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Recent Policy Studies
Regulation & DeregulationBy Christopher Snowdon, Institute of Economic AffairsPaper, 10/31/2012
One in ten bottles or cans of beer sold in the UK have not had duty paid on them and there are growing reports of counterfeit spirits being sold by licit and illicit retailers. The UK loses more revenue from the cross-border movement of alcohol than any other EU state. The aim of this paper is to identify the factors that encourage the production, distribution and purchasing of alcohol in the shadow economy. It notes that alcohol duty provides significant income to European governments, but maximising these revenues carries significant risks in terms of health, crime and secondary poverty. Lessons can be learnt from countries which have low rates of unrecorded alcohol. This paper concludes that economic prosperity, moderate taxation and minimal corruption are essential for a country to minimise the size the alcohol black market. Without these preconditions, efforts to tackle the illicit alcohol supply through education, deterrence and enforcement are unlikely to succeed.
Transportation/InfrastructureBy Oliver Knipping, Richard Wellings, Institute of Economic AffairsReport, 10/31/2012
In this Hobart Paper, the authors – transport economists Oliver Knipping and Richard Wellings – propose the privatisation of the UK road network. In doing so, they examine the traditional objections to privatisation and find them wanting. In a lively discussion, making good use of practical examples, the authors also look at related issues such as road taxation, the planning system, pricing, regulation and the management of congestion. Whilst the authors admit that there are valid objections to road privatisation – and straightforward privatisation may not suit all types of roads – there are many imaginative schemes outlined that could deal with those objections. The authors also show that the nationalisation of roads has not been a success. They conclude that state control of road networks can be rolled back. Case studies from around the world demonstrate that ownership by private bodies is highly successful given the right institutional framework.
Budget & TaxationBy Jonathan Ingram, Ted Dabrowski, Illinois Policy InstituteReport, 10/31/2012
Illinois reports that it owes $83 billion in its five public pension funds, although there are actually hundreds of billions more in state and local pension liabilities for pension and other retirement debt. There is therefore a pension crisis facing Illinois. This report offers three suggestions to help solve this problem, suggesting that Illinois ought to 1) move to defined contribution plans for future work. Pensions should be frozen at their current levels, and future retirement savings should be structured differently. The state should also 2) freeze cost-of-living increases for all retirees. The COLA, as currently structured, doubles the annual value of a pension over 25 years, making pensions even more unaffordable. Finally, Illinois should 3) raise the retirement age for future retirees. The retirement age was raised to 67 for all Tier 2 employees. Further pension reforms should adopt similar requirements for those not covered under Tier 2, while protecting near-retirees.
Economic GrowthBy J. Scott Moody, Ted Dabrowski, Illinois Policy InstitutePolicy Brief, 10/31/2012
This Policy Brief makes a number of proposals to help improve Illinois’ disappointing job climate. 1) Less regulation is needed to reduce the cost of launching new businesses and to stay competitive with neighboring states. 2) Reduction in Illinois’ minimum wage law and its prevailing wage law, which would allow businesses to hire more and to expand. 3) Lower taxes to encourage business growth; Illinois has the 5th worst business, 7th worst unemployment insurance taxes, and the 6th worst property taxes in the nation. 4) Reform state finances to cut spending and balance the state budget in order to foster lower unemployment, strong domestic in-migration, and high GDP growth. 5) Improve governance so that the state ends its policy of picking winners and losers and stops giving hundreds of millions in special tax breaks to Illinois’ largest companies.
Elections, Transparency, & AccountabilityBy Malia Hill, Grassroot Institute of HawaiiReport, 10/31/2012
The issue of electoral (commonly summed up as “voter”) fraud stands at a curious place in American culture. No one denies that voter fraud is a part of American history, and many acknowledge that it remains a reality. But despite the fact that voter fraud ought to be the ultimate in bipartisan issues, it has become a surprisingly contentious political topic, with some claiming that it is a nonexistent ruse designed to “intimidate” or even opposing the most basic legal protections against it. In truth, electoral fraud disenfranchises U.S. citizens, making it worthy of rooting out on principle alone, as even a single instance undermines the American political system and its citizens’ freedoms.
