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Recent Policy Studies
EducationBy Barry W. Poulson, Independence InstituteIssue Backgrounder, 01/14/2011
Only in recent years has the state become dependent on federal funding for higher education. Far from stabilizing higher education spending, the federal funding has created a structural deficit in the state budget. Solving this structural deficit will require fundamental reforms in the higher education system (these reforms are explored in a forthcoming Issue Paper by the Independence Institute: Privatization: The Solution to the Funding Crisis in Higher Education). These reforms will enable the state to stabilize higher education funding, and balance the state budget without federal handouts and federal unfunded mandates.
Regulation & DeregulationBy Dennis L. Weisman, Glen O. Robinson, Free State FoundationPerspectives from FSF Scholars, 01/14/2011
More than 70 years ago John Maynard Keynes lamented that accepted economic theory was not up to the task of responding to the pressing economic problems of the day. The most fundamental challenge, he thought, was not in developing new ideas, “but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.” The same challenge confronts the modern-day regulator in overseeing the market and technological upheavals that have transformed the telecommunications marketplace.
Health CareBy Roger Stark, Washington Policy CenterPolicy Note, 01/14/2011
Mandates, the modified guaranteed issue law and community rating rules cause health insurance premiums to rise artificially. The natural market price of individual insurance in Washington is much lower than the current regulated price. Policy changes in Olympia that remove regulatory restrictions and reduce mandate costs would make quality individual health coverage more affordable for people in all 39 counties. With at least 13 percent of Washington’s population uninsured, we need to make the individual health insurance market more competitive and more affordable.
Health CareBy Stephen A. Moses, Commonwealth Foundation for Public Policy AlternativesReport, 01/14/2011
The only way to reform Medicaid LTC, and provide more home care while saving money, is to reduce the number of Pennsylvanians who become dependent on the program in the future. Four alternative sources of LTC financing exist: (1) Asset Spend Down, (2) Estate Recoveries, (3) Home Equity Conversion, and (4) Private Long-Term Care Insurance. This report explains how these alternative funding sources can be maximized to relieve Medicaid and enable the program to re-balance cost-effectively.
Economic GrowthBy Stephen J.K. Walters, Louis Miserendino, Maryland Public Policy InstituteStudies, 01/14/2011
The Great Evacuation of Baltimore began shortly after World War II and continued for six decades: between 1950 and 2008, its population fell from 950,000 to 637,000. Concurrently, the city population not only shrank, but also became poorer. In 1950, the median family income of Baltimoreans was seven percent above the U.S. figure; by the 2000 census, the median household income1 for city residents was 28 percent below the national median. We all know – or think we know – why this happened. The usual narrative involves the following elements: racial bias that caused whites to flee an increasingly diverse urban population; our ecologically unfortunate preference for suburban lawns and auto travel over dense city neighborhoods and public transit (or walking); and the transition from a manufacturing- to a service-based economy that doomed America’s old industrial cities to inevitable decline. In Baltimore, however, we often console ourselves with stories about the heroic political figures who staved off complete disaster of, say, Detroitian proportions, with a downtown redevelopment strategy2 that has made the Inner Harbor a tourist attraction and, in recent years, slowed population losses to a mere trickle (though not job losses: from 2002 to 2008, average annual employment in the city fell by over 30,000).
EducationBy Lance T. Izumi, Vicki E. Murray, Pacific Research InstituteBook, 01/14/2011
Of all the states, one would expect that the impact of technology on the delivery of educational services would be greatest in California, home to Silicon Valley and major high-tech companies. Indeed, many expected this environment to wield considerable influence on the school system. Yet, when it comes to harnessing the technological revolution as it applies to education, it turns out that California is lagging in many respects.
