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Recent Policy Studies
Elections, Transparency, & AccountabilityBy Christian Schneider, Wisconsin Policy Research InstituteReport, 05/24/2012
The recall amendment began in the early 1900s as part of a slate of progressive “good government” reforms meant to decrease the role of special interests on the political process. Progressives believed the recall put more power in the hands of the people, allowing voters to remove corrupt elected officials. Further, they believed the recall mechanism was a way to purge the political process of the influence of money. But as recent recall elections have demonstrated, the effect of the recall amendment has been the exact opposite. Additionally, the recall provision’s original supporters never intended it to be used as it has been in the past two years.
Crime, Justice & the LawBy Vikrant P. Reddy, Marc A. Levin, Texas Public Policy FoundationPolicy Perspective, 05/24/2012
In 2010, the Texas Public Policy Foundation published a checklist titled “Analyze before You Criminalize.” The checklist was—and still is—intended to assist legislators in halting the rise of overcriminalization. Policymakers welcomed the checklist, but many consistently asked a follow-up question: “This checklist helps us prevent new overcriminalization, but how do we reverse the overcriminalization that has already occurred?” Here are some answers.
Budget & TaxationBy Chuck DeVore, Texas Public Policy FoundationPolicy Brief, 05/24/2012
Zero-based budgeting isn’t easy, however, and hasn’t been used by the state of Texas for the last nine years. While the process of zero-based budgeting provides the people’s elected legislative representatives with a thorough understanding of how and why every taxpayer dollar is spent, this understanding comes at the cost of a strenuous investment of time from both agency administrators and lawmakers. A key part of making zero-based budgeting a success includes reviewing all aspects of an agency or program including its purpose and goals as well as the metrics used to gauge success or effectiveness. Lastly, it is important to avoid the common pitfall of putting the same people or interests who might be impacted by program changes, consolidations or eliminations in charge of their own review.
Foreign Policy/International AffairsBy Walter Lohman, Robert Warshaw, The Heritage FoundationBackgrounder, 05/24/2012
There is broad bipartisan support in Washington for America’s commitment to the Asia–Pacific. The United States is, after all, a Pacific nation, and for more than 60 years has been the guarantor of peace and stability in the region. Any successful effort to maintain a presence befitting its resident superpower status there requires getting the diplomatic engagement framework right. That means sorting through the mix of regional multilateral organizations and prioritizing the roles that the U.S. plays in them.
National SecurityBy Paul Rosenzweig, The Heritage FoundationBackgrounder, 05/24/2012
The number of cybersecurity attacks on, and breaches within, the United States government has been growing. The U.S. Senate is now gearing up to debate cybersecurity legislation—and will have to vote on whether the federal government should regulate cybersecurity measures of the private sector as well as those of government. The government’s track record on cybersecurity does not inspire confidence that it can devise effective cybersecurity regulations for the private sector. Cybersecurity for the nation should be a cooperative effort between the private sector and the government, with each contributing in its own way. Onerous regulations are not the solution to the ever-expanding reality of cyberthreats.
ImmigrationBy Bruce Thornton, Hoover InstitutionDefining Ideas, 05/24/2012
No matter how the Supreme Court rules on the Arizona law, this problem of assimilation will remain. There will still be 11 million illegal immigrants whose fate must be decided. Millions of them no doubt are striving to become Americans despite the obstacles multiculturalism has put in their path. Many others have not developed that sense of American identity, nor have they been compelled, as immigrants were in the past, to acknowledge the goodness and superiority of America and give her their loyalty. Their relation to this country is merely economic or parasitic. Developing some way of determining which immigrants are which, and figuring out what to do with those who prefer not to be Americans, will be a difficult challenge in the years after the current case is adjudicated.
National SecurityBy Seth Cropsey, Hudson InstituteBriefing Paper, 05/24/2012
The scenario that follows offers one possible consequence of the United States’ prolonged naval disarmament. There are many others. All lead to the same place, a self-inflicted loss of America’s great power status as a direct consequence of its navy’s inability to shape events, project power, and defend American and allied interests at a distance from our borders.
Health CareBy Tevi Troy, Hudson InstituteBriefing Paper, 05/24/2012
A significant number of physicians are extremely concerned about these implications, and both perception and reality will shape how doctors practice medicine in the years to come. Many of these changes, while worrisome, are predictable, and government officials and health care administrators alike can make certain adjustments to prepare for the expected consequences. Many others, however, are less predictable, and it is unrealistic to expect officials to be able to react to them. The unknowables include the possibility that the supply of doctors cannot meet the demand, or that dedicated professionals may lose the incentive or flexibility to create new cures, or that talented individuals choose not to pursue medical training at all. If these outcomes occur, we may never know what the ultimate consequences might be, and who will be left waiting for the treatment or the cure that never comes.