Information TechnologyBy Seth L. Cooper, Free State FoundationPerspectives from FSF Scholars, 10/31/2012
Consumers of digital services are best served by simple and consistent rules concerning the privacy of their personal data, including mobile location-based data. But generating a workable set of rules that accounts for the intricacies and constraints presented by dynamic digital technologies and services will be more likely achieved through collaboration, not agency mandates. The multi-stakeholder process for developing voluntary codes of conduct on data privacy practices offers just such a collaborative approach. That process should be given the space it needs to achieve its purpose.
Regulation & DeregulationBy Diane Katz, The Heritage FoundationIssue Brief, 10/31/2012
After three years of unprecedented regulatory activity, the Obama Administration has noticeably slowed its rulemaking in recent months. A number of major rules remain under prolonged “review” by the White House, while publication of the regulatory agenda required by statute has not occurred. This flouting of the law is disturbing enough, but it is made worse by the mounting regulatory uncertainty it has caused. The Administration should come clean about its regulatory intentions by releasing its agenda as required.
Economic GrowthBy John B. Taylor, Hoover InstitutionDefining Ideas, 10/31/2012
The author focuses on three points; namely, 1) that the American economy is in bad shape, 2) the current economic policy is the reason the economy is in such bad shape, and 3) that the Romney economic program delivers the needed change in policy. Obama’s policy of stimulus packages, cash for clunkers, temporary payments to state governments and individuals have not led to a strong sustainable recovery. These initiatives only create economic uncertainty. The Romney plan does more to raise growth, focusing on five strategic areas: energy, education, trade, debt reduction, and small business job creation. In these areas Romney would work towards needed reforms, including approving necessary pipelines, allowing for greater student mobility and school choice, increasing trade with foreign countries, paying off the debt and reducing federal spending to 20% of GDP, and finally lowering tax rates to spur small business growth.
Budget & TaxationBy William McBride, Tax FoundationFiscal Facts, 10/31/2012
Rather than pretending that the damage of tax increases is limited to “rich” people, it makes sense to look at overall economic effects, either nationally or within each state. In dollar terms, the states that are most affected are big, high-income states. California stands to lose $241 billion over ten years as a result of the president’s tax policies. This is followed by New York at $186 billion, Texas at $131 billion, Florida at $104 billion, and Illinois at $74 billion. The state least affected is Vermont, which loses $2 billion over ten years. As a percent of income, Wyoming is most affected, losing 1.82 percent of income in 2013, followed by Connecticut, New York, Delaware, and Massachusetts. In all, thirteen states are set to lose at least 1 percent of income as a result of these tax increases, and every state loses at least 0.5 percent of income.
Budget & TaxationBy Scott Drenkard, Tax FoundationFiscal Facts, 10/31/2012
While public health advocates claim that soda taxes are a useful tool to combat obesity, economic evidence shows that they have minimal effects because consumers are likely to substitute other calorie-laden products for soda. In practice, soda taxes just create compliance difficulties as businesses are forced to reclassify new products for different tax treatment. Individual diet choices are determined by each person based on nuanced information and individualized beliefs about what is appropriate for their bodies. The tax code is far too blunt an instrument to address such an important public health issue.
Natural Resources, Energy, Environment, & ScienceBy Kathleen Hartnett White, Texas Public Policy FoundationPolicy Perspective, 10/31/2012
Enacted more than 40 years ago, the architecture of the CAA imposes a militaristic, top-down approach to ad¬ministrative process and regulation. As a founding trust¬ee of the Environmental Defense Fund noted as early as 1988, “The EPA’s regulation has grown to the point where it amounts to nothing less than a massive effort at Soviet-style planning of the economy to achieve envi¬ronmental benefits.”After elimination of massive volumes of air contami¬nants over the last 20 years, the usefulness of the exist¬ing CAA’s traditional procedures and regulatory tools is increasingly questioned. That the CAA needs reform is a belief widely shared, at least outside of the EPA and activist organizations. A four-year project enlisting the input from 40 environmental experts from across the ideological spectrum concludes that the CAA has “statu¬tory arteriosclerosis.”