Budget & TaxationBy Steven Malanga, Manhattan InstituteCity Journal, 01/14/2011
Reformers should use the current downturn as a starting point to demand new measures that end the fiscal gimmicks, evasions and ploys. Though reforms will differ from state to state, several sensible principles should govern change. One is for states to switch from yearly budgets to balanced multiyear plans, so that legislators won’t be able to employ tricks one year and ignore their consequences the next. Another is for states to tighten restrictions on borrowing to include debt issued by quasi-governmental entities and authorities. States can also increase the amount of money that their reserve accounts must hold during good economic times, which would both restrain the growth of government during the good times and provide a cushion against severe revenue falloffs in recessions. Such reforms would represent the next stage in taxpayers’ never-ending battle against budget gimmicks.
Budget & TaxationBy Pamela Villarreal, National Center for Policy AnalysisStudies, 01/14/2011
Excise taxes are fees levied on specific products like cigarettes, beer and gasoline. Unlike broad-based taxes, such as general sales or income taxes, excises are often paid by a narrow subset of the population, such as smokers, consumers of alcohol and so forth. These taxes are often hidden from consumers because they are embedded in a product’s retail price. Some excise taxes are called “sin” taxes because they are levied on undesirable behaviors such as smoking and drinking.
Health CareBy Peter Swanson, National Center for Policy AnalysisBrief Analysis, 01/14/2011
Scaling back emergency services would limit our national preparedness to respond to all incidents, but fragmented and inadequate financing risks municipal insolvency. Federal reimbursement rates do not cover EMS costs and the increased demand due to the ACA will put additional stress on the system. Possible solutions include dedicated taxes and changes in health insurance reimbursement policies that give patients incentives to control their consumption and cost, and reimburse EMS providers for medical treatment that does not require transport.
Transportation/InfrastructureBy Marc Scribner, Competitive Enterprise InstituteIssue Analysis, 01/14/2011
Government at all levels in the United States has been slowly moving away from grand central planning schemes and toward markets. One result has been the rise of public-private partnerships (PPPs). Proponents of these arrangements argue that many of the information and transaction cost problems inherent in government institutions can be mitigated by sharing construction, maintenance, and operational responsibilities with profit-motivated private firms. When the status quo is a government monopoly, PPPs should be viewed as preferable in nearly every case. Unfortunately, PPPs can also drive rent-seeking behavior, and create significant risk of improper collusion between political actors and politically preferred firms and industries.
Estimating ObamaCare’s Effect on State Medicaid Expenditure Growth: A Study of Five Most Populous U.S. StatesBy Jagadeesh Gokhale, Cato InstituteWorking Paper, 01/14/2011
Unless repeal attempts succeed, the Patient Protection and Affordable Care Act of 2010 (ObamaCare) promises to increase state government obligations on account of Medicaid by expanding Medicaid eligibility and introducing an individual health insurance mandate for all US citizens and legal permanent residents. Once ObamaCare becomes fully effective in 2014, the cost of newly eligible Medicaid enrollees will be almost fully covered by the federal government through 2019, with federal financial support expected to be extended thereafter. But ObamaCare provides states with zero additional federal financial support for new enrollees among those eligible for Medicaid under the old laws. That makes increased state Medicaid costs from higher enrollments by “old-eligibles” virtually certain as they enroll into Medicaid to comply with the mandate to purchase health insurance. This study estimates and compares potential increases in Medicaid costs from ObamaCare for the five most populous states: California, Florida, Illinois, New York, and Texas.
Regulation & DeregulationBy Nicholas Kalaitzandonakes, Alexandre Magnier, Douglas Miller, Cato InstituteRegulation, 01/14/2011
R&D-driven industries tend to be concentrated, and the U.S. seed industry is no exception. Concerns about the presence and use of market power in such industries are not rare since products are differentiated, which allows firms to set prices and charge mark-ups that can be used to pay for R&D investments and other fixed costs. The balance between firm profits and investments in product quality and innovation is an important indicator of dynamic efficiency in the marketplace—and probably a more effective gauge of competition in dynamic and innovative industries. Because of the complex supply and demand structures of R&D-focused industries, estimation of market power and associated price mark-ups is not straightforward. Nevertheless, such estimations are essential if antitrust scrutiny is to enhance competition instead of stalling innovation. Our results suggest that, in the case of the U.S. seed industry concentration, moderate market power and dynamic market efficiency appear to coincide over our period of analysis.
