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Recent Policy Studies
WelfareBy David J. Armor, Sonia Sousa, National AffairsNational Affairs, 09/25/2012
The key to controlling our swiftly growing welfare programs is to think in terms of the purpose and not just the size of government. The idea that anti-poverty programs should help those who are poor is so obvious as to be a tautology. And yet—as the data above illustrate clearly—this is not at all how our federal anti-poverty programs work today. By bringing these programs into line with their original, stated aim—providing a safety net for people who are actually poor or who have serious disabilities—enormous budget savings can be realized. And because our massive debts put all federal programs in danger, making the reasonable reductions outlined above will actually put our welfare programs on more sustainable long-term footing. In so doing, it will also preserve a true safety net for Americans in need.
The Constitution/Civil LibertiesBy Joshua D. Hawley, National AffairsNational Affairs, 09/25/2012
The federal judiciary is in many respects the nation’s best-functioning branch of government. It does justice in thousands of cases every day. It defends and enforces Americans’ liberties; it is a model of efficiency, professionalism, and excellence. As for the Supreme Court, it too has done the country much good. But for all its proud history, it has proved to be a dangerous institution—the most dangerous, in fact, of any branch of government. The Court’s very design makes it a threat to the vital separation of constitutional law and politics. And the Court’s praxis over the past half-century has turned that threat into very real harm. If conservatives want to make the Court safe for democracy, they should focus less on getting it to reach the right constitutional results—and should focus instead on having it reach far fewer constitutional results in the first place.
EducationBy Marcus A. Winters, National AffairsNational Affairs, 09/25/2012
Given what is at stake, it seems obvious that the nation’s public-school system should want to do everything in its power to make sure that children are instructed by the best teachers possible—using pay, tenure, and other incentives to reward quality, not simply longevity. But such reforms are not possible without a reliable, empirical measure of teacher quality—one rigorous and objective enough to withstand the opposition of teachers concerned primarily with their own comfort and job security. Fortunately, value-added analysis offers just such a measure. While not perfect, the value-added approach does provide important information that is missed by the current system and can be used to identify our best- and worst-performing public-school teachers. And reforming that system—which is now so stacked in the teachers’ favor as to be completely ineffective—is the first step toward the ultimate aim of ensuring that all public-school students receive a quality education.
Health CareBy Kip Hagopian, Dana Goldman, National AffairsNational Affairs, 09/25/2012
The approach to health insurance described here would have several important advantages over both the health-care system which has long-reigned in America and the reforms sought by the Affordable Care Act. The purpose of this sketch is to suggest a conceptual approach to health insurance that could make the system more efficient and, at the same time, also provide real insurance coverage for all Americans at a reasonable cost. Pursuing universal catastrophic health insurance would allow us to overcome many of the obstacles that have stood in the way of a rational health-care system for decades. And it could offer a market-friendly and practical path to universal coverage—without breaking the bank.
Health CareBy David P. Kessler, National AffairsNational Affairs, 09/25/2012
Medicare’s out-of-control spending is the natural result of its centralized, politicized structure. The creation of a centralized board of cost controllers—all political appointees—is thus not the way to address it. Premium support, in contrast, would deal with Medicare’s fundamental problems far better. It would commit the program to a structure more resistant to lobbying by interest groups and meddling by Congress. It would create incentives for insurers and beneficiaries to avoid low-value care and invest appropriately in controlling fraud and abuse. And its market mechanisms would allow Medicare to make greater use of prices in order to transmit information about the real costs of treatment decisions and insurance-policy design. All of these factors would make Medicare better at delivering good value and controlling spending. Premium support does carry risks, but when compared against the idea’s advantages—and against the vastly greater danger of national fiscal collapse—those risks are worth taking.
Health CareBy Arthur B. Laffer, Pacific Research InstituteReport, 09/25/2012
This study, which covered 100% of all Texas Medicaid dental patients in fiscal year 2011, finds that DSOs are doing just what Congress hoped they would do. DSOs are providing dental care to some of the poorest, most underserved segments of society. DSOs are not only providing much needed care, but they are providing that care expeditiously and relatively inexpensively when compared to non-DSO affiliated dentists. Rather than being vilified, DSOs should be applauded as a win-win-win solution.
Crime, Justice & the LawBy David A. Wilson, Washington Legal FoundationLegal Opinion Letter, 09/25/2012
Over the last decade or so, the implementation of Sarbanes-Oxley, the incentives in the U.S. Sentencing Guidelines, and other factors have elevated the need for rigorous corporate compliance programs. Strong compliance program can prevent and deter violations of the law, and can at least partially mitigate penalties if a violation is found. But an unanticipated pitfall may exist in a gray area at the intersection of compliance programs and supervisory liability under the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940. A recent case in the Securities and Exchange Commission (SEC), which subjected the general counsel of a broker-dealer to a five-year investigation for failing to supervise a broker, highlights the uncertainty and risk that those charged with compliance responsibilities in the investment advisory business may face.
