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Recent Policy Studies
Natural Resources, Energy, Environment, & ScienceBy Brett D. Schaefer, Nicolas Loris, The Heritage FoundationIssue Brief, 12/05/2012
The Conference of the Parties to the United Nations Framework Convention on Climate Change is currently holding its 18th meeting in Doha, Qatar. The two-week conference ending on December 7 is intended to jump-start the stalled negotiations on a successor agreement to the Kyoto Protocol to reduce greenhouse gas emissions. Midway through the meetings, it is clear that very little of substance will transpire, which has been the case for years. The past four years have demonstrated conclusively that there is no international consensus for action. The U.S. should refuse to attend future U.N. conferences on climate change, call for a moratorium on future conferences unless there is a fundamental shift in position among key countries, and focus its efforts on alternative forums involving key countries. Further, the U.S. should prevent and remove unilateral attempts to address climate change that have adverse economic effects and no environmental benefit.
International Trade/FinanceBy Bryan Riley, The Heritage FoundationIssue Brief, 12/05/2012
Lobbyists for sugar growers—already forced to rely on shady arguments to persuade Congress to keep giving handouts to their clients—are facing a new P.R. problem: Twinkie production may be moving to Mexico. Hostess, the maker of Twinkies, has blamed union troubles for its bankruptcy, but other experts have pointed to U.S. government-inflated sugar prices as a possible factor in the company’s decline. Government interference in the sugar market hurts consumers and food manufacturers by driving up the price of sugar, reducing export opportunities by giving other countries an excuse to impose similar penalties on U.S.-made products, and weakening the U.S. economy. This Depression-era program, which was supposed to end in 1940, should be abolished.
Elections, Transparency, & AccountabilityBy John Malcolm, The Heritage FoundationIssue Brief, 12/05/2012
Retiring Senator Daniel Akaka (D–HI) has indicated, with the support of Senate Majority Leader Harry Reid (D–NV) and the Obama Administration, that he intends to push his “Carcieri Fix” (S. 676) during the lame-duck session of Congress. The bill would give the Secretary of the Interior largely unbridled discretion to turn over tens of thousands of acres of private land to Indian tribes. Before giving serious consideration to a Carcieri Fix, Congress should establish clear and specific standards, including elucidating what constitutes a legitimate “tribal need,” in order to guide the land trust decisions made by those executive branch officials acting under a grant of congressional authority.
Foreign Policy/International AffairsBy Steven Groves, The Heritage FoundationBackgrounder, 12/05/2012
The United States can mine the deep seabed without acceding to the United Nations Convention on the Law of the Sea (UNCLOS). For more than 30 years, through domestic law and bilateral agreements, the U.S. has established a legal framework for deep seabed mining. In fact, U.S. accession would penalize U.S. companies by subjecting them to the whims of an unelected and unaccountable international bureaucracy. U.S. companies would be forced to pay excessive fees, costs, and royalties to the International Seabed Authority for redistribution to developing countries. U.S. interests are better served by not acceding to UNCLOS.
Crime, Justice & the LawBy Paul Rosenzweig, The Heritage FoundationLegal Memorandum, 12/05/2012
The growth in criminal law today reflects a divergence from its treatment early in our republic and under traditional common law rules of Anglo–American culture. This is most evident in such areas as overfederalization of criminal law and the dilution of the “guilty mind” requirement. Yet there is one area in which this divergence is particularly acute that has not received the same attention: the atrophying of the executive’s pardon power. Properly understood, the pardon power is one of the great bulwarks of individual liberty. It is, in effect, the personification of the government acting as a check on the institutions of the government. Leaders today would do well to remember the value of the pardon power and restore it to its former prominence.