Elections, Transparency, & Accountability
“Occupy Wall Street” and Communist China’s Emerging “Neo-Kong” Discourse of Antidemocratic LegitimacyBy Christopher A. Ford, Hudson InstituteBriefing Paper, 05/24/2012
As Western observers have noted, China’s state-run media “had a field day [in the] autumn [of 2011] with [the] Occupy Wall Street [movement], spinning an almost daily morality play about capitalism gone amok and an American government unable or unwilling to aide the victims of a rapacious elite.” In this paper, I offer a few observations of my own about coverage of “Occupy Wall Street” (OWS) in the official Chinese press, my thoughts on some interesting political and intellectual currents that I think are visible in Beijing today, and some musings about how the OWS narrative and associated images of American democracy may fit into the Chinese Party-State’s modern conception of itself.
LaborBy Sheldon Richman, Reason FoundationReason, 05/24/2012
Who do you imagine said this? “[Trade-unions] seem natural to the passing phase of social evolution, and may have beneficial functions under existing conditions. . . .” If you guessed some wily labor leader or social democrat, you are wrong. British laissez-faire advocate Herbert Spencer (1820-1903) wrote those words in his Principles of Sociology (1896). Spencer was the most prominent and respected individualist philosopher of his time. To this day his voluminous scholarly and popular writing remains an important resource for adherents of the freedom philosophy. Spencer’s statement, then, may surprise some readers. It shouldn’t. Our libertarian forebears put the plight of workers at the top of their concerns.
Economic GrowthBy Veronique de Rugy, Reason FoundationReason, 05/24/2012
The idea that small is glorious or that small businesses are the engine of growth is based on bad economics, and the result is bad policy. The government’s definition of a small business has become absurdly broad. The category officially includes the “mom and pop” firms with fewer than 10 employees that most people think of when they hear the term. But companies with hundreds or even thousands of employees (depending on the industry) are also eligible for benefits and other preferences; they win the coveted designation by virtue of the fact that they are small relative to other firms in their industry. Based on the federal government’s bizarre classifications, 99.7 percent of firms in America qualify as small.
Budget & TaxationBy George R. Crowley, Adam J. Hoffer, Mercatus CenterWorking Paper, 05/24/2012
The practice of earmarking tax revenue is used to increase the total size of government without the implementation of unpopular general tax rate increases. The revenue raised from earmarks primarily does not go to its intended expenditure category, but rather it is used as fungible revenue to be spent at the government’s discretion. From a voter’s perspective, these increases in total expenditures are inefficient, and therefore the elimination of earmarking, at the very least in those cases where it cannot be shown to benefit its intended target, would likely be in the public interest. Finally, to the extent a strict fiscal constitution is required to control the size of government, the earmarking of tax revenues will need to be addressed.
EducationBy Emmett McGroarty, Jane Robbins, Pioneer Institute for Public Policy ResearchWhite Paper, 05/24/2012
The story of the Common Core Standards has been one of disdain for the American people. The federal government and private organizations have imposed the Standards on the states. They have done so in a manner that denied the people and their elected legislators a meaningful chance to review the Standards and to consider the implications of participation in the Common Core Standards system, including assessments and data collection. The federal constitutional structure – a compound republic with a separation of powers – serves to protect our liberties and governance by the people. The Common Core Standards Initiative and Race to the Top misused that structure by taking the people’s money and forcing their elected representatives to decide whether to compete for a chance to get that money back, and did so without respecting the states’ responsibility to put the issue to their people.
Health CareBy Benjamin Zycher, Pacific Research InstituteHealth Policy Prescriptions, 05/24/2012
Because incentives to invest in the research and development of new medical technologies are driven by perceived returns, the excise tax on durable medical equipment and medical supplies can be predicted to reduce such investment. The finding here is that such investment would be reduced by about 10 percent annually, or about $2 billion during 2013 through 2020. By analogy with the estimates available in the literature for pharmaceutical investment, this investment loss would cause, conservatively, a loss of about 1 million expected life-years each year, the economic cost of which would be about $100 billion per year, a figure substantially greater than the entire U.S. market for medical devices and equipment. The sheer magnitude of this adverse economic effect suggests strongly that the excise tax on medical equipment and supplies should be repealed.
EducationBy Gabriel J. Michael, Maryland Public Policy InstituteMaryland Policy Report, 05/24/2012
In light of the state’s difficult fiscal situation, the struc¬ture of teacher compensation policy, and the state’s new Race to the Top-related push for teacher quality evaluation procedures, this policy report supports a partial, phased cost shift of teacher pension contributions to Maryland’s counties. Below, we explain the rationale behind cost shift¬ing, discuss the various elements of a feasible cost shifting proposal, and explore the possible consequences of cost shifting for both teachers and students.