Crime, Justice & the LawBy Nicholas Vari, Washington Legal FoundationLegal Opinion Letter, 09/25/2012
In deciding that protective respirators fall outside the scope of its prior Braaten decision, the Washington Supreme Court provided limited guidance in defining the products that fall within the realm of Braaten. Nevertheless, in affirming Braaten and its progeny, this court left no doubt that Braaten remains in full force, and that suppliers of valves and pumps to the United States Navy are not legally responsible for asbestos-containing materials that the Navy chose to use with the steam systems on its ships. Moreover, the Court continued the trend of considering the element of control of a particular use to be the guiding principle in deciding whether a product manufacturer can be liable for harms caused directly by materials made and sold by others.
Economic and Political ThoughtBy Jean M. Yarbrough, The Heritage FoundationArticle, 09/25/2012
Theodore Roosevelt, 26th President of the United States (1901–1909), was the youngest and arguably most energetic man ever to fill that office. Growing up in the Gilded Age, he regarded commercial ideals as “mean and sordid” and brought these sensibilities with him into public life. A firm believer in what he called the manly virtues, he urged his countrymen to fight for the right. As President, he pushed executive powers to new limits, arguing that the rise of industrial capitalism had rendered limited government obsolete.
Budget & TaxationBy Curtis Dubay, The Heritage FoundationBackgrounder, 09/25/2012
The Tax Policy Center (TPC) recently released a report that erroneously concludes that Governor Mitt Romney’s tax reform plan would necessarily cut taxes for the rich and raise them for middle-income and low-income taxpayers. However, despite the authors’ claims, their analysis is far from definitive. Instead, their conclusion is the result of a series of carefully made choices. These choices, not the underlying nature of the Romney plan, cause them to arrive at their selected result. This finding is harming the debate on tax reform.
Budget & TaxationBy Duanjie Chen, Jack Mintz, Cato InstituteTax & Budget Bulletin, 09/25/2012
This bulletin presents new estimates of marginal effective tax rates (METRs) on corporate investment for 90 countries. These tax rates take into account statutory rates plus tax-base items that affect taxes paid on new investment, such as deductions for capital depreciation, inventory costs, and interest expenses. This bulletin ignores temporary incentives because they do not support sustained capital investment, but instead shift investment from the future to the present year. It finds that the U.S. effective tax rate on new corporate investment is 35.6 percent in 2012, which is almost twice the average rate for the 90 countries studied, and it is also the highest rate among the major industrial nations. These results underscore the need for U.S. policymakers to tackle corporate tax reform.
Foreign Policy/International AffairsBy Bruce Klingner, The Heritage FoundationBackgrounder, 09/25/2012
Greater military and political cooperation between South Korea and Japan would protect South Korean, Japanese, and U.S. national interests in Asia. The growing North Korean and Chinese security threats to the region have motivated South Korea and Japan to cooperate more, but historical animosities and recent diplomatic missteps have constrained bilateral cooperation. The U.S. can best facilitate increased South Korean–Japanese cooperation by creating opportunities for more robust trilateral cooperation and by continuing to maintain the stabilizing force of a robust forward-deployed U.S. military presence in the region.
Foreign Policy/International AffairsBy Renato De Castro, Walter Lohman, The Heritage FoundationBackgrounder, 09/25/2012
The recent standoff at Scarborough Shoal between the Philippines and China demonstrates how Beijing is targeting Manila in its strategy of maritime brinkmanship. Manila’s weakness stems from the Philippine Air Force’s (PAF) lack of air-defense system and air-surveillance capabilities to patrol and protect Philippine airspace and maritime territory. The PAF’s deplorable state is attributed to the Armed Forces of the Philippines’ single-minded focus on internal security since 2001. Currently, the Aquino administration is undertaking a major reform to shift the PAF from its focus on counterinsurgency to its original role of air defense, an effort hindered by the perennial lack of funds. It is imperative for the U.S.— Philippines’ alliance—to assist the PAF in developing the air power and skills to spread its wings and protect the country’s territory.
National SecurityBy The Heritage Foundation, The Heritage FoundationIssue Brief, 09/25/2012
The Heritage Foundation has recently published a number of Issue Briefs and blog posts analyzing the Obama Administration’s policies and congressional proposals on cybersecurity. These writings cover the President’s recent draft executive order, legislation, and whether the government is better able than the private sector to protect against cyber attacks.
Budget & TaxationBy Scott A. Hodge, William McBride, Tax FoundationReport, 09/24/2012
As this book shows, much of the perceived rise in inequality is really the natural result of the business cycle as well as social and demographic forces far beyond the role of tax policy. Indeed, there is no evidence of a long-term trend in inequality over the last 20 years, only wide swings up and down. Thanks to misdirected tax policy, America is becoming divided between a shrinking group of taxpayers who are bearing the lion’s share of the cost of government today and a growing group of taxpayers who are disconnected from the basic cost of government. The goal of this book is to put a face on the ever-changing demographics of American taxpayers. The failure to understand these changes has produced poor tax policy and threatens to undermine efforts to overhaul the tax code.
Budget & TaxationBy Cecil E. Bohanon, Brandon M. Pizzola, Mercatus CenterReport, 09/24/2012
The question of who pays a tax has a discernible answer that need not be shrouded in technical mystery. This paper offers those who have little or no formal exposure to economics a tutorial in the economics of tax incidence. The analysis begins by considering a simple market for butter in a provincial town in France. A tax is placed on butter and its impact on both buyers and sellers is examined. A number of general principles of tax incidence are derived. The paper then examines three taxes used in the United States. Evidence as to the incidence of each tax is presented. The empirical analysis is broadly consistent with the theoretical predictions. The upshot is that a bit of basic economic analysis coupled with some common sense will take the untrained analyst a long way in making reliable predictions as to tax incidence.
Budget & TaxationBy Stephen Slivinski, Goldwater InstitutePolicy Report, 09/24/2012
Policymakers in states across the country are searching for solutions to unemployment and a faltering economy. The answers, though, are simple and within reach. Legislators looking for a bold economic growth strategy should seriously consider the benefits of unshackling state economies from the income tax—a tax that penalizes workers, creates double taxation, and inhibits investment. A new tax structure can be revenue neutral while spurring economic growth. This combination is possible because the type of taxes a state imposes matter. By taxing wages, income taxes penalize work and dissuade investment and job growth. By contrast, a system of sales taxes encourages work and investment, eliminates tax loopholes, and reduces politicization of the tax code. Those changes help to spur economic growth and job creation.
Economic and Political ThoughtBy James A. Dorn, Cato InstituteCato Journal, 09/24/2012
There is no more important question than the scope of government in a free society. The legitimate functions of government help define the range of choices open to individuals and, hence, the boundaries between the individual and the state. Limiting the powers of government to the protection of persons and property—broadly understood in the Lockean sense as “lives, liberties, and estates”—provides a clear sense of justice and promotes a spontaneous market order, enhancing both personal and economic liberties. An overreaching government does the opposite.
LaborBy Todd C. Neumann, Jason E. Taylor, Jerry L. Taylor, Cato InstituteCato Journal, 09/24/2012
Increases in equilibrium wage rates are the desirable by-product of rising worker productivity, but policy-driven wage increases, such as those that followed the NIRA (National Industrial Recovery Act of 1933) and NLRA (National Labor Relations Act), would be expected to exacerbate the unemployment problem in a depressed economy. In fact, the economy experienced significant recovery between May 1935 and April 1937, only to falter again in the months that followed. In this article, an empirical analysis is performed to determine whether the different movements in labor input, output, and real wage rates between policy regimes persists when controlling for changes in fiscal and monetary policy. Our results suggest that the recovery that occurred between Schechter and Jones & Laughlin was indeed related to the absence of the harmful policies that preceded and followed those decisions.
Budget & TaxationBy Masoud Moghaddam, Cato InstituteCato Journal, 09/24/2012
This article attempts to revisit the evidence in favor of the “fiscal illusion hypothesis,” according to which tax cuts actually increase rather than decrease government spending, as presented by Young (2009). It ultimately tries to show that Young’s own findings invalidate the main contention of his article.
Monetary Policy/Financial RegulationBy David Cronin, Cato InstituteCato Journal, 09/24/2012
This article revisits the key conceptual aspects of the New Monetary Economics (NME) by examining the idea of “monetary separation” and objections raised against it. So long as a dominant role for base money in exchange exists, using it to provide the unit of account remains advantageous and is likely to outweigh any mooted benefits of separation. Recent quantitative analysis, however, shows the transaction demand for government base money to be falling, a development that can be expected to continue in the years ahead. The passage of time thus seems to be weakening the principal basis on which monetary separation has been criticized—namely, the superiority of base money in payments. That development fits into the history of money told by Austrian economists, which emphasizes payment practices evolving over time in response to technological improvements and market forces.
EducationBy Nathan L. Gray, Cato InstituteCato Journal, 09/24/2012
K–12 education policy has recently received much scrutiny from policymakers, taxpayers, parents, and students. Reformers have often cited increases in spending with little noticeable gain in test scores, coupled with the fact that American students lag behind their foreign peers on standardized tests, as the policy problem. School choice, specifically charter school policy, has emerged as a potential remedy. School choice is hypothesized to have both participant and systemic (sometimes called competitive) effects. This article concentrates on the latter by using a novel design not used before in studies of this subject. School level data from Ohio are analyzed to estimate if traditional public schools potentially threatened by charter schools respond with positive test score gains. Specifically, an exogenous change to the education system in 2003 provides a natural experiment to examine potential systemic effects. Results indicate that the threat of charter schools seems to have had a small positive effect on traditional public school achievement.
Economic and Political ThoughtBy Kruti Dholakia-Lehenbauer, Euel W. Elliot, Cato InstituteCato Journal, 09/24/2012
This article explores four questions. First, what theoretical frameworks help describe policy failure and success? Second, how might the decision that leads to failure or success be understood in terms of differing concepts of rationality and decisionmaking? Third, how does the discussion of risk and uncertainty as originally proposed by Frank Knight (1921) apply to a better understanding of both the first and second questions? Fourth, what is the relationship between serial and parallel processing and how are these administrative systems related to important aspects of the prior questions? The chief contribution of this article is to show the ways in which these questions and their respective theoretical frameworks are interrelated as applied to one important contemporary policy question—climate change. This paper’s proposed integration of the various literatures offers important insights into the challenges policymakers face in deciding whether or not to adopt a particular policy.
Economic GrowthBy Bruce K. Gouldey, Clifford F. Thies, Cato InstituteCato Journal, 09/24/2012
This article argues that, when a housing bubble bursts, the combination of high loan-to-value mortgages and costly foreclosures can inhibit house prices from quickly falling to their new equilibrium levels. The adjustment problem manifests itself, among other ways, in homeowners being unable to complete the sale of their houses at current market values. For some time, the resulting supply failure distorts the supply of houses offered for sale, inventories of houses listed for sale, and the relative prices of different quality houses. The model developed here suggests instead public policy should focus on unwinding uneconomic contracts in order to enable house prices to fall quickly to their equilibrium levels. Such policies would enable more homeowners to sell their houses at then current market prices, restoring the normal turnover of the housing stock and housing mobility to families. Indeed, by returning a measure of liquidity such policies would, in the long term, contribute to the demand for housing.
Economic GrowthBy Deepak Lal, Cato InstituteCato Journal, 09/24/2012
This article examines the basis of the “new” theoretical curiosa questioning the Washington Consensus – which promoted a classical liberal approach to economics – as they now form the basis of the advice given by the “new dirigiste“ (that is, advocates of government planning to facilitate economic development) to alleviate Third World poverty. It also briefly examines the claim that the Chinese economic “miracle” was created not by the replacement of the plan by the market, but by various forms of dirigisme, which has led to a new “Beijing Consensus” to replace the defunct Washington Consensus.
Economic and Political ThoughtBy Dwight R. Lee, Cato InstituteCato Journal, 09/24/2012
This paper argues that even if Keynesian remedies could be implemented in a timely manner, there are other serious problems undermining Keynesian hopes for moderating the decline, duration, and frequency of economic downturns. The first problem is that Keynesian prescriptions are filtered through a political process being driven by many competing agendas, of which balanced economic growth is only one. The second problem is that both Keynesian economics and the political process are almost entirely focused on short-run demand-side concerns while largely ignoring the long-run importance of economic productivity. The result is a political dynamic that has increasingly turned Keynesian economics into a prescription for fiscal irresponsibility that undermines economic growth without promoting economic stability.
Foreign Policy/International AffairsBy Terry Miller, et al., The Heritage FoundationIssue Brief, 09/24/2012
On September 25, President Obama will address the U.N. General Assembly. With anti-American protests continuing throughout the Islamic world and setbacks to key U.S. foreign policy goals, the President should deliver a strong, confident speech that reflects America’s determination to defend its interests and serve as a constructive force for good. President Obama should make clear where the U.S. should stand on the key issues that will be at the fore of the delegates’ consideration. These are core challenges for advancing the causes of freedom, peace, and prosperity.
Foreign Policy/International AffairsBy Ray Walser, The Heritage FoundationIssue Brief, 09/24/2012
While the murder of American diplomats and violent anti-American riots across the Islamic world dominate the news cycle, it is easy to overlook the slow burn of anti-Americanism closer to home. In the Western Hemisphere, Hugo Chávez’s Venezuela, the Castro brothers’ Cuba, and the other members of the Bolivarian ALBA movement continue to advance a hostile, if less violent, anti-American agenda. Washington urgently requires a policy that stands against manifestations of anti-Americanism in the Americas by denying trade benefits and loan concessions, withholding ambassadors, and standing firmly with friends of liberty and democracy against those who wish the U.S. ill.
Foreign Policy/International AffairsBy William A. Niskanen, Cato InstituteCato Journal, 09/24/2012
In 2005, a proposed constitution for the European Union was defeated, only to have most of its provisions implemented in December of 2009 under the Lisbon Treaty. Such measures, however, do not reflect Europe’s only possible future. The major alternative political and economic futures for Europe are nationalism, selective functional integration, an association of European states, and a European state. This article addresses the considerations that bear on the choice among these alternatives. It suggests that over time, a demonstrably imperfect Europe of national states may be a better protection of liberty than approving the proposed constitution in the hope for a more perfect European Union.
Foreign Policy/International AffairsBy Lazar Berman, American Enterprise InstituteReport, 09/24/2012
Thus far, Israel’s Iron Dome air defense system has met with success in intercepting enemy rocket attacks, winning it attention and accolades from a grateful public. However, critics of the system have declared it too costly, too slow, and the result of poor planning. In either case, Iron Dome has the potential to significantly affect not only Israel’s defense strategy but also the offensive strategies of its enemies in the region. The United States also has a great stake in the project because of its interest in preserving Middle East peace, democracy, and access to oil. Though Israel developed the system on its own, the United States has been involved in the post-deployment development and funding of the system, and President Obama has promised further funding over the next few years. Examining the strengths and weaknesses of the system will help clarify its strategic implications for all involved.
Monetary Policy/Financial RegulationBy John H. Makin, American Enterprise InstituteEconomic Outlook, 09/24/2012
The latest Federal Open Market Committee (FOMC) statement, released on September 13, amounts to an extraordinary upgrade in the intensity of the Fed’s efforts to ignite more growth and reduce unemployment. The new approach to monetary policy, QE3+, aims at enabling the Federal Reserve to affect real variables like the level of unemployment by committing it to taking further action if goals are not met and maintaining a highly accommodative policy stance—zero interest rates and quantitative easing (QE)—even after the economy starts to improve. QE3+ is a risky, experimental approach to monetary policy that carries with it the chance of higher inflation.
Economic GrowthBy Christine Chmura, Thomas Jefferson Institute for Public PolicySpecial Report, 09/24/2012
Although Virginia is faring better than the rest of the nation, a robust economic recovery in the Commonwealth continues to be dampened, according to the 2012-2013 Virginia Economic Forecast, the thirteenth annual report on the economy conducted by Chmura Economics & Analytics and released by the Thomas Jefferson Institute for Public Policy. The Forecast projects a number of key economic data for Virginia, including employment, wages and salaries, retail sales and housing, and compares them with national projections.
EducationBy Audrey Spalding, Show-Me InstituteCase Study, 09/24/2012
During the 2012 legislative session, Missouri lawmakers failed to pass public school funding reform and failed to do much to address the increasing number of students trapped in failing districts. Education funding continues to consume a large share of the state budget, and public school districts receive billions in local property tax revenues. Meanwhile, student academic achievement in Missouri remains low when compared to other states. As innovation continues to change the way society works and communicates, forms of virtual education are beginning to take hold in Missouri and elsewhere. Virtual education has been shown to reduce the costs of educating public school children, increase course diversity, and help students graduate.
LaborBy David Neumark, Show-Me InstitutePolicy Study, 09/24/2012
Some advocates in Missouri would like to see the state’s minimum wage increased to as much as $8.25, and to index it to the rate of inflation so that it will continue to climb in subsequent years. The main argument proffered in favor of a minimum wage increase is that it will help poor and low-income families. But a higher minimum wage is unlikely to achieve this goal. A higher minimum wage will likely reduce employment among the very low-wage, low-skilled workers that minimum wage proponents are trying to help. A large body of research illustrates the disemployment effects of minimum wage. In the current economic environment, with unemployment remaining high and job growth fairly stagnant, it may be far wiser for policy to focus on increasing employment among the unemployed, rather than trying to increase the wages of the employed.
Health CareBy Paul Howard, Manhattan InstituteIssues, 09/24/2012
This report considers criticisms of Medicaid block grants and suggests a block-grant design (based on bipartisan block-grant welfare reforms enacted in 1996) that encourages states to experiment with Medicaid reforms to help control costs while improving patient outcomes. Federal block-grant goals should encourage states to 1) design coverage and care arrangements that improve health outcomes for Medicaid recipients through a variety of care options and benefit structures (including co-pays and preferred provider network designs) 2) coordinate and delivering care in the most cost-effective fashion, with an emphasis on preventive care and wellness programs that encourage patients to take more responsibility for maintaining good health, 3) target federal resources in relation to a state’s relative population of low-income and disabled, adjusted for cost of living (to ensure that poorer states with relatively larger poor and disabled populations would receive more federal aid than wealthier states), and 4) encourage the uptake of high-quality private insurance.
EducationBy Lindsey Burke, Stuart M. Butler, The Heritage FoundationBackgrounder, 09/21/2012
America’s higher education system is in dire need of reform. The average college student leaves school with more than $23,000 in debt, and total student loan debt in the United States now exceeds $1 trillion. Furthermore, too many students are leaving college without the skills needed to be successful in the workforce. And yet, despite the dire state of today’s higher education system, there is hope on the horizon: By favoring knowledge and skill acquisition over seat time, online options and competency-based learning are disrupting the traditional higher education market and perhaps have laid the foundation for a revitalization of American education. Despite the promise presented by these innovations, however, the antiquated higher education accreditation process remains a considerable obstacle to reform.
Budget & TaxationBy Will Freeland, William McBride, Ed Gerrish, Tax FoundationSpecial Report, 09/21/2012
There is reason to be concerned about the broad political and fiscal consequences of disconnecting the 58 million Americans who don’t pay income tax from the basic costs of government. This report finds that the growth of nonpayers is strongly associated with increases in transfer payments and the national debt. Indeed, the twenty-year growth in nonpayers is associated with more than $213 billion in increased transfer spending and a 14 percentage point increase in the debt-to-GDP ratio in 2010 alone. Similarly, it finds that for every 1 percentage point increase in the share of tax filers who are nonpayers, the debt as a percentage of GDP increases by 0.704 percentage points. These findings imply that when voters perceive the cost of government to be cheaper than it really is, they demand ever more government benefits because they either don’t feel the cost directly or believe that others will be paying those costs.
Crime, Justice & the LawBy John Malcolm, The Heritage FoundationIssue Brief, 09/21/2012
The Inspector General (IG) of the U.S. Department of Justice (DOJ) has come out with a long-awaited report about Operation Fast and Furious. As described in a previous Legal Memorandum, this was an ill-conceived gun-smuggling investigation to identify the kingpins of a firearms trafficking network—and the Mexican cartel leaders behind that network—that resulted in the sale of over 2,000 high-powered weapons to “straw purchasers” for about $1.5 million in cash. The vast majority of these weapons (only 105 weapons were seized before being transported into Mexico) ended up in the hands of dangerous thugs who used them to commit murder and mayhem. This report shows that critics of the failed operation were right.