ImmigrationBy Jessica Zuckerman, Landon Zinda, The Heritage FoundationIssue Brief, 12/05/2012
Currently, far too many immigrants educated here in the U.S. are forced to return to their home countries upon graduation. This makes little sense, particularly for science, technology, engineering, and math (STEM) workers. A STEM-educated workforce is vital to the security and prosperity of the U.S. However, the STEM Jobs Act would also reopen and lower the wait time for the visa category that allows spouses and children of permanent legal residents to be admitted to the country while awaiting approval of their green card applications. With the majority of family chain immigrants predominantly low-skilled laborers, this provision would likely raise welfare costs and poverty. Rather than increasing the fiscal drain on American taxpayers, Congress should consider reform of the STEM visa process on its own merits.
Monetary Policy/Financial RegulationBy Michael D. Bordo, e21 – Economic Policies for the 21st CenturyPosition Paper, 12/05/2012
The Subprime Mortgage housing boom that ended in a bust in 2006-2007 leading to a financial crisis in 2008 and the Great Recession may have been related to expansionary Federal Reserve monetary policy from 2002-2006 designed to offset incipient deflation. The housing boom which began in the late 1990s had its origins in a long tradition of policies to encourage home ownership in succeeding presidential administrations, financial innovation, lax regulatory supervision and oversight and corporate malfeasance.
Monetary Policy/Financial RegulationBy Mickey D. Levy, e21 – Economic Policies for the 21st CenturyPosition Paper, 12/05/2012
US fiscal and monetary policies are both on unsustainable courses. By far, fiscal policy—with its reckless deficit spending and rapidly mounting government debt, inefficient structures of the tax system and spending programs and appallingly dysfunctional budget and policy process—ranks first in terms of harming economic performance and threatening the standards of living of future generations. The Federal Reserve’s monetary policy is also misguided, and although its risks are different in nature and less straightforward than those posed by fiscal policy, they are very important, and particularly pressing in the current fiscal environment. The combination of alarmingly high budget deficits and the Fed’s massive purchases of government and agency bonds (effective debt monetization) involve unacceptably high potential risks.
Monetary Policy/Financial RegulationBy Gregory Hess, e21 – Economic Policies for the 21st CenturyPosition Paper, 12/05/2012
With the retirement of Congressman Ron Paul (R-TX), one would think that that the Federal Reserve would face less criticism, political friction, threats of reform, or unwelcome extensions of their responsibilities in the coming 113th Congress. Unfortunately, this is unlikely to be the case. The Federal Reserve will face significant political troubles in the upcoming Congress, as the legislature continues to pare back the central banks’ ability to independently set policy goals and take decisions. The Fed has no one to blame but itself for opening the political Pandora’s box.
Monetary Policy/Financial RegulationBy Marvin Goodfriend, e21 – Economic Policies for the 21st CenturyPosition Paper, 12/05/2012
In January 2012, “[f]ollowing careful deliberations at its recent meetings,” the Federal Open Market Committee reported that it had “reached broad agreement on the following principles regarding its longer-run goals and monetary policy strategy.” The statement goes on to say that “[t]he Committee intends to reaffirm these principles and to make adjustments as appropriate at its organizational meeting each January.” Emphasizing the time and effort put into developing the statement, the broad agreement, and its forward-looking nature, the FOMC signaled that its statement of principles and goals would provide fundamental guidance for monetary policy in the future.
Monetary Policy/Financial RegulationBy Charles W. Calomiris, e21 – Economic Policies for the 21st CenturyPosition Paper, 12/05/2012
When will monetary policy return to “normalcy”? To answer that question, one must begin with a definition of normalcy. By normalcy, Charles Calomiris means a monetary policy regime in which the Fed uses changes in the fed funds rate to predictably control variation in aggregate demand. Some believe that a return to normalcy depends only on the eventual exit from the zero-interest-rate policy. The author of this paper, however, disagrees with that point of view. Other major policy changes enacted during the crisis are likely to have long-term impacts that will make it difficult to restore pre-crisis monetary policy normalcy, and these are under-appreciated. As the Fed emerges from the zero-interest- rate policy era, it will be more challenging than ever for the Fed to use traditional monetary policy tools to achieve predictable results. In this essay, Calomiris explain why, and conclude by offering some suggestions for how the Fed, and other central banks, can deal with the new combination of challenges that they face.