EducationBy Lindsey M. Burke, Maryland Public Policy InstituteMaryland Policy Report, 05/24/2012
Although online learning options are currently limited, state policymakers can look around the country for inspiration to make Maryland a leader in virtual education. A three-part approach could propel Maryland from laggard to leader in the fast-growing online learning movement, by: freeing resources to allow funding to follow a child to the online learning provider of choice; expanding the Maryland Virtual School; and creating a favorable environment for online charter schools.
Health CareBy Grant D. Bosse, Josiah Bartlett Center for Public PolicyPolicy Matters, 05/24/2012
Certificate of Need laws, or CONs, have been set up across the country under the assumption that rationing hospital construction and expansion would limit increases in health care costs. Four decades of experience have shown that CONs do not control costs, but do provide a significant barrier to entry to innovative health care facilities and limit competition in the health care marketplace. Faced with this evidence, CON supporters have created novel arguments to justify them, but these new rationales also fall under close scrutiny. New Hampshire should end its thirty-year experiment and repeal its Certificate of Need Law.
EducationBy Benjamin DeGrow, Independence InstituteReport, 05/24/2012
Many Colorado secondary students may benefit from greater opportunity to take a number of traditional face-to-face classes and digital courses simultaneously. Students’ ability to “self-blend” courses in this manner is hampered by school district control of per-pupil funding and course options. Following the national Digital Learning Council’s guidelines, Colorado should alter the K-12 education funding system to enable greater student access to effective online course options.
EducationBy Jonathan Butcher, Goldwater InstitutePolicy Report, 05/24/2012
A particularly vexing inefficiency is the practice of paying for “ghost” students. In theory, schools would receive funding on a per-pupil basis. The more students they have, the more funding they receive. However, because schools receive funding based on prior-year student counts, schools in districts with declining enrollments get funding for students no longer on campus. At the same time, schools with new students can get same-year funding. That means that when a student transfers between schools, the state pays for that student twice. In 2009-10, that overpayment added up to $125 million spent on approximately 13,500 ghost students in districts with declining enrollments.
Getting Georgia Going: An Analysis of the Referendum on Georgia’s Transportation Special Purpose Local Option Sales TaxBy Baruch Feigenbaum, Georgia Public Policy FoundationIssue Analysis, 05/24/2012
On July 31, 2012, voters in 12 regions in Georgia, including a 10-county metro Atlanta region, will decide whether to enact a 1 percent Special Purpose Local Option Sales Tax for transportation. With Georgia ranked 49th in transportation spending, the question should be not whether there is a need to increase investment in the state’s transportation network, but what is the best, most efficient and politically realistic way to do so. Given this framework, there are reasons for voting for and against the legislation.
Information TechnologyBy Seth L. Cooper, Free State FoundationPerspectives from FSF Scholars, 05/24/2012
Consumers are increasingly adopting smart phones and tablet devices running data-rich applications and streaming video content. This makes spectrum an increasingly critical input for wireless carriers. The proposed Verizon/SpectrumCo and Verizon/Cox transactions would enable Verizon Wireless to increase and expand its deployment of next-generation wireless networks. With additional spectrum in use, Verizon could improve coverage and increase capacity to meet surging wireless data traffic demands. Unlike a merger, the proposed transactions would not reduce the number of competing carriers in the wireless market. Rather, unused AWS-1 spectrum licenses in the 700MHz band would be transferred from cable operators to Verizon. But a white paper released by the American Antitrust Institute (AAI) seeks to put the proposed spectrum license transactions in a negative light. Unfortunately, AAI’s white paper is plagued by compound conceptual problems.
Information TechnologyBy Free State Foundation, Free State FoundationTranscript, 05/24/2012
This year’s overall conference theme is “The Internet World: Will It Remain Free From Public Utility Regulation?” And the discussion topic of the two panels is “Convergence, Competition,” and “Consumer Choice: The Right Regulatory Approaches for the Digital Age.” On the question posed, “Will the Internet Remain Free From Public Utility Regulation?” the answer is certainly not at all settled, at least not in the way it should be. My own view of the proper answer is represented by the conference logo on the front of the brochure. Look at your brochure. Do you see the telephone representing the old Ma Bell legacy regulation? And then there’s the laptop, representing broadband Internet, which in my view, should not be regulated.
Economic and Political ThoughtBy Tom G. Palmer, Students for LibertyBook, 05/24/2012
After the Welfare State will explain the history and motivations of the modern welfare state, examine its current crisis, explain how it is used as an immoral tool of state control and subjection, and propose possible alternatives for providing mutual aid in a world after government imposed welfare programs have run their course.