Transportation/InfrastructureBy B. Kelly Eakin, et al., Cato InstituteRegulation, 01/14/2011
The Staggers Act has lived up to its promise, delivering early, substantially, and over a long period of time. As we pass into the second decade of the new century, the state of the freight railroad industry is sound. Railroad productivity growth in the years ahead will likely be less than what has been experienced, but enough to sustain the industry. And the struggle between the railroads and the shippers to capture those smaller gains may intensify. Such an outcome would further attest to the Staggers framework resulting in workable regulation. We are optimistic that the regulatory framework will continue to provide the market flexibility and the oversight that the freight railroad industry will need to address future challenges and opportunities.
ImmigrationBy Barry R. Chiswick, American Enterprise InstituteBook, 01/14/2011
High-Skilled Immigration in a Global Labor Market examines policies designed to attract and cultivate immigrants with exclusive skill sets—scientific, technical, engineering, and management (STEM) workers with advanced degrees, extensive technical training, and strong entrepreneurial skills. Because these workers are more likely than low-skilled immigrants to obtain high-salaried, full-time jobs, they tend to pay more in taxes than they receive in public benefits. Therefore, adding STEM workers to the labor force results in a positive net fiscal balance—in contrast to the negative fiscal impact of low-skilled immigration. High-skilled foreign workers also boost the U.S. economy by expanding production capability, increasing output per capita, and attracting foreign capital investments.
Natural Resources, Energy, Environment, & ScienceBy Jon Entine, American Enterprise InstituteBook, 01/14/2011
In Crop Chemophobia: Will Precaution Kill the Green Revolution? Jon Entine and his coauthors examine the “precautionary principle” that underlies the movement to sharply curtail the use of chemicals. U.S. policy toward herbicides and pesticides relies on empirical studies and scientific risk standards, considering a chemical safe if tests reveal no known risks at the microscopic trace levels found in our food, with a margin of error in the thousands. The EU ban, however, circumvents the established process for a politicized and restrictive hazard structure that deems some chemicals dangerous at any level, even absent definitive risk data. The precautionary approach is now being exported around the world. This incisive volume considers the impact of precautionary standards on international food security policies and explores its possible unintended consequences—including environmental degradation, the spread of disease, and a hungrier world.
Economic GrowthBy John H. Makin, American Enterprise InstituteEconomic Outlook, 01/14/2011
The extra fiscal stimulus from the tax cuts late in 2010 could produce a 4 percent growth rate for the first half of 2011—a sharp turnaround from December’s gloomy news on US employment. However, China’s overheating and Europe’s sovereign-debt crisis continue to threaten the global recovery. In addition, four risks could make liftoff difficult for the US economy: hostility in the new Congress to additional fiscal stimulus; higher energy costs, which could offset the boost from the payroll tax cut; a housing sector under heavy stress; and fiscal drag from state and local governments as the federal stimulus wears off. We have already fired the economic and monetary stimulus guns for the second time. If these measures fail to provide liftoff, we could face a cold shower in 2012.
National SecurityBy Bruce Klingner, The Heritage FoundationBackgrounder, 01/14/2011
The United States and its allies are at risk of missile attack from a growing number of states and non-state terrorist organizations. This growing threat is particularly clear in East Asia, where diplomacy has failed to stop North Korea from developing nuclear weapons and the missiles to deliver them on target, and where China continues the most active nuclear force modernization program in the world. To counter these growing threats, the U.S. should work with its allies, including South Korea and Japan, to develop and deploy missile defenses, including ground-based, sea-based, and air-based components.
Economic GrowthBy Rea Hederman Jr., James Sherk, The Heritage FoundationWebMemo, 01/14/2011
The Bureau of Labor Statistics reported that the number of jobs increased by 103,000 in December and the unemployment rate fell sharply by 0.4 percent to 9.4 percent. While the payroll’s reported job growth was disappointing, the decline in the unemployment rate is a pleasant surprise. The sharp drop in the unemployment rate was due to a combination of workers exiting the labor force and strong job growth in the household survey.
