels.
Retirement/Social SecurityBy Shinichi Nishiyama, Kent Smetters, Michigan Retirement Research CenterWorking Paper, 10/24/2008
The United States Social Security system is fairly unique in that it explicitly allows for a progressive formulation of retirement benefits by assigning a larger replacement rate to workers with small pre-retirement wages. In contrast, the public pension systems in other countries often replace a constant fraction of pre-retirement wages, although the length of the “averaging period” is typically shorter relative to the U.S. On one hand, progressivity in the benefit structure provides risk sharing against shocks that are difficult to insure privately. On the other hand, progressivity introduces various marginal tax rates that distort labor supply. Rather surprisingly, we find that the ex-ante best U.S. Social Security replacement rate structure is fairly “flat.” Intuitively, the relatively long averaging period used in the U.S. system formulation already provides some insurance against negative idiosyncratic shocks, but in a manner that is more efficient than explicit redistribution.
WelfareBy Richard V. Burkhauser, Mary C. Daly, Philip R. de Jong, Michigan Retirement Research CenterWorking Paper, 10/24/2008
In the 1990s, the United States reformed welfare programs targeted on single mothers and dramatically reduced their benefit receipt while increasing their employment and economic wellbeing. Despite increasing calls to do the same for working age people with disabilities in the United States, disability cash transfer program rolls continue to grow as their employment rates fall and their economic well-being stagnates. In contrast to the failure to reform United States disability policy, the Netherlands, once considered to have the most out of control disability program among Organization for Economic Co-operation and Development nations, initiated reforms in 2002 that have dramatically reduced their disability cash transfer rolls, while maintaining a strong but less generous social minimum safety net for all those who do not work.
Budget & TaxationBy Duncan Currie, American Enterprise InstituteThe American, 10/24/2008
Earlier this week, John McCain proposed temporarily slashing the capital gains tax rate from 15 percent to 7.5 percent for 2009 and 2010. Barack Obama supports raising the capital gains rate to 20 percent for individuals earning more than $200,000 a year and couples earning more than $250,000. This is a bigger issue than many people realize. U.S. capital stock is extremely sensitive to changes in capital income taxation. Before McCain called for a temporary reduction in the capital gains rate to 7.5 percent, estimations were that in the long term, America’s capital stock would be “about 18 percent lower” under the Obama plan than it would be under the McCain plan. (Again, this was before McCain endorsed a temporary rate cut to 7.5 percent.) A higher capital gains tax rate eventually translates into lower wages for the average worker.
Monetary Policy/Financial RegulationBy Dave Mason, The Heritage FoundationWebMemo, 10/24/2008
The current financial crisis has many causes; there is plenty of blame to go around. While immediate action was necessary to stabilize the banking system, policymakers need a better understanding of the roots of the crisis before making permanent changes. Depression-era regulatory structures must be brought in line with a globalized 21st-century economy, but hasty changes could do more harm than good. An Independent Commission on Financial Markets—similar to the 1987 Brady Commission, but chartered by Congress—could provide Congress and the next Administration with the information necessary to make informed decisions about financial regulatory and market restructuring. Appointing a commission now would avoid losing the three months until the next President takes office and allow the commission to work in concert with the newly elected President's transition team.
Transportation/InfrastructureBy Ronald D. Utt, The Heritage FoundationWebMemo, 10/24/2008
Despite the national attention it has received, much of the current debate on infrastructure is simply wrong, and it may very well be more wrongheaded today than at any time in the past two centuries. More to the point, as any list of infrastructure “needs” and “problems” reveals, nearly all troubled areas can be described as those where government owns and operates the means of production. In effect, what Americans now confront is a problem familiar to the citizens of Bulgaria and Belarus: The crisis of socialism.
Foreign Policy/International AffairsBy Michael Rubin, American Enterprise InstituteBook Chapter, 10/23/2008
War is always a hot story for journalists. For many, war was a sexy story; religion was not. Ignoring religion, though, is a mistake. In the Middle East, war, politics and religion can often be so intertwined as to be inseparable. As in any story, the devil is often in the details. As journalists rush to fill 700-word copy, they can seldom address theology in detail. Failure to understand the nuances of religion, though, can lead them to misanalysis and an artificial emphasis on political and diplomatic motivations. The general rule for Western correspondents in the Muslim world is to report violence and political intrigue, but ignore underlying religious tension, especially when disagreements involve doctrinal disputes within sects rather than fighting between sects or religions. As a result, the Western media often gets the Middle East wrong.