Health CareBy Russell Sykes, Empire Center for Public PolicyReport, 12/05/2012
New York State has embarked on an ambitious multi-year effort to overhaul its taxpayer-funded Medicaid program, which has long combined high costs with less than impressive health outcomes. This report makes some specific recommendations, including suggestions that New York should 1) experiment with a variety of cash or cash-like incentives to encourage patients with chronic conditions to access primary and preventive services, adopt healthy behaviors and follow recommended treatment plans. Such incentives are often called conditional cash transfers, which predicate the receipt of payments on fulfilling certain responsibilities, 2) remove barriers that limit private managed care plans’ ability to provide higher cash or cash-equivalent rewards for healthier behavior to their Medicaid clients, 3) incorporate proven approaches from other states that have already designed incentive programs and mechanisms to boost patient responsibility, 4) test multiple approaches on a small scale and evaluate them carefully both to add to the research literature on incentives and to expand successful programs.
Budget & TaxationBy e21: Economic Policies for the 21st Century, e21 – Economic Policies for the 21st CenturyArticle, 12/05/2012
During the upcoming fiscal cliff negotiations, most of the attention is likely to be paid to two threshold questions: (1) whether or not Congress should agree to new tax revenue, period; and (2) what magnitude of spending cuts should be required for Congress to accept new revenue. Nearly as important, however, is how the revenue is to be collected. In this case, it is quite obvious that revenue should come from limitation on deductions rather than increases to marginal tax rates. However, there are key differences between the various approaches to limiting deductions. If revenue is necessary to avoid the fiscal cliff or achieve sizeable debt reduction, Congress should ensure that deductions are limited in the way that creates the fewest distortions.
Budget & TaxationBy Charles Blahous, e21 – Economic Policies for the 21st CenturyArticle, 12/05/2012
This article makes eight major points regarding fiscal discussions. Point #1: There is no point in complaining about others pushing for their policy views. Point #2: While the fiscal cliff is largely about taxes, the long-term deficit problem is about spending. Point #3: Advertised ratios of proposed spending cuts to tax increases are meaningless and should be ignored. Point #4: Stabilizing spending is the best way to clinch any deal that includes revenue increases. Point #5: Federal deficits are reduced by tax revenues, not by tax rates. Point #6: For a given amount of tax revenue collections, high marginal tax rates with many loopholes are bad economic policy relative to lower rates with few loopholes. Point #7: The logical way to hit the “rich” is to cut federal spending on them. Point #8: Any credible deficit-reduction deal must split the Democratic caucus and will likely need to be negotiated largely by President Obama and Republicans.
Information TechnologyBy Jonathan H. Adler, Free State FoundationPerspectives from FSF Scholars, 12/05/2012
Whether local land-use and zoning regulations unduly inhibit the placement of mobile service facilities may well be a question about which the FCC has substantial expertise. Yet whether Congress delegated the FCC authority to address this question is not. Questions of agency jurisdiction are legally and analytically antecedent to the question of whether a given agency interpretation is one to which Chevron deference is due. In City of Arlington the Supreme Court has the opportunity to clarify this point. There are good reasons for it to make clear that agencies should only receive Chevron deference when they are exercising that authority Congress has delegated, and they should not receive deference when facing the question of whether the agency has authority at all.
Regulation & DeregulationBy Seth L. Cooper, Free State FoundationPerspectives from FSF Scholars, 12/05/2012
The Internet Radio Fairness Act’s provisions, wisely or not, operate entirely within a system in which a government bureaucracy, not market mechanisms, determines quantities and prices for services. But a commitment to the rule of law and free market principles would mean a complete overhaul of the existing regime for music copyright licensing royalties. Part and parcel of any legislative deliberations regarding reform to the existing music copyright royalties system should include concrete steps to eliminate compulsory licensing and ratemaking in order to finally transition to a free market for music in which copyright holders and users are all treated equally, regardless of the underlying technology involved.