National SecurityBy Mackenzie Eaglen, Julia Pollak, The Heritage FoundationBackgrounder, 01/14/2011
After the sweeping cuts in the FY 2010 defense spending bill and with the proposed reductions in FY 2011, further defense cuts would jeopardize long-standing core capabilities that comprise the foundation of American military strength. Nevertheless, policymakers should relentlessly pursue greater efficiencies within defense operations and eliminate waste and duplication in the defense budget. The responsible defense efficiency reform package laid out in this paper could realize more than $70 billion (possibly up to $90 billion) in annual savings. Congress should allow the military to use any savings that it generates to pay for urgent priorities, such as modernization of each of the services’ inventories. This will bolster the incentive to improve efficiency while directly strengthening the U.S. military.
The Constitution/Civil LibertiesBy Charles Cooper , The Heritage FoundationFirst Principles, 01/14/2011
In a certain sense, the Tenth Amendment—the last of the 10 amendments that make up the Bill of Rights—is but a truism that adds nothing to the original Constitution. Since the federal government only possesses those powers which are delegated to it (Article I, Section 1), this amendment merely restates that all powers not delegated are in fact reserved to the States or to the sovereign people. In this sense, the Tenth Amendment concisely articulates the very idea and structure of a government of limited powers. The Tenth Amendment reinforces the federal system created by the Constitution and acts as a bulwark against federal intrusion on state authority and individual liberty. While the Supreme Court has countenanced a far-reaching expansion of federal power since the New Deal, Congress, as a co-equal branch of government, is not bound by these precedents and should uphold the concept of federalism embodied in this amendment.
Foreign Policy/International AffairsBy Dean Cheng, Derek Scissors, The Heritage FoundationWebMemo, 01/14/2011
The upcoming summit is not a place for historic breakthroughs, but neither should it be a route back to business as usual. The PRC wants an elaborate, smooth, and globally recognized visit for Hu. The U.S. should take this opportunity to press for public Chinese commitments to a small set of important principles that will guide the bilateral relationship through what could be rough waters ahead.
International Trade/FinanceBy Derek Scissors, The Heritage FoundationWhite Paper, 01/14/2011
China’s investment overseas is increasingly important to the United States and the international community. The China Global Investment Tracker created by The Heritage Foundation is the only publicly available, comprehensive dataset of large Chinese investments and contracts worldwide beyond Treasury bonds. Details are available on well over 300 attempted transactions – failed and successful – over $100 million in all industries, including energy, mining, transportation and banking.
Budget & TaxationBy Robin Harris, The Heritage FoundationSpecial Report, 01/14/2011
Britain and the United States face similar budgetary problems. Deficits in both countries are unsustainably high. So is public spending. Action is being taken in Britain, but in the U.S., there is continuing pressure either to take no serious action at all or to take the wrong action, most notably by repairing the deficit with tax increases or—to make matters worse—by increasing spending even further.
Economic and Political ThoughtBy Peter C. Myers, The Heritage FoundationFirst Principles, 01/14/2011
Nearly 50 years after Martin Luther King delivered his memorable “I have a dream” speech, there is a growing consensus that the civil rights movement, despite some important victories, has been a failure. While conceding that these critics have a point, Peter C. Myers faults them for embracing a radical critique of America that rejects America’s founding principles as racist, abandons the goal of integration, and fosters alienation. To reaffirm the old integrationist faith in America, Myers turns to the renowned 19th century abolitionist and advocate of civil and political equality Frederick Douglass. In America’s dedication to principles of natural human rights set forth in the Declaration of Independence, Douglass found reason to love and identify with his country, despite the injustices that he and his people had suffered. To this day, Douglass endures unequalled as the invincible adversary of racial despair and disaffection—the preeminent exemplar and apostle of hopefulness in the American promise of justice for all.