Natural Resources, Energy, Environment, & ScienceBy Poh Lin Tan, American Enterprise InstituteThe American, 10/23/2008
Most Americans believe that increased domestic drilling will reduce gas prices and enhance U.S. energy security. Skeptics cite government statistics showing that more domestic drilling will have only a miniscule effect on gas prices and argue that a larger domestic oil supply will not solve America’s long-term energy problem. In the near future, an increase in offshore drilling will not have a significant effect on gas prices. There are two main reasons for this. First, offshore drilling is not like onshore drilling. Oil companies will shy away from areas where there is no preexisting infrastructure, such as the Atlantic coast. Second, the deepwater areas now open for drilling are located more than 50 miles off the coast, where infrastructure is relatively expensive and resources scarce. The good news is that American consumers can look forward to a bigger price impact in the more distant future.
Monetary Policy/Financial RegulationBy Desmond Lachman, American Enterprise InstituteThe American, 10/23/2008
In response to the worldwide financial crisis, G-7 policymakers have taken dramatic, albeit belated, steps to avert a complete meltdown. It is unclear, however, whether these measures will be sufficient to a) stave off the worst global recession since World War II, b) forestall further nationalization of the banking system, and c) prevent the overregulation of international finance. When the dust settles on today’s crisis, the world will find itself with a radically changed financial system. A large portion of the banking sector will be partially or wholly nationalized, and the remaining portion will be largely concentrated in the hands of a few mega-banks. Most investment banks will have exited the scene, along with probably half of all hedge funds and private equity firms.
Foreign Policy/International AffairsBy Reuel Marc Gerecht, American Enterprise InstituteEuropean Outlook, 10/23/2008
The recently concluded negotiations for placing an anti-ballistic missile system in Poland and the Czech Republic underscore a truism of the post-Cold War transatlantic relationship: Americans and Europeans often do not see the world the same way, yet this does not prevent cooperation on sensitive issues even if such cooperation is strongly disliked by many, or even most, Europeans. The Europeans may not (yet) fear mullahs armed with nukes, but their leaders do not want to confront the world without the United States. The saga of missile defense is a window into the frustrating but still essential transatlantic alliance.
Regulation & DeregulationBy Evan Sparks, American Enterprise InstituteThe American, 10/23/2008
One measure finds that customer satisfaction with airlines is at its lowest point in three years; and the 2008 Airline Quality Rating, an aggregation of consumer complaints to the Department of Transportation, reports that complaints were up 60 percent since 2007. Airlines seem to give travelers fewer reasons to smile. Airlines are struggling under the regulation instated by the Federal Aviation Administration and the Transportation Security Administration (the hastily constructed bureaucratic response to the 9/11 terrorist attacks). The U.S. aviation sector’s very real problems are due not to the lack of regulation but to excessive or ineffective government involvement in other segments of the industry. By making its aviation infrastructure more competitive and efficient, the United States can spend the next 30 years building on deregulation’s unmet potential.
WelfareBy William W. Beach, The Heritage FoundationCenter for Data Analysis Report, 10/23/2008
The retirement of the baby boomers will constitute a substantial growth in the dependent population of the United States. Perhaps the most important aspect of the boomer retirement is how dramatically it reminds us of the rapid growth of dependency in the United States. Our republican form of government, with its finely balanced mixture of civil and political institutions and charitable roles, probably could withstand further but limited increases in the dependent population. Can it stand, however, against the swelling ranks of Americans who believe themselves entitled to public-sector benefits for which they pay few or no taxes? Are we completely indifferent to history’s many examples of experiments in republican government collapsing under the weight of just such a population? Are we near a tipping point in the nature of our government and the principles that tie it to civil life?