Foreign Policy/International AffairsBy Gary C. Gambill, Foreign Policy Research InstituteNotes, 05/24/2012
The Obama administration belatedly came to accept that Assad had no intention of accommodating his enemies, only to place considerable hope in persuading his henchmen to do the same. Seeking to engender institutional and factional conflicts of the kind that helped bring down Mubarak, it reportedly communicated to high-ranking regime officials (and the Russians) that they could stay on during the transition period if they oust Assad. Even as Syrian security forces were besieging the city of Homs in February 2012, Ambassador Ford declared that a “peaceful transition for the Syrian people … is still possible.” However, by this time the scale of atrocities had reached a point where no one in a position of authority to challenge Assad could realistically expect to escape justice after he’s gone.
Economic GrowthBy Guy Sorman, Manhattan InstituteCity Journal, 05/24/2012
An essential part of the free-market argument is “creative destruction,” a theory proposed by the great Austrian economist and Harvard University professor Joseph Schumpeter. If you don’t understand Schumpeter’s insight—expressed most powerfully in his classic 1942 book Capitalism, Socialism and Democracy—you’ll have a hard time understanding why free markets work so well to generate prosperity. Yet creative destruction is a complicated concept, poorly understood by the general public and not always easy to defend. As November nears, the Republican nominee will have to figure out a way to show voters how essential it is to American prosperity.
EducationBy Troy Senik, Manhattan InstituteCity Journal, 05/24/2012
Seen as a national leader in the classroom during the 1950s and 1960s, the country’s largest state is today a laggard, competing with the likes of Mississippi and Washington, D.C., at the bottom of national rankings. The Golden State’s education tailspin has been blamed on everything from class sizes to the property-tax restrictions enforced by Proposition 13 to an influx of Spanish-speaking students. But no portrait of the system’s downfall would be complete without a depiction of the California Teachers Association, a political behemoth that blocks meaningful education reform, protects failing and even criminal educators, and inflates teacher pay and benefits to unsustainable levels.
Monetary Policy/Financial RegulationBy Nicole Gelinas, Manhattan InstituteAnalysis, 05/24/2012
It is far from clear that preventing financial-industry losses—even losses that lead to financial-firm failure—should be the goal of financial regulation. Instead, the goal should be for financial firms to be able to fail without endangering the broader economy. Rather than focusing on the Volcker Rule, lawmakers and regulators should turn their attention to improving other aspects of Dodd-Frank so that the law can better achieve its goals of preventing bailouts and protecting the economy from the risk posed by the financial industry. These areas include treatment of derivatives instruments, treatment of capital and other requirements for “systemically important financial institutions,” and treatment of failing financial firms via “orderly liquidation authority.” Moreover, if lawmakers remained concerned that insured depositories such as JPMorgan should not trade in the securities markets, there is a far more straightforward way for lawmakers to accomplish that goal.
Economic GrowthBy Steve Conover, American Enterprise InstituteThe American, 05/24/2012
Robust growth, as in 1998, can mitigate or solve a lot of problems—which strongly suggests adding alternative scenarios to the actuarial analysis in the government’s financial report, if only for the purpose of revealing the sensitivity of the actuarial analysis to the basic assumptions affecting the growth rate. If the financial report included those alternative scenarios in the actuarial analyses, voters would be in a much better position to judge which policies and candidates would be more effective at encouraging the economic growth we need. The debate about fixing our unfunded liabilities would not then be limited to the issue of how to cut liabilities—it would include which new growth policies could help fund them.
Budget & TaxationBy Lee Harris, American Enterprise InstituteThe American, 05/24/2012
Even if the European austerity programs are right on the economics, they are politically disastrous. An oppressive totalitarian regime might try to impose them on its people against their will, through terror and intimidation, but no democracy can hope to do this. The political revolt in Greece, therefore, is not a fluke, but a harbinger of more revolts to come, along with more economic crises and more political paralysis. It would be absurd to compare the EU with the USSR in terms of their relative respect for freedom and democracy, but it is precisely the EU’s tradition of democratic principles that may well doom it to the same fate that befell the Soviet Union—a sudden and shocking collapse, followed by years of economic decline and political turmoil.
Monetary Policy/Financial RegulationBy Arnold Kling, American Enterprise InstituteThe American, 05/24/2012
When we think of regulation, we think of specific rules that spell out the boundaries between what is approved and what is forbidden. For example, requiring credit card issuers to give 45 days notice prior to a rate increase. I call this bright-line regulation. What I want to propose is an alternative approach, called principles-based regulation (PBR). With PBR, legislation would lay out broad but well-defined principles that businesses are expected to follow. Administrative agencies would audit businesses to identify strengths and weaknesses in their systems for applying those principles, and they would punish weaknesses by imposing fines. Finally, the Department of Justice would prosecute corporate leaders who flagrantly violate principles or who are negligent in ensuring compliance with those principles.