Regulation & DeregulationBy Wayne Winegarden, Pacific Research InstituteStudies, 10/31/2012
The development of orphan drugs, because they serve patients with rare diseases, face additional economic obstacles created by the lack of scale. Despite the more difficult economics of serving patients with rare diseases, orphan drug development is desperately needed. The incentives created by Congress in passing the Orphan Drug Act of 1983 made significant positive changes to the policy environment. In response, orphan drug development has become a significant area of investment for pharmaceutical companies which, along with other private investors, are now driving the current therapeutic drug research efforts. The total economic cost from all rare diseases in the U.S. could be in the hundreds of billions of dollars. The annual sales of orphan drugs (i.e., the value provided to current patients) are currently around $50 billion to $85 billion. To a large extent, this value was enabled by lowering the costs imposed on private sector pharmaceutical research created by government regulations.
Monetary Policy/Financial RegulationBy Hester Peirce, Mercatus CenterWorking Paper, 10/31/2012
The Federal financial regulators who are entrusted with implementing Dodd-Frank and other key financial regulatory initiatives do not routinely conduct economic analysis. This paper looks at the statutory obligations that Federal financial regulators face and the degree to which they use economic analysis in their decision-making. The paper also looks at quasi-governmental regulatory organizations, which—like their governmental counterparts—do not routinely conduct economic analysis.
Monetary Policy/Financial RegulationBy Scott Sumner, Mercatus CenterReport, 10/31/2012
The recent financial crisis exposed serious flaws with inflation-targeting monetary policy regimes. Because of inflation fears, the Fed did not provide enough monetary stimulus in late 2008, allowing the largest decline in nominal spending since the 1930s. This demand shock intensified the financial crisis and led to high unemployment. Nominal GDP targeting would have greatly reduced the severity of the recession, and also eliminated the need for fiscal stimulus. The national debt today would be far lower if Fed policy had been more expansionary and Congress had not passed the 2009 fiscal stimulus. Nominal GDP targeting also makes it much easier for politicians to resist calls for bailouts of private sector firms. It assures low inflation on average, and reduces the severity of the business cycle. It also makes asset price bubbles slightly less likely to occur.
Economic GrowthBy Randall G. Holcombe, Mercatus CenterWorking Paper, 10/31/2012
Crony capitalism describes an economic system in which the profitability of firms in a market economy is dependent on political connections. The term has been used in the popular press but rarely appears in academic literature. However, there has been a substantial amount of academic research on various components that, when aggregated, describe crony capitalism. This literature shows that crony capitalism exists only because those in government are in a position to target benefits to their cronies, and have an incentive to do so, because they get benefits in return. The ability to target those benefits is a result of the spending and regulatory power of government, so big government causes cronyism. One remedy often suggested for cronyism is more government regulation and oversight of the economy, but this remedy misunderstands the cause of cronyism. The substantial and well-established economic literature on the components of crony capitalism shows that big government is the cause of crony capitalism, not the solution.
Budget & TaxationBy Jeremy Horpedahl, Brandon M. Pizzola, Mercatus CenterStudies, 10/31/2012
This study documents the economic distortions and inefficiencies that result from a tax system filled with tax expenditures. Tax expenditures are provisions in the U.S. tax code through which individuals and corporations can lower their tax burden by behaving in specific ways. Total tax expenditures in the United States are currently around $1 trillion, with over 80 percent accruing to individuals and the remainder to corporations. We review each of the ten largest tax expenditures for individuals and corporations, focusing on the following distortions of economic activity: spending on goods and services, capital allocation, the distribution of income, and lobbying and rent-seeking. The benefits of tax expenditures accrue disproportionately to higher-income earners, since they are more likely to itemize deductions and can afford to hire accountants to minimize their tax burden. Eliminating tax expenditures would increase economic growth and allow for lower tax rates, further increasing growth.