National SecurityBy Kenneth L. Wainstein, The Heritage FoundationHeritage Lecture, 10/23/2008
In describing our country’s response to the 9/11 attacks, I hark back 60 years or so to December 1941 and to the words that have been attributed to Admiral Yamamoto, the commander of the Japanese battle fleet, as he sailed back from the surprise attack against Pearl Harbor. He recognized that, by provoking a country of such size and power, Japan had actually just sealed its fate. And he reportedly rendered that prediction by saying that they had “awakened a sleeping giant.” Al–Qaeda’s attacks on September 11, 2001, similarly awakened our country to a totalitarian threat—this time to the threat of violent Islamic extremism. And it similarly stirred us to mobilize our will and our resources to build the capacity to defeat that threat. Under President Bush’s leadership we have seen some concrete results, but we must all recognize that there is more work to be done.
Economic GrowthBy William W. Beach, The Heritage FoundationTestimony, 10/23/2008
The stock market turmoil that has captured everyone’s attention is rooted in the ongoing crisis in credit markets and aggravated by the slowdown in general economic activity that stems from the ills of the financial sector. While the attention of most policymakers will be on immediate responses to the current slowdown, everyone should attend to a factor that is increasingly important to confidence in the U.S. economy: the seeming unwillingness of Congress to seriously address the enormous financial challenges from entitlement spending. A good first step in addressing the long-term entitlement obligations of the United States would be to show these obligations in the annual budget. A solid second step would be to convert retirement entitlements into 30-year budgeted discretionary programs.
Budget & TaxationBy Scott A. Hodge, Tax FoundationFiscal Facts, 10/23/2008
The Tax Policy Center’s recent analysis of the presidential tax plans has received a considerable amount of attention in the press, but little attention has been paid to how each plan affects the overall distribution of the nation’s tax burden. On this account, the plans are vastly different. Under the McCain plan, since every taxpayer gets a tax cut, the overall distribution of the federal tax burden remains roughly the same as it is today. Under the Obama plan, because some taxpayers get a tax cut and others get a substantial tax increase, the overall distribution of the federal tax burden changes quite considerably. In 2009, for example, after the income-shifting in the Obama plan, the top 1 percent of taxpayers would pay a greater share of the total federal tax burden than the bottom 80 percent of Americans combined.
Natural Resources, Energy, Environment, & ScienceBy Ross Wingo, H. Sterling Burnett, National Center for Policy AnalysisBrief Analysis, 10/23/2008
How will America meet its future energy needs? Rising demand for electricity, possible greenhouse gas legislation and U.S. dependence on foreign oil are some of the reasons for concern. These factors, combined with the high cost and relative unreliability of various other alternative energy sources, have forced policymakers to consider nuclear energy once again. Nuclear power could be critical in sustaining the growth of our economy, as it is relatively inexpensive and can be tapped domestically. It is also clean, reliable and recyclable.
Budget & TaxationBy Todd Hollenbeck, Independence InstituteIssue Paper, 10/23/2008
The Taxpayer’s Bill of Rights (TABOR or Amendment 1) was predicted by opponents to cause economic Armageddon, destroy the education system and the arts, even put the Pope at risk, and let criminals back on the streets. None of these predictions came true. TABOR, added to Colorado’s Constitution in 1992, contains three main provisions: voters approve tax increases; revenue growth has limits; and weakening existing revenue, spending, or debt limitations requires voter approval. TABOR has not left Colorado an economic wasteland. Colorado’s K-12 educational system is better now than it was before TABOR. The bond ratings for governments are strong. The Pope had a wonderful, safe visit. Funding for the arts has increased significantly. Government spending has also increased substantially—but the increase has been smaller than it would have been without TABOR. Now, when governments want to raise taxes, or accelerate spending increases, they simply have to ask the voters for permission.
Budget & TaxationBy Barry W. Poulson, Independence InstituteIssue Backgrounder, 10/23/2008
Amendment 59 on Colorado’s November statewide ballot, also known as the SAFE (or Savings Account For Education) Initiative, suffers from two major shortcomings. One is the substantive impact this initiative would have on fiscal policies in the state. The second is the procedural problems the Initiative would create in designing and implementing our fiscal policies. Amendment 59 would basically repeal revenue and expenditure limits that have constrained the growth of state revenue and spending since 1992. Limits on the growth of state revenue and spending imposed by the Taxpayer’s Bill of Rights (TABOR) would be eliminated. Surplus revenue above the TABOR limit that would have been rebated to taxpayers would instead be transferred into the State Education Fund. Those moneys would then be appropriated from the SEF to finance spending for education P-12.