Economic GrowthBy Charles Lammam, Amela Karabegovic, Niels Veldhuis, Fraser InstituteResearch Studies, 12/05/2012
This study measures income mobility in Canada over two five-year periods (1996-2001 and 2002-2007) and over a 10-year and a 19- year period (1990-2000 and 1990-2009). It concludes, among other things, that (1) in all periods, Canadians initially in the lowest income group (the bottom 20%) experienced the greatest relative income increase. that (2) over the 10-year period (1990 to 2000), 83 percent of Canadians who started in the bottom 20% moved to a higher income group, (3) over the 19-year period (1990 to 2009), 87 percent in the bottom 20% moved up with 21 percent of them reaching the highest income group (the top 20%) and (4) that the average income of those initially in the bottom 20% in 1990 grew an impressive 635 percent by 2009, while the average income of those initially in the top 20% grew by only 23 percent over the same period.
Economic GrowthBy Salem Ben Nasser Al-Ismaily, et al., Fraser InstituteReport, 12/05/2012
This report compares and ranks Arab nations in economic freedom. The report measures available data on economic freedom in 22 nations of the League of Arab States, but due to data limitations, calculations of the overall level of economic freedom are only available for 16 jurisdictions: Algeria, Bahrain, Comoros, Djibouti, Egypt, Jordan, Kuwait, Lebanon, Mauritania, Morocco, Oman, Qatar, Saudi Arabia, Syria, Tunisia, and UAE. It concludes that the Arab world has considerable diversity in economic freedom, with some nations having high levels of economic freedom by world standards and others relatively low levels. Unfortunately, those nations with low levels deprive their citizens of the well-known benefits of economic freedom. Economic freedom in the region has remained stable over the period of the index. This is a considerable achievement given the challenges the region has faced in recent years. The future holds many puzzles given the many significant changes now underway.
Economic and Political ThoughtBy Avilia Bueno, et al., Fraser InstituteReport, 12/05/2012
This is the eighth edition of the annual report, Economic Freedom of North America. The statistical results of this year’s study persuasively confirm those published in the previous seven editions: economic freedom is a powerful driver of growth and prosperity. Those provinces and states that have low levels of economic freedom continue to leave their citizens poorer than they need or should be. Economic Freedom of North America employs 10 components for the United States and Canada in three areas: 1. Size of Government; 2. Takings and Discriminatory Taxation; and 3. Labor Market Freedom.
Health CareBy Bacchus Barua, Nadeem Esmail, Fraser InstituteResearch Studies, 12/05/2012
Some of the key findings of this research study include facts such as: 1) specialist physicians surveyed across 12 specialties and 10 Canadian provinces report a total waiting time of 17.7 weeks between referral from a general practitioner and elective treatment in 2012, 2) patients in Ontario experience the shortest wait (14.9 weeks) followed by Quebec (16.6 weeks), and British Columbia (17.0 weeks), 3) patients wait longest for orthopaedic surgery (39.6 weeks) and wait least for medical oncology treatment (4.1 weeks), 4) after an appointment with a specialist, Canadians wait approximately 3 weeks longer than what physicians believe is “reasonable” for elective treatment, 5) in 2012, throughout the provinces people are waiting for an estimated 870,462 procedures, assuming that each person waits for only one procedure, 2.5 percent of Canadians are waiting for treatment, and finally that 6) only 10.3 percent of patients are on waiting lists because they requested a delay or postponement.
ImmigrationBy Janice Kephart, Center for Immigration StudiesMemorandum, 12/05/2012
The president began implementing his deferred action amnesty program in August. Illegal aliens were offered driver’s licenses in California in September. Other states are following suit. Amnesty plus driver’s licenses equals a magnet for an illegal population that seeks both legality and the ID that embodies legality in most places in America—the driver’s license—so they can get a job and live in the United States comfortably. Despite the border violence, abuse, extortion by smugglers, and the high cost of coyotes, plus “border bandits” and “rip crews” within U.S. borders and cartel-controlled corridors, Mexicans and other foreign nationals may well see the value in risking the violence and potential death for the chance at a job and amnesty being offered north