Economic GrowthBy Joel Kotkin, Manhattan InstituteCity Journal, 10/31/2012
Weather, education, and, in some places, a legacy of corruption still present considerable challenges to the ascendancy of the “Third Coast,” which stretches from Brownsville to Tampa Bay. But if the region can surmount these challenges—and it appears to be succeeding at this—then while the East and West coasts struggle with economic stagnation and dysfunctional politics, the Third Coast could become one of the major forces in twenty-first-century America.
Natural Resources, Energy, Environment, & ScienceBy Mark P. Mills, Yevgeniy Feyman, Manhattan InstituteIssues, 10/31/2012
Developing and implementing policies that will not just continue but accelerate the boom in domestic hydrocarbon production will enable the United States to rapidly realize the economic and jobs benefits in this paper. Recent history shows that these jobs can be created quickly. Both production and employment have grown from marginal or near zero in certain parts of North Dakota, Ohio, and Pennsylvania, for example, to become major forces in only a few years. The same could happen in many states, not just Texas, Oklahoma, and Colorado, but also in California and New York. These gains in production and jobs are at risk due to overregulation and government opposition. Conversely, more jobs could come sooner under policies favorable to development which ameliorate, suspend, or remove regulations that have created either unintended or intended impediments to domestic production.
Economic GrowthBy Jacob Vigdor, et al., Manhattan InstituteIssues, 10/31/2012
In his 1980 presidential debate with Jimmy Carter, Ronald Reagan looked directly into the television cameras and asked the American public, simply, “Are you better off than you were four years ago?” The question—posed by incumbent and challenger alike—has since become a recurring feature of presidential campaign season. Now, with Election Day 2012 nearly upon us, the Manhattan Institute has enlisted six of its fellows to take up the question anew. On issues such as housing prices, energy prices, unemployment, bank regulation, and America’s reputation in the Muslim world, the news is not good. The United States is not better off than we were four years ago and in some cases it is worse off—far worse off. However, the last four years have seen significant improvement in one issue area of historic concern to the Manhattan Institute: education.
LaborBy Derk Wilcox, Mackinac Center for Public PolicyPolicy Brief, 10/31/2012
The proposed constitutional amendment would authorize the forced unionization of tens of thousands of home-based caregivers in Michigan, allowing the Service Employees International Union to continue skimming millions of dollars in dues from Medicaid stipends meant to help Michigan’s most vulnerable residents. A line-by-line review of Proposal 4 shows that it would not provide any programs or services to in-home care recipients that are not already available, including any improved care, new options for care recipients or taxpayer cost savings.
Elections, Transparency, & AccountabilityBy James M. Hohman, Mackinac Center for Public PolicyPolicy Brief, 10/31/2012
The study examines the claim that local control will diminish if Proposal 1 passes and Public Act 4 is nullified. Public Act 4 had provided expanded powers to state-appointed emergency managers of local governments and school districts that are in a state of serious “fiscal stress or “fiscal emergency.” The study determined that the question in Michigan has not been whether state-appointed managers or court-appointed receivers may replace local elected officials in running a local unit of government; they have been able to do so for decades. The only question is whether state government will participate in the effort to avoid local fiscal insolvency and how it will do so.
Budget & TaxationBy Michael D. LaFaive, Mackinac Center for Public PolicyPolicy Brief, 10/31/2012
The study examines the amendment to the state constitution that proposes to require a two-thirds supermajority vote of both the Michigan House and Senate, or a simple majority vote of the people in a November election, to impose new state taxes or increase any state taxes that currently require only a majority vote of the Legislature. The study concludes that Proposal 5 is likely to provide additional protection against state tax increases, though it may be appropriate to ensure state lawmakers take further steps to ensure the original intent of the proposal.