Natural Resources, Energy, Environment, & ScienceBy David Kreutzer, The Heritage FoundationWebMemo, 01/14/2011
Must it always be opposite day in Washington? Petroleum and gasoline prices are surging while the Obama Administration and its allies seem intent on making things worse. Instead of taking actions to increase supplies of petroleum and gasoline, the Administration pursues policies to restrict U.S. access to its own petroleum, ban imports of vast quantities of Canadian oil, and drive up costs of refining.
The Constitution/Civil LibertiesBy John C. Eastman, The Heritage FoundationFirst Principles, 01/14/2011
Perhaps no other clause in the Constitution generated as much debate among the Founders as the “Spending Clause”—the first of the 18 powers granted to Congress under Article I, Section 8. Alexander Hamilton and James Madison, the principal authors of The Federalist, famously disagreed about the meaning of “general Welfare” and the limits to Congress’s spending power. For the past 70 years, however, this fruitful debate over the meaning of the Constitution has been replaced by the view that there are no limitations whatsoever on Congress’s power to spend and that the “general Welfare” means whatever Congress says it means. Today, no project is deemed too local or too narrow not to fall under the “general Welfare” rubric. It is therefore incumbent upon Members of Congress to consider, once again, the limits of their spending power and recognize, as even Hamilton did, that it is not unlimited.
Economic GrowthBy Terry Miller, Kim R. Holmes, et al., The Heritage FoundationBook, 01/13/2011
The results of the 2011 Index of Economic Freedom will be encouraging for champions of individual freedom and policies that promote openness and competition. After two years of decline, the world’s average level of economic freedom is again on the rise, up by about a third of a point. This news is particularly cheering because the current growth of economic freedom is driven primarily by the sound policy choices of many evolving and developing economies that have joined the free world only recently.
Economic GrowthBy Oliver Marc Hartwich, Centre for Independent StudiesIssue Analysis, 01/13/2011
A realistic assessment of Europe shows the continent to be in terminal decline and facing an uncertain and unpleasant future. Whether these problems will culminate in a big, existential crisis or repeat the Japanese experience of a few lost decades is hard to predict. Neither scenario is particularly appealing, though. Recent emigration levels from European countries show that the exodus from Europe has already begun. Between 1997 and 2006, nearly two million Britons left their country, and that was at a time when the British economy was still growing. In Germany, more than 160,000 people left the country in 2007, many of whom were highly qualified. A survey compiled for the Economics Ministry revealed that a large proportion of German migrants named high taxes and a complicated bureaucracy as important factors contributing to their decision—and this was before the economic crisis.
Foreign Policy/International AffairsBy Sung-Yoon Lee, Hillsdale CollegeImprimis, 01/13/2011
The great and noble efforts of Americans in the Korean War, the legacy of a 60-year friendship between the U.S. and South Korea, and U.S. strategic interests should not now be sacrificed on the altar of diplomatic peace. Now is rather the time for prudent and pragmatic policymakers to pave the way for a permanent peace on the Korean peninsula, and, in doing so, to pay the greatest honor possible to all those who served in a war—often referred to by historians as “The Forgotten War”—that is decidedly forgotten no more.
Economic GrowthBy Joseph L. Bast, Heartland InstituteLegislative Principles, 01/10/2011
Maintaining a good business climate has never been more important. Thanks to the Internet, the collapse of communism around the world, and advances in shipping and logistics, capital and labor are much more mobile than in the past. Businesses must bid for customers and workers not only from local competitors but from businesses in other communities, in other states, and even in other countries. Small changes in taxes, regulations, and other cost drivers can lead to businesses losing customers and possibly failing or relocating. There is no single list of factors or recipe for a good business climate.
EducationBy Richard Vedder, et al., Center for College Affordability and ProductivityReport, 01/10/2011
While higher education is intensely competitive, the outcomes resulting from this pressure are far from desirable. “A major reason why competition does not yield optimal results in higher education is that students cannot adequately evaluate the options available to them.” The reason they cannot evaluate their options is that there is virtually no information available about the quality of teaching or how much they can expect to learn. Without this information, students are forced to rely on reputation, which in turn encourages institutions to focus their efforts on improving their reputation, as opposed to their teaching. Not surprisingly, this leads to some highly undesirable outcomes as “behavior is distorted by an information-starved market, where institutional quality stagnates due to lack of competitive pressure to improve vital areas like teaching, where innovators are ignored at best and stifled at worst, where public investment is diminishing by the year due in significant part to a lack of information—and thus, confidence—in what the public receives in return.”