Economic and Political ThoughtBy Leon R. Kass, American Enterprise InstituteLecture, 05/24/2012
In this most fundamental sense, hope is not a hope for change, but an affirmation of permanence, of the permanent possibility of a meaningful life in a hospitable world. Hope in this sense is not only a Judeo-Christian virtue. It is not only the most essential—and abundant—American virtue. It is the condition of the possibility of all human endeavor and all human fulfillment. Yes, there is still much spiritual poverty in America. But we go forward with confidence that our spiritual hungers can yet be nurtured in this almost promised land, provided that we have the courage to insist that the well-being of the spirit is central to our notion of national success and personal flourishing. This war on poverty—on our spiritual poverty—will not add a cent to the deficit. It can enrich our lives beyond measure.
EducationBy Frederick M. Hess, Taryn Hochleitner, American Enterprise InstituteEducation Outlook, 05/24/2012
College ranking guides such as Barron’s Profiles of American Colleges and US News and World Report serve as bibles for college applicants and their families. The schools they proclaim as most competitive or elite receive a flood of applications, despite their often-hefty price tags. However, the ranks of the top-tier schools are growing, without any evidence that these schools’ instructional quality is increasing. Inflation in the number of applications each student submits means that each school seems more selective, and inflation in students’ high school GPAs means that their accepted student bodies appear more accomplished. This false sense of exclusivity allows top-tier schools to raise their tuition, knowing parents and students are willing to pay more for the sake of access to the perceived prestige of these institutions. Applicants and their families should be wary of letting these rankings serve as the main criteria in their college decisions.
Foreign Policy/International AffairsBy Frederick W. Kagan, et al., American Enterprise InstituteReport, 05/24/2012
The pattern of Iranian economic, social, political, and diplomatic activity seemed to possess a unity that US policy—stove-piped into separate US concerns such as the war in Iraq, the Israel-Palestinian peace process, the Iranian nuclear program, and, subsequently, the Arab Spring—often seemed to miss. This study makes clear that Iran does, indeed, pursue such a coherent smart-power approach to the region, although not always with success.
Monetary Policy/Financial RegulationBy Gerald P. O’Driscoll Jr., Cato InstituteCato Journal, 05/23/2012
My argument is simply that restoration of the gold (or other) commodity standard must be on the agenda for those wanting to restore a classical liberal order. Doing so undoubtedly requires greatly downsizing government. Downsizing government is its own imperative. A gold standard, by constraining central banks, would help limit the growth of government. It would also render possible a serious debate over the rationale for central banking.
Monetary Policy/Financial RegulationBy Roger W. Garrison, Cato InstituteCato Journal, 05/23/2012
It is undoubtedly true that no newcomer to the field can even begin to understand the current state of macroeconomics and policy formulation without understanding just how, dating from the pre-Keynesian era, the profession has arrived at this state. High theory today takes the form of stochastic dynamic general equilibrium analysis, while policy discussion, which concerns itself with economy-wide disequilibrium, centers on the effectiveness (or ineffectiveness) of old-style fiscal and monetary stimulants. The market is a process and so too is the theorizing about it. The history of macroeconomic thought reasserts its relevance at times of economic crises and almost inevitably leads us to the question “How far back do we have to go to start all over?” A plausible answer is that we have to go back to 1912 and the publication of Ludwig von Mises’s Theory of Money and Credit.
Monetary Policy/Financial RegulationBy Lawrence H. White, Cato InstituteCato Journal, 05/23/2012
Suppose for the sake of argument that we all agree to the following proposition: If we could change the monetary regime with zero switching cost, merely by snapping our fingers, we would prefer the United States to be on a gold standard. In the most general terms, a gold standard means a monetary system in which a standard mass (so many grams or ounces) of pure gold defines the unit of account, and standardized pieces of gold serve as the ultimate media of redemption. Currency notes, checks, and electronic funds transfers are all denominated in gold and are redeemable claims to gold. We then face the question: What would be the least costly way for the United States to make the transition to a new gold standard? We need to choose a low-cost method to ensure that the agreed benefits of being on the gold standard exceed the costs of switching over.
Monetary Policy/Financial RegulationBy William McBride, Kurt Schuler, Cato InstituteCato Journal, 05/23/2012
Despite extensive historical experience with free banking, it has long since become commonly accepted among economists, jurists, and the public at large that issuing notes and coins is properly a government monopoly. This attitude is at variance with attitudes about most other goods and even about other forms of credit. Over the last 30 years or so, people around the world have seen the benefits of moving from government monopoly to competition in many industries, including airlines, railroads, electricity generation, mail, and telephones. All former centrally planned economies now have competition in banking. Whether in Washington or Warsaw, no consumer would be happy with a monopoly government bank from which there would be no appeal if it refused him a mortgage, a car loan, or a credit card. Why, then, is note issue different?