Budget & TaxationBy Merrill Matthews, Mark E. Litow, Institute for Policy InnovationReport, 10/31/2012
The “fiscal cliff” coming at the end of the year pales in comparison to the “entitlements cliff” being forced on the American people by a multitude of entitlement programs that they can no longer afford. The federal government faces a serious economic challenge in trying to address this shortfall. Attempting to collect enough money to sustain this level of entitlement spending will only result in a reduction in work effort, reduced employment opportunities, and more people moving onto entitlements. At least three changes must occur in order to successfully address the entitlement problem: 1) entitlement spending must be cut, 2) policies that encourage economic growth must be implemented, and 3) several programs must transition to prefunded personal accounts.
Elections, Transparency, & AccountabilityBy Kori Schake, Hoover InstitutionDefining Ideas, 10/31/2012
Academia advises to avoid striking oil, for it will doom a country’s economy to lower growth, and its society to bad governance. This advice results from studies in economics and political science purporting to show that countries that rely on extractive industries like oil tend not to develop as robustly and be as well-governed as those without the benefit of natural resources. This is called the “resource curse.” This article argues against the existence of this curse, stating that possessing natural resources is not a danger sign for a country; but rather is a potential asset that, when paired with good governance, serves its people well. Academics have rightly identified the correlation of extractive industries and bad governance in underdeveloped countries. But the deficiencies of governance look to be more important than the existence of extractive industries in determining whether a country develops a diverse economy with high growth rates.
EducationBy Joseph L. Bast, Joy Pullman, Heartland InstitutePolicy Brief, 10/31/2012
The Parent Trigger is a powerful education reform because it is a bottom-up tool for school reform, not another top-down reform that is likely to be deformed and undermined by the bureaucracies that must implement it. When correctly drafted, Parent Trigger laws provide a clear path for parents to follow by specifying what their reform choices are, who can sign a petition and how many signatures are necessary, and how to submit the petition. Well-designed Parent Triggers don’t restrict parents’ choices to only “turnaround” or charter schools, they don’t give school officials the power to veto parents’ choices, and they don’t cap or otherwise limit the number of schools that can be triggered. The model legislation in Appendix A presents one vision of a Parent Trigger law incorporating the best ideas of hundreds of legislators and policy experts. It would empower all parents – not just those with children attending “failing” public schools – to trigger their local public schools.
Education Savings Accounts: A Path to Give All Children an Effective Education and Prepare Them for LifeBy Jonathan Butcher, Goldwater InstitutePolicy Report, 10/31/2012
In the years between A Nation at Risk, released in 1983, and the Council on Foreign Relations’ U.S. Education Reform and National Security, published in 2012, the conventional wisdom about U.S. public education has not changed, including its acknowledgement the fact that America’s primary and secondary schools are widely seen as failing. In the years between the two reports, lawmakers have enacted top-down reforms that have not changed the trajectory of student achievement. What is more, advances in technology are changing the way we consider education. Online and hybrid schools, along with free educational content through YouTube and iTunes, have helped shift the focus of a child’s experience from the schoolhouse to, well, any house. Parents and children need to be able to pursue education wherever it is found. Education savings accounts allow them to do just that. The accounts are a model for what education in the 21st century should look like: flexible, innovative, and child-centered.
Natural Resources, Energy, Environment, & ScienceBy Roger Meiners, Pierre Desrochers, Andrew Morriss, Cato InstituteBook, 10/31/2012
Widely credited with launching the modern environmental movement when published 50 years ago, Silent Spring has received little critical inquiry over the decades. In Silent Spring at 50: The False Crises of Rachel Carson, a team of experts explores the book’s historical context and scientific foundations and the policy consequences of its core ideas. Their analyses reveal how Rachel Carson’s iconic work contains significant errors, often substituting sensationalism for fact and apocalyptic pronouncements for genuine knowledge.