Budget & TaxationBy Benjamin DeGrow, Independence InstituteIssue Backgrounder, 10/23/2008
Amendment 49 on the November 2008 Colorado ballot proposes to limit government payroll deductions to specified items. The amendment effectively prohibits the collection and transfer of funds to private non-charitable groups that lobby government officials and fund campaigns— including such groups as political parties, professional associations, and labor unions. Current Colorado law allows government payroll systems to administer and deliver money to these groups. The primary argument for Amendment 49 is that it eliminates a major conflict of interest. Proponents say government should not be able to transfer money to politically active groups that use the same money to influence the officials who represent that government. Three other leading arguments for Amendment 49, as exemplified in the endorsements of Colorado’s major newspapers, are as follows: it focuses government on core functions; it levels the playing field among various lobbyists and interest groups; and it protects many public employees from unwanted deductions.
Monetary Policy/Financial RegulationBy David C. John, The Heritage FoundationWebMemo, 10/23/2008
Last week, the Treasury Department announced a new approach to addressing the crisis gripping financial markets: the direct purchase of equity stakes in U.S. banks in order to increase the capital levels of those institutions. While it is a potentially effective step toward rebuilding confidence in the banking system and restarting the credit markets, the action is also a dangerous one. Policymakers must ensure that the result is not a legacy of political control of the financial system, threatening the efficiency of markets and the principle of private ownership. The program must be temporary and voluntary; there must be no attempt to allocate credit; any government investments should include only nonvoting preferred stock; any restrictions on executive pay must be strictly limited; and taxpayers should share in any profits. Most importantly, we must preserve over the course of this situation the free market principles and independent institutions that are necessary for America’s economic health.
Monetary Policy/Financial RegulationBy James L. Gattuso, The Heritage FoundationWebMemo, 10/23/2008
Easy answers are seldom correct ones. That principle seems to be at work as the nation struggles to discover the causes of the financial crisis now rocking the economy. Looking for a simple and politically convenient villain, many politicians have blamed deregulation by the Bush Administration. House Speaker Nancy Pelosi, for instance, stated last month that “the Bush Administration’s eight long years of failed deregulation policies have resulted in our nation’s largest bailout ever, leaving the American taxpayers on the hook potentially for billions of dollars.” But there is one problem with this answer: Financial services were not deregulated during the Bush Administration. If there ever was an “era of deregulation” in the financial world, it ended long ago. And the changes made then are for the most part non-controversial today.
National SecurityBy Jena Baker McNeill, James Jay Carafano, The Heritage FoundationWebMemo, 10/23/2008
In a White House Rose Garden ceremony on October 17, President Bush announced that seven countries had met the requirements for admission into the Visa Waiver Program (VWP). Within a month citizens from those countries will be allowed to travel to the United States for tourism and business without having to first obtain a visa. The program also adds new security guarantees to combat terrorist and criminal travel as well as deterring “overstays” (persons remaining in the United States unlawfully). This announcement is a positive step for visa reform. No countries have been admitted to the VWP since 9/11. Adding security while facilitating travel has proven to be a winning formula. Congress should now build on the successes of VWP reform.
International Trade/FinanceBy Derek Scissors, The Heritage FoundationBackgrounder, 10/23/2008
The end of 2008 could be a momentous time for Sino–American commercial relations. A new U.S. President will take the reins just after the 30th anniversary of China’s market reforms. Natural attention is being given to what the new President plans for the Strategic Economic Dialogue and other elements of the economic relationship. But the 30th anniversary marks a more important development to the future of these negotiations. Reform began 30 years ago—about three years ago, it stopped. Since the present Chinese leadership took power in late 2002, market-oriented reform has been minor, resting on a legacy of earlier decisions. As market-oriented policies wind down, they are increasingly supplanted by state-run development. The last few years have been characterized by price intervention, absence of privatization, rollback of competition, and fresh investment barriers. Protectionism will harm the U.S.—even if it harms China more.
National SecurityBy Jena Baker McNeil, Richard Weitz, The Heritage FoundationBackgrounder, 10/23/2008
A major threat to America has been largely ignored by those who could prevent it. An electromagnetic pulse (EMP) attack could wreak havoc on the nation’s electronic systems—shutting down power grids, sources, and supply mechanisms. An EMP attack on the United States could irreparably cripple the country. It could simultaneously inflict large-scale damage and critically limit our recovery abilities. Congress and the new Administration must recognize the significance of the EMP threat and take the necessary steps to protect against it. While some progress has been made in hardening potential U.S. targets against attack, including critical military and government systems, the vast majority of electrical systems are unshielded and unprotected, especially in the civilian sector. If properly shielded, electrical devices and systems can generally survive even the strongest EMPs.