Monetary Policy/Financial RegulationBy Ron Paul, Cato InstituteCato Journal, 05/23/2012
What we need to do is just restore the principle of liberty, defend our Constitution, and recognize that the government’s legitimate function is to safeguard property rights and freedom of contract, so that markets can expand. The monetary issue would not be that major if we allowed some competition to come in, but we have a long way to go on that.
Monetary Policy/Financial RegulationBy Kevin Dowd, Martin Hutchinson, and Gordon Kerr, Cato InstituteCato Journal, 05/23/2012
Going well beyond such measures is the need for a new constitutional settlement that reflects the lessons to be learned, of which the key lesson is simply that governments and money don’t mix. Central to this is therefore the need for a total separation of the state and the monetary and financial systems. This can be achieved only by a “free money” constitutional amendment.
Monetary Policy/Financial RegulationBy Richard H. Timberlake, Cato InstituteCato Journal, 05/23/2012
Since abolishing the Fed seems politically impossible, the next-best remedy would be a congressional mandate—perfectly reasonable since the Fed is a creature of Congress—voiding its monetary discretion, and requiring it to keep the general price level constant at all times and without exception. This rule is not the only one possible. However, the public understands its plausibility, and it is the only practical goal any central bank can achieve.
Monetary Policy/Financial RegulationBy Judy Shelton, Cato InstituteCato Journal, 05/23/2012
Something has gone terribly wrong with the world’s monetary system. It’s evident that some kind of fundamental reform needs to be implemented. The question is: Can governments be trusted to issue sound money, or is money too important to be left to the politicians? Is it reasonable to expect governments to abide by the discipline required to maintain sound money? Or have we set up an irresistible temptation by empowering governments to control both fiscal and monetary policy? Would it make more sense to return money to markets by privatizing money issuance? In this article, I propose a reform that would bring the power of market forces and competition to bear on the challenge of providing sound money while still giving government a principled role in the monetary system.
Monetary Policy/Financial RegulationBy George Selgin, Cato InstituteCato Journal, 05/23/2012
Like Bagehot, I offer here some second-best suggestions, informed by recent experience, for improving existing arrangements for dealing with financial crises. Unlike Bagehot, who merely recommended changes in the Bank of England’s conduct, I propose changes to the Federal Reserve’s operating framework. And although, like Bagehot, I consider my proposals mere “palliatives,” I do not assume that we cannot ultimately do better: on the contrary, I doubt that any amount of mere tinkering with our existing, discretionary central banking system will suffice to protect us against future financial crises. To truly reduce the risk of such crises, we must seriously consider more radical reforms.
Monetary Policy/Financial RegulationBy Benn Steil, Cato InstituteCato Journal, 05/23/2012
The financial crisis that began unfurling in 2008 has led to the refashioning of the model central bank governor along the lines of Churchillian war leader, willing to try anything with the money he conjures to restore economic growth. This raises important questions as to what limits, if any, elected officials should impose on such aspiring great men, and what limits markets will ultimately impose on them if elected officials forbear. This article focuses on the second of these questions.
Monetary Policy/Financial RegulationBy James Grant, Cato InstituteCato Journal, 05/23/2012
Good banking is produced not by rules but by good bankers, and the 2011 regulatory thrust is misdirected. Leveraged financial institutions are among the wobbliest of human contrivances. They are dangerous enough in a time of monetary orthodoxy and individual responsibility. In a world of paper money and socialized risk, they are positively combustible.
Monetary Policy/Financial RegulationBy George Melloan, Cato InstituteCato Journal, 05/23/2012
A creative society will invent substitutes if circumstances demand it. Gold clauses in contracts might offer some protection for traders. How about cyber-currency? There’s already something called a bitcoin in limited “peer-to-peer” circulation, partly for illicit activities, so I am told. The problem is that improvised substitutes for fiat currencies are usually inefficient. In some sense, fiat currencies have served well, judging from the healthy expansion of world trade and an impressive rise in global GDP over the years since Bretton Woods. Millions of Chinese and Indians, not to mention other nationalities in once poor lands, have been lifted out of poverty. But keep in mind that most of that growth took place in the 20 years after 1983 when America was running a fairly stable fiscal and monetary policy. We are right to be concerned today about the stewardship of the world’s most important fiat currency.
Monetary Policy/Financial RegulationBy John A. Allison, Cato InstituteCato Journal, 05/23/2012
The reason we need to get rid of the Fed is that as long as it exists the temptation for Congress to borrow until we go broke is there. Believing that members of Congress will discipline themselves if they can print money is incredibly naïve. From 1870 to 1913, the United States did not have a central bank, and yet we had a very successful economy; private banking systems actually have worked. But progress has been limited by the government’s monopoly on currency and by regulation. Markets are about experiments. Now some of the experiments don’t work. But the existence of a government agency in any arena destroys the experimentation process and keeps people from learning. Without government impediments, private free markets would have already solved a long time ago the problem of providing sound money.