Natural Resources, Energy, Environment, & ScienceBy Patrick J. Michaels, et al., Cato InstituteSpecial Report, 10/31/2012
A vision for future climate change assessments includes both sustained, extensive stakeholder involvement, and targeted, scientifically rigorous reports that address concerns in a timely fashion. The value of stakeholder involvement includes helping scientists understand what information society wants and needs. In addition, the problem-solving abilities of stakeholders will be essential to designing, initiating, and evaluating mitigation and adaptation strategies and their interactions. The best decisions about these strategies will come when there is widespread understanding of the complex issue of climate change – the science and its many implications for our nation.
The Constitution/Civil Liberties
Transcript of the 2012 Walter Berns Constitution Day Lecture: Spending, Public Debt, and Constitutional DesignBy Michael McConnell, American Enterprise InstituteLecture, 10/31/2012
Madison warned that constitutional limits on governmental abuse would be mere parchment barriers if not reflected in the deep structure of accountable representation and separation of powers. The Anti-Federalists were even more pessimistic, saying that the only real restraint comes from an active and engaged citizenry—the very thing that Madison’s Constitution sought to neutralize, on the assumption that the populace would generally favor short-sighted policies, like “spend now, pay later.” The United States has essentially given up on constitutional design as a restraint. The general welfare limits on federal spending are completely ignored, and the Supreme Court did not even mention them in its Obamacare decision. Will an active and engaged citizenry reemerge, and will they be heard? In the end, American citizens are the only protection that really counts.
Elections, Transparency, & AccountabilityBy Dan Blumenthal, et al., American Enterprise InstituteReport, 10/31/2012
A more open and efficient Taiwan would bring broad and unconditional benefits, and could even make foreign partners more willing to deal with Taiwan on both economic and diplomatic fronts. The necessary changes include more regulatory transparency, more flexibility for labor and capital, greater transport capacity, and efforts to advertise these changes to the rest of the world. The United States can assist Taiwan with feasible bilateral accords that would economically and strategically benefit both parties. In pursuing the course outlined here, Taiwan could improve the welfare of its people. With Taiwan as a commercial hub, more people in the United States and around the world would have a stake in its success. This would help enhance Taiwan’s security, make it less likely that China would underestimate the international community’s interest in the island’s future, and, in turn, Taiwan could become an even more attractive destination for international business.
Monetary Policy/Financial RegulationBy Peter J. Wallison, American Enterprise InstituteFinancial Services Outlook, 10/31/2012
Supporters of the Dodd-Frank Act argue that it ends bailouts, but this is true only if bailouts are defined narrowly as the use of taxpayer funds to rescue a failing financial institution. However, the source of funds for a bailout is not the real issue. Both possibility of a creditor bailout as well as the special “stringent” regulation required by the act for banks and other firms deemed systemically important create moral hazard by reassuring creditors that there is less risk in lending to these large firms than to small ones, and thus provide the biggest firms with a continuing competitive advantage in the form of lower funding costs.. Title I invokes stringent regulation for systemically important firms, Title II provides a mechanism for bailing out creditors if a systemically important firm should fail, and Title VIII authorizes Federal Reserve funding for an unlimited number of additional financial institutions. If President Obama is re-elected, Dodd-Frank is likely to continue in its current form, adding materially to the problem of moral hazard and TBTF in the US financial system.
Economic GrowthBy Bryan Riley, Terry Miller, The Heritage FoundationSpecial Report, 10/26/2012
The Heritage Foundation has been tracking and ranking trade freedom around the world since 1995. The rankings have consistently shown a correlation between trade freedom and improved lives for people around the world—and vice versa. The latest rankings, in the forthcoming 2013 Index of Economic Freedom, once again confirm that connection. For that reason, it is a matter of concern that the worldwide trade freedom score has not improved over the past year. The United States used to be a free trade leader, serving as an example to other countries. It can, and should, be a leader again. This Special Report describes which trade policies are helpful, which are harmful, and what the U.S. Congress can do now to put the U.S. back on a path to free trade leadership.