Budget & TaxationBy Michael LaFaive. Todd Nesbit, Mackinac Center for Public PolicyReport, 01/10/2011
Lawmakers consistently advance cigarette excise taxes in order to raise revenue, improve health or both. Few seem aware that the higher tax is unlikely to raise the projected revenue or cause smokers to abandon cigarettes in droves. With high cigarette excise taxes, states like Michigan, California, New York and New Jersey have already created massive illegal cigarette markets. Indeed, state tobacco taxes have provided profits for organized crime. There are real societal costs to smuggling and its unintended consequences: violence against innocent victims, strain on police and the legal system, theft, property damage and use of unfiltered legal cigarettes and adulterated counterfeit tobacco products.
Foreign Policy/International AffairsBy David J. Danelo, Foreign Policy Research InstituteOrbis: A Journal of World Affairs, 01/10/2011
The United States should not unilaterally deploy soldiers to the border; Mexico City would justifiably protest such a move as a threat to Mexican sovereignty. A mutual resolution, in contrast, emphasizes shared responsibility, particularly in the Sierra Madres and Rio Grande Basin. Historically, the United States and Mexico have cooperated in these regions. By establishing joint federal authority in the desert and mountains, the United States and Mexico could address smuggling both north and south. A border deployment also gives Mexican soldiers a clearer mission than a vague mandate to ‘‘beat the cartels’’—a goal that, despite their patriotism and valor, is not being achieved.
Family, Culture & CommunityBy Alex Gainer, Charles Lammam, Niels Veldhuis, Fraser InstituteFraser Alert, 01/10/2011
US jurisdictions top the overall Generosity Index rankings. Utah places first (8.7 out of 10.0), followed by Maryland (7.6 out of 10.0), and Connecticut (6.2 out of 10.0). Manitoba is the highest-scoring Canadian province (3.8 out of 10.0), but its performance ranks only 35th overall out of 64 North American jurisdictions.
Health CareBy Andrew J. Rettenmaier, Thomas R. Saving, National Center for Policy AnalysisBrief Analysis, 01/10/2011
The Affordable Care Act essentially imposes price ceilings on Medicare payments to providers. These price controls will lead to fewer health care options and lower quality of care for the Medicare population. In contrast, the Rivlin/Ryan approach would affect both the demand and supply side of the health care market – patients would shop and providers would respond. Provision for low-income beneficiaries in the form of health spending accounts could be structured to keep pace with the new system. The more realistic cost savings resulting from the Rivlin/Ryan proposal could be accomplished without the unintended consequences of price ceilings.
Economic and Political ThoughtBy James Paterson, Centre for Independent StudiesPolicy, 01/10/2011
Modern behaviourists have adopted a scientific veil to argue that humans are fundamentally irrational and that society would be better off if these irrationalities were controlled. But it is not clear that people are as wildly irrational as they claim. Even if they are able to conclusively prove that individuals are so irrational they can’t be trusted to run their own lives, surely the answer is not to hand power over their lives to equally irrational policymakers with potentially skewed priorities.
Economic GrowthBy David Alexander, Centre for Independent StudiesPolicy, 01/10/2011
On the one hand you can be a small government, inequality-tolerant country like the United States; on the other you can be a high taxing, egalitarian state like the Scandinavian countries, and all countries fit somewhere on this spectrum from right to left. What is not appreciated, but has been demonstrated by recent research, is that Australia offers a genuine alternative to these models—a unique form of low-taxing egalitarianism—that is both more successful and more sustainable than other models. This combination of freedom and fairness in Australia has provided an environment conducive to economic reform and can continue to do so in the future.