Monetary Policy/Financial RegulationBy Allan H. Meltzer, Cato InstituteCato Journal, 05/23/2012
Overresponse to short-run events and neglect of longer-term consequences of its actions is one of the main errors that the Federal Reserve makes repeatedly. The current recession offers many examples of actions that some characterize as bold and innovative. I regard many of these actions as inappropriate for an allegedly independent central bank because they involve credit allocation, fill the Fed’s portfolio with an unprecedented volume of long-term assets, evade or neglect the dual mandate, distort the credit markets, and initiate other actions that are not the responsibility of a central bank.
Monetary Policy/Financial RegulationBy Jeffrey M. Lacker, Cato InstituteCato Journal, 05/23/2012
My former colleagues Al Broaddus and Marvin Goodfriend have argued that the design of central bank asset policy is “part of the unfinished business of building a modern, independent Federal Reserve.” The 1951 Treasury-Fed Accord gave the Fed independent control of its liabilities, a necessary ingredient in monetary policy ndependence. But the accompanying power to use the Fed’s asset portfolio to intervene in credit markets is a threat to that independence and a threat to financial stability. Sorting out the conundrum of central bank asset policy should be high on the agenda for all those interested in improving the practice of central banking.
Budget & TaxationBy Trevor Burrus, Cato InstitutePolicy Analysis, 05/23/2012
Public broadcasting has been in critics’ crosshairs since its creation in 1967. Assailed from all sides with allegations of bias, charges of political influence, and threats to defund their operations, public broadcasters have responded with everything from outright denial to personnel changes, but never have they squarely faced the fundamental problem: government-funded media companies are inherently problematic and impossible to reconcile with either the First Amendment or a government of constitutionally limited powers. The Constitution does not give Congress the power to create media companies, and we should heed the Founders’ wisdom on this matter. In fact, consistent with that wisdom, before the Corporation for Public Broadcasting was created, nonprofit, noncommercial media stations enjoyed a vibrant existence, remaining free to criticize current policies and exhibit whatever bias they wished. Yet today the taxpayer contribution to public broadcasting, although relatively small, clearly influences the decisions of public broadcasting officials.
Monetary Policy/Financial RegulationBy Thomas L. Hogan, Cato InstitutePolicy Analysis, 05/23/2012
Privately issued money can benefit consumers in many ways, particularly in the areas of value stability and product variety. Decentralized currency production can benefit consumers by reducing inflation and increasing economic stability. This paper examines two ways in which banks could potentially issue private money. First, U.S. banks could issue private notes redeemable for U.S. Federal Reserve notes. Considering that banks issuing private notes in Hong Kong, Scotland, and Northern Ireland earn hundreds of millions of dollars annually, it appears that U.S. banks may be missing an opportunity to earn billions of dollars in annual profits. Second, recent turmoil in the financial sector has increased demand for a stable alternative currency. Banks may be able to capture significant portions of the domestic and international currency markets with a private, commodity-based currency.
LaborBy James Sherk, The Heritage FoundationIssue Brief, 05/23/2012
Unions should not be permitted to retaliate against employees who expose corruption. Congress should create whistle-blower protections for union employees under the Labor-Management Reporting and Disclosure Act. This would protect honest union officers and encourage them to reveal corruption—helping to root out corruption in the union movement. A union employee who witnesses misconduct should not have to choose between his conscience and his job.
The Constitution/Civil LibertiesBy Andrew Grossman, The Heritage FoundationIssue Brief, 05/23/2012
The Ninth Circuit correctly dismissed Jose Padilla’s lawsuit against John Yoo, the former Department of Justice official who provided key analysis of legal questions arising from the war on terrorism. But being the traditionally liberal and oft-reversed Ninth Circuit, the court could not leave well enough alone and issued an opinion that casts doubt on the lawfulness of terrorist detention policies and opens the door to future lawsuits against officials responsible for developing and implementing national security policies. Though it reached the right result, the court’s reasoning sets a dangerous precedent that may hinder future responses to attempted acts of terrorism. The Constitution assigns responsibility for national security to the political branches, and the courts should be far warier than the Ninth Circuit in second-guessing their decisions.