International Trade/FinanceBy Daniella Markheim, James M. Roberts, The Heritage FoundationWebMemo, 10/23/2008
Beleaguered supporters of economically open and market-oriented democracies can take some solace from the September 24 announcement by the Bush Administration of a new initiative: “Pathways to Prosperity in the Americas” (PPA). The PPA is an attempt to re-energize U.S. government and regional efforts to enlarge a free trade area in the Western Hemisphere and create positive momentum for open-market policies that will carry over into the next Administration. Heritage Foundation Vice President for Foreign Policy Kim Holmes noted recently that “international forums created to foster trade and open markets are struggling to advance free-market principles.” Too often officials at multilateral organizations such as the World Bank, the International Monetary Fund, and the United Nations are sympathetic to socialism and recommend statist policies to redistribute income rather than liberalizing and opening private trade and investment.
Monetary Policy/Financial RegulationBy Brett D. Schaefer, The Heritage FoundationWebMemo, 10/23/2008
Prime Minister Gordon Brown of the United Kingdom asserted earlier this week that the financial crisis revealed the need to “rebuild our fractured financial system.” The European Union echoed this sentiment in a call for “a genuine and complete reform” of the world’s financial architecture. The heart of Brown’s proposal is to enhance the power and authority of the International Monetary Fund and the World Bank (known collectively as the Bretton Woods organizations) to create an unprecedented level of global governance to supervise financial institutions, impose universal standards for accounting and regulation, and serve as an early warning system for future crises. The financial crisis certainly is serious, but Mr. Brown’s suggested solutions would, for the most part, do little to prevent future crises; on the contrary, they could do great harm.
Natural Resources, Energy, Environment, & ScienceBy Ben Lieberman, The Heritage FoundationWebMemo, 10/23/2008
There are lessons to be learned by studying the dramatic drop in gas and oil prices. These lessons, if incorporated into the nation’s energy policy, could help prevent prices from going back up to record levels in the future. Anger at high prices last summer led to the usual push for politically convenient scapegoats, such as “Big Oil”. But if large oil companies really were responsible for creating last summer’s high prices, why would they give them up so quickly? Secondly, sky-high pump prices in the face of a weakening economy led to lower demand and a drop in those prices. The financial meltdown may have weakened faith in markets over the last few weeks, but the precipitous decline in oil and gasoline prices should help strengthen that faith.
Budget & TaxationBy Shanea Watkins, The Heritage FoundationWebMemo, 10/23/2008
A recent Heritage Foundation Center for Data Analysis report describes the economic outcomes that can be expected based on the presidential candidates’ proposed tax plans. The outcomes include the effects of these proposed policies on gross domestic product, disposable income, and employment growth over a 10-year period. The analysis finds that job growth under Senator John McCain’s (R–AZ) plan at the national level is more than two times faster than job growth under Senator Barack Obama’s (D–IL) plan. Job creation grows faster in McCain’s plan because of the plan’s pro-growth provisions. Obama’s plan relies chiefly on a series of tax credits in order to redistribute income. These credits will serve to boost consumption, but will not boost business investment, which influences employment outcomes in other sectors of the economy.
Transportation/InfrastructureBy Ronald D. Utt, The Heritage FoundationWebMemo, 10/23/2008
In the months since the fatal collapse of the I-35W bridge in Minneapolis, safety concerns about the nation’s 600,000 bridges have become a leading symbol of what many contend is America’s crumbling infrastructure. And while an earlier Heritage article and a subsequent federal report noted that design flaws—not a lack of money—may have been the chief cause of the collapse, many have used the tragedy to justify more government spending on the nation’s infrastructure, including bridges. But evidence suggests that existing bridge repair funds may have been diverted to other purposes—and that this process continues. Before committing more taxpayer dollars to the bridge repair program, the inspector general for the U.S. Department of Transportation should conduct a comprehensive financial audit of both the federal and the state programs to determine how much bridge repair money has been misused and to suggest remedies to improve the program.