Economic GrowthBy James Roberts, Mark Schreiber, Derek Scissors, The Heritage FoundationSpecial Report, 09/21/2012
Brazil is the world’s fifth-largest country, Latin America’s largest economy, and an important trading partner for the U.S. The Brazilian government dominates many areas of the country’s economy, undercutting development of a more vibrant private sector, and Brazil’s four-year growth average of 4 percent has recently weakened. Government expenditures consume more than 40 percent of GDP. The pace of Brazil’s regulatory reform has slowed, and the tax burden is much heavier than in many other emerging economies. Corruption is high, private property rights are insecure, and the judicial system remains vulnerable to political influence. Brazil needs more economic freedom, and the government should eliminate barriers to entrepreneurial activity—burdensome taxes, inefficient regulation, flaws in long-term financing, and continuing government-created rigidities in the labor market.
The Constitution/Civil LibertiesBy Paul Rosenzweig, et al., The Heritage FoundationBackgrounder, 09/21/2012
Flying drones—unmanned aerial vehicles—have been made famous by their use in the war on terrorism, notably in operations in Iraq and Afghanistan, but such military drones are a small fraction of those used by the United States today. Thousands of drones are used for a wide variety of purposes, from scientific research to military operations. Both government and the private sector use drones mostly without weapons capabilities. Because of their wide-reaching surveillance capabilities, however, even unarmed drones could threaten personal privacy and civil liberties. As the Federal Aviation Administration develops regulations for the operation of drones in domestic skies, it should consider constitutional concerns and privacy rights.
Foreign Policy/International AffairsBy Baker Spring, Michaela Bendikova, The Heritage FoundationIssue Brief, 09/20/2012
The State Department recently released its 2012 Annual Compliance Report, which informs Congress and the public about how the United States and other countries are fulfilling their multilateral and bilateral treaty obligations regarding arms control and nonproliferation. Regrettably, the report is not an objective assessment of U.S. or foreign compliance with these obligations. Accordingly, it serves to undermine the legitimacy and effectiveness of the arms control process.
Monetary Policy/Financial RegulationBy J.D. Foster, The Heritage FoundationIssue Brief, 09/20/2012
The Federal Open Market Committee announced a third round of quantitative easing (QE) on September 13 with the intent of stimulating the economy. Two key arguments in support of QE3 are that it will put downward pressure on long-term interest rates and that it will induce an increase in asset prices that will induce an increase in personal consumption. A careful examination shows both arguments to be weak and the latter argument to echo an unfortunate past experiment in monetary policy. However, if the Fed goes forward with its plan to buy an additional $40 billion in long-dated federal agency-backed debt and do so indefinitely, it will be adding nearly a half-trillion dollars a year to its already worrisome balance sheet. Shrinking the balance sheet to a more normal size by unloading all these long-dated assets will prove difficult Bernanke should find a convenient excuse to stop QE3 before he does any more damage.
Natural Resources, Energy, Environment, & ScienceBy Nicolas Loris, The Heritage FoundationIssue Brief, 09/20/2012
Proposed and newly implemented administrative regulations affecting coal will drive up energy costs for American consumers and business owners, destroying jobs and cutting deeper into people’s pocketbooks. All of this is being done by unelected bureaucrats in Washington who are protected from being held accountable by those who are harmed by their policies. H.R. 3409, the Stop the War on Coal Act, would restrict the federal government’s regulatory overreach and reaffirm the states’ role in regulating coal activities
WelfareBy Robert Rector, The Heritage FoundationBackgrounder, 09/20/2012
In 1996, Congress enacted welfare reform legislation that included three main elements, the most important being the work requirement. As a result of this reform, welfare caseloads dropped by half and employment rates among welfare recipients soared. Nonetheless, this sparked significant liberal opposition, which has increased over the years even though the vast majority of Americans favor work requirements. Unable to roll back workfare legislatively, liberals are employing an illegal bureaucratic tactic to gut the work requirements in the original legislation. The Obama Administration has declared the work provisions null and void and has granted itself unlimited authority to re-craft the work standards in any manner it chooses.
Health CareBy Hadley Heath, Independent Women's ForumReport, 09/20/2012
Medicare cannot continue as it has operated in the past. That’s why President Obama also included significant reforms to Medicare in his health law, the Affordable Care Act. Both Ryan and Obama recognize that Medicare faces trillions of dollars in unfunded liabilities, and something must be done to bring those costs down. Americans need to understand how both Ryan and Obama’s Medicare reforms work so that they can decide which option they prefer for Medicare in the future.
Budget & Taxation
Taxing Marriage: Microeconomic Behavioral Responses to the Marriage Penalty and Reforms for the 21st CenturyBy Jason J. Fichtner, Jacob Feldman, Mercatus CenterWorking Paper, 09/20/2012
Politicians often stress that marriage is a key institution that promotes family values. However, many aspects of the federal tax code do not promote marriage and may in fact provide disincentives and penalize marriage. As an alternative to marriage, cohabitation is a common choice for low-income couples facing significant fiscal penalization from the joint income filing requirement, particularly when qualifying for the Earned Income Tax Credit (EITC). In part because of the additional tax liability associated with joint tax filing, many middle-income and upper-income people are forgoing marriage as well. As more women enter the labor force and female wages rise, the marriage penalty becomes increasingly important to horizontal tax equity concerns and for economic growth.
Regulation & DeregulationBy Steven Globerman, George Georgopoulos, Mercatus CenterWorking Paper, 09/20/2012
This report provides a preliminary assessment of the concern that government regulation in the United States is becoming increasingly burdensome and that the growing burden is harming the international competitiveness of the U.S. economy. Specifically, it discusses alternative measures of international competiveness and government regulation and positions the United States relative to other developed countries in terms of those measures. It finds that the regulatory environment in the United States has become less favorable to private-sector activity in recent years compared to other countries. Furthermore, a number of measures of economic performance show a notable deterioration in the position of the United States relative to other developed economies. A declining productivity performance is a plausible consequence of an increasingly complex and uncertain U.S. regulatory environment.
Natural Resources, Energy, Environment, & ScienceBy Jonathan A. Lesser, Manhattan InstituteEnergy Policy & the Environment Report, 09/20/2012
Because the Indian Point Energy Center (IPEC) provides significant quantities of round-the-clock electricity to the New York City area and because of long-standing constraints that limit how much electricity can be imported from upstate New York, New England, New Jersey, and elsewhere, closing IPEC would require the development of higher-cost alternatives. This paper examines the economic consequences of closing the Indian Point energy center (IPEC). Specifically, we consider the broader economic impacts of shutting down the plant and replacing its electricity-generating capacity. We evaluate how the resulting higher electric costs will manifest themselves in reduced economic growth and job losses throughout the state.
Natural Resources, Energy, Environment, & ScienceBy Tom Gray, Manhattan InstituteCity Journal, 09/20/2012
California pays a high price for its aversion to oil. By refusing to tap much of the oil wealth off its shoreline, the state is forgoing a resource that could go far to revive its economy and bring state and local governments back to fiscal health. On dry land, too, California is missing an opportunity: its vast onshore oil reserves are underused, thanks to a green-energy agenda that raises the cost of oil production and refining. Policymakers have to realize that their quixotic quest to outgrow fossil fuels isn’t helping the state. California was once a genuine petro-state, one of global importance. If it so chooses, it stands a good chance of becoming one again.
Budget & Taxation
The Case for Abolishing the Economic Development Administration: A Great Society Relic that Robs Peter to Pay PaulBy David Bier, Competitive Enterprise InstituteIssue Analysis, 09/20/2012
Recent federal stimulus packages to revitalize America’s troubled economy share a common heritage with the four decade-old Economic Development Administration (EDA)—they both are based on the belief that America’s international competitiveness and economic growth depend on government investments. This approach is fundamentally flawed. Not only do such grants not create economic growth, they are actively harmful to it. EDA’s funding should be immediately revoked, allowing private entrepreneurs to direct capital to the best projects.
International Trade/FinanceBy K. William Watson, Cato InstitutePolicy Analysis, 09/20/2012
Section 337 of the Tariff Act of 1930 gives the United States International Trade Commission (ITC) the power to exclude products from the United States that are imported pursuant to “unfair methods of competition.” The range of potential activities covered by the law is broad, but the most common claim brought before the ITC is patent infringement. In addition to filing a lawsuit in federal district court, U.S. patent holders can often use Section 337 to bring a second case over the same subject matter as long as the defendant imports the impugned product from abroad. This tactic has become increasingly popular because the ITC renders its decisions relatively quickly and has the authority to order a very powerful remedy—total exclusion of the product from the U.S. market. Repealing Section 337 is the only way to ensure the integrity of the U.S. patent system, to bring the United States into compliance with trade obligations, and to prevent future abuse of this protectionist trade law.
Health CareBy J. Scott Moody, Wendy P. Warcholik, Rio Grande FoundationReport, 09/20/2012
The time has come to inject some much needed transparency into the tax exemptions and subsidies received by these not-for-profit hospitals—of which the top 5 hospital systems account for 41 percent of all not-for-profit revenue in New Mexico. In the short-run, New Mexico policymakers should enact limits on the amount of assets that can fall under a hospital’s not-for-profit umbrella—similar to the HB 1482 debated in New Hampshire. This would curtail the aggressive expansion by not-for-profit hospitals like UNMH into health care services that are not related to indigent and Indian care. In the long-run, rather than just giving one-size-fits all tax exemptions and subsidies to not-for-profit health care providers, these public monies could be tied to indigent and Indian patients directly.
Budget & TaxationBy Amy K. Frantz, Public Interest InstitutePolicy Brief, 09/20/2012
According this study, in 2010 – the year of the most recent available data on this subject – Iowa’s state-government workers received an average wage that was 150.28 percent of what the average private-sector worker in Iowa was paid. Given the fact that Iowa has the nation’s largest Pay Gap between private and public-sector employees, isn’t it time we take a hard look at state-government employee salaries?
WelfareBy Robert Rector, The Heritage FoundationIssue Brief, 09/20/2012
The Department of Health and Human Services (HHS) has declared that the work requirements written in the Temporary Assistance to Needy Families (TAMF) law are no longer legally binding on state governments and that they can and will be replaced by alternative rules devised unilaterally by the HHS bureaucracy. This action grossly violates the intent and letter of the welfare reform law. The government should in fact take the opposite course. The work participation rates in TANF should be increased to cover more recipients. In the long term, strong work participation standards should be established in other programs such as food stamps, public housing, unemployment insurance, and Medicaid. Regrettably, the Obama Administration is marching briskly in the opposite direction.
National SecurityBy Steven Bucci, The Heritage FoundationIssue Brief, 09/20/2012
The report on sequestration released last week by the Office of Management and Budget (OMB) sheds little additional light on how these cuts will affect national security. Considering the recent violence directed at the U.S. in the Middle East and the looming January 2 deadline for sequestration, it would be imprudent for Congress to remain idle. Members of Congress need to act now to stop defense sequestration and support robust national security funding.
EducationBy Mark Bauerlein, Sandra Stotsky, Pioneer Institute for Public Policy ResearchWhite Paper, 09/20/2012
Our aim in this paper is to convince state and local education policy makers to do two things: the first is to emphasize Common Core’s existing literary-historical standards, requiring English departments and English teachers to begin with them as they redesign their secondary English curricula. The second is to add and prioritize a new literary-historical standard of their own along the lines of “Demonstrate knowledge of culturally important authors and/or texts in British literature from the Renaissance to Modernism.” This paper concludes by showing how the National assessment of Educational Progress’ (NAEP) criteria for passage selection can guide construction of state-specific tests to ensure that all students, not just an elite, study a meaningful range of culturally and historically significant literary works in high school. Such tests can promote classroom efforts to develop in all students the background knowledge and quality of analytical thinking that authentic college coursework requires.
Information TechnologyBy George S. Ford, Lawrence J. Spiwak , Phoenix Center for Advanced Legal and Economic Public Policy StudiesPolicy Perspective, 09/20/2012
Plainly stated, Section 706(a) of the Communications Act allows the Federal Communications Commission (FCC) to impose broad-reaching regulation over advanced communications services, including broadband services, if it finds that deployment is not “reasonable and timely.” Given the breadth and scope of the Commission’s willingness to use its new-found legal authority in Section 706, the purpose of this PERSPECTIVE is to apply some scrutiny to the Commission’s initial determination that broadband deployment was not “reasonable and timely.” As will be shown, there is a profound defect with the Commission’s argument. Specifically, the Commission’s own financial analysis shows that the cost of ubiquitous availability via wired and wireless networks exceeds any plausible measure of the benefit. The FCC has successfully rigged the game to permit expansive broadband regulation under Section 706. In so doing, the legal and factual predicates for the agency’s aggressive regulatory agenda stand on shaky ground.
What is the Effect of Regulation on Broadband Investment? Regulatory Certainty and the Expectation of ReturnsBy George S. Ford, Lawrence J. Spiwak, Phoenix Center for Advanced Legal and Economic Public Policy StudiesPerspective, 09/20/2012
U.S. policymakers constantly call for increased investment in the broadband infrastructure. Yet, the FCC consistently signals to investors its intent to reduce the returns to such infrastructure through various forms of price and non-price regulation. If the government is serious about promoting broadband investment, then it needs to stop sending the wrong signals to the market. So, while Broadband Service Providers in the United States have certainly continued to invest significant sums over the past several years to support their networks and expand availability, this analysis makes clear that even higher levels of investment would be supported in a more investment-friendly regulatory climate.
Information TechnologyBy T. Randolph Beard, et al., Phoenix Center for Advanced Legal and Economic Public Policy StudiesPolicy Papers, 09/20/2012
This paper shows how the Federal Communications Commission’s regulatory process may be used to impede the efficient functioning of a secondary market for commercial spectrum. In particular, it shows that imposing (and threatening to impose) significant conditions when firms seek to repurpose spectrum from a low-value to a higher-value use acts as a “tax” and thus reduces the incentives of firms to exchange spectrum in the secondary market. As a result, “taxation by condition” will discourage the larger scale transactions necessary to resolve spectrum exhaust, though we may still observe many deals of a less material nature that will attract less attention and thus fewer conditions. Under the constant threat of spectrum exhaust, “taxing” efforts to repurpose spectrum is perhaps the worst of all policies. Instead, if the Commission is serious about alleviating exhaust for commercial spectrum, then barring legitimate competitive or interference concerns, the agency should expeditiously approve efforts to repurpose spectrum without extraneous conditions.
Foreign Policy/International AffairsBy Ray Walser, The Heritage FoundationBackgrounder, 09/20/2012
On October 7, 2012, Venezuela’s Hugo Chávez will stand for re-election against opposition candidate Henrique Capriles. The Venezuelan presidential election matters to the U.S.: Venezuela is a major oil supplier to the U.S.; Chávez’s anti-American worldview has led to alliances with Iran, Syria, and Cuba; and Chávez offers safe havens to FARC and Hezbollah. Chávez also works to weaken democratic governance throughout the Americas. Under the Obama Administration, the U.S. has offered no comprehensive strategy or policy for dealing with the man who continuously demonstrates his ruthlessness in implementing an anti-American, socialist, Bolivarian Revolution across the Americas, but there is still time for the U.S. to support democratic freedoms before the election.