Foreign Policy/International AffairsBy Lisa Curtis, The Heritage FoundationIssue Brief, 05/23/2012
Pakistan missed a valuable opportunity to create goodwill with the U.S. and other NATO members when it failed to announce a reopening of NATO supply routes to Afghanistan at the summit held Sunday and Monday in Chicago. Not only has Pakistan’s closure of the supply routes over the past six months made the war effort more expensive for NATO members, but its failure to crack down on Taliban and Haqqani network sanctuaries on its soil has prolonged the war and undermined the overall NATO mission in Afghanistan. Unless Pakistan demonstrates that it is willing to make greater efforts to help bring peace and stability to Afghanistan, the U.S. and NATO should shift their diplomatic focus to working more closely with other countries in the region, including the Central Asian states and India.
Foreign Policy/International AffairsBy Morgan Lorraine Roach, The Heritage FoundationIssue Brief, 05/23/2012
Currently, there is no legal clarity for classifying Boko Haram or its actions. Should the Obama Administration designate Boko Haram as an FTO, the U.S. government would be required to hold members of the organization and individuals who provide material support to it criminally liable. FTO designation also provides closer interagency counterterrorism coordination, as all U.S. agencies recognize listed organizations. FTO designation would also encourage the Nigerian government to take the threat Boko Haram poses to its national security more seriously. President Goodluck Jonathan and his administration lack a comprehensive strategy for managing the current crisis. Designating Boko Haram would erase any ambiguity regarding U.S. policy and could be used as a diplomatic tool to encourage a more robust Nigerian approach. Most importantly, FTO designation would restrict Boko Haram’s ability to operate and limit the threat the organization poses to the United States and its citizens.
Health CareBy Baker Spring, The Heritage FoundationIssue Brief, 05/23/2012
The DOD’s health care costs are growing so quickly that they are contributing to an internal imbalance in defense budgets. In the context of forecasted defense budgets that are way too low to meet U.S. national security commitments, these rising health care costs are effectively robbing from the accounts that fund new weapons and equipment for the military. Accordingly, all proposals that serve to reduce the projected growth rate in military health care deserve appropriate consideration. No stone should be left unturned, including ones related to the management structure for overseeing the MHS.
Foreign Policy/International AffairsBy James Phillips, The Heritage FoundationIssue Brief, 05/23/2012
The revived nuclear talks with Iran, set to resume May 23 in Baghdad, face an uncertain and risky future. Iran has a long history of exploiting diplomatic talks on the nuclear issue as a means of forestalling international pressure, easing sanctions, and buying time for its steadily advancing nuclear program. The United States should stand firm and prevent backsliding by the international coalition mobilized to pressure Tehran to halt its nuclear weapons program. In particular, sanctions on Iran should not be lifted or reduced until Tehran has taken concrete and irreversible steps to halt its uranium enrichment program, transferred its stockpile of enriched uranium out of the country, allowed more intrusive inspections, and dismantled its enrichment facility at Fordow.
Foreign Policy/International AffairsBy Dean Cheng, The Heritage FoundationBackgrounder, 05/23/2012
Over the past decade, there has been growing interest in legal warfare or “lawfare.” While the U.S. is focusing on the interplay between the law and counterinsurgency operations, China is approaching lawfare from a different perspective: as an offensive weapon capable of hamstringing opponents and seizing the political initiative. Indeed, Chinese planners are almost certainly preparing legal war plans aimed at controlling the enemy through the law or using the law to constrain the enemy. Consequently, the United States must take steps to prepare for the possibility of legal warfare and incorporate defensive measures into its strategic, operational, and tactical policies.
Foreign Policy/International AffairsBy Morgan Lorraine Roach, Ray Walser, The Heritage FoundationBackgrounder, 05/23/2012
Famine, drought, war, piracy, international terrorism, and the absence of democratic governance: The factors behind, as well as the symptoms of, the failed Somali state are legion. Despite its woes, Somalia has not been considered a U.S. foreign policy priority—an unfortunate relegation that has undermined national security. Yet, as terrorist groups like al-Shabaab increase their grip on the region, the U.S. can no longer afford to be anything but fully engaged with Somalia. Rather than attempting another round of unsuccessful “nation building,” the U.S. should set the conditions that will allow the Somalis to secure a more prosperous and secure future, while mitigating threats to U.S. security.
National SecurityBy Rebeccah Heinrichs, The Heritage FoundationAmerica at Risk Memo, 05/22/2012
Threats to America’s security, way of life, and allies are increasing rather than decreasing. Instability persists in the Middle East, terrorists continue to plot attacks, adversaries buy and sell ballistic missiles and nuclear technology, and the intent of countries with the ability to pose a strategic threat to the U.S. can suddenly change. Director of National Intelligence James Clapper recently said, “Never has there been in my almost 49-year career in intelligence a more complex and interdependent array of challenges than that we face today.” Yet the Obama defense budget leads one to believe the President views the world as less dangerous and that after 10 years of war, the U.S. can relax its guard. The truth is that the President’s budget both fails to provide the capabilities the U.S. requires to protect its national interests and threatens to diminish American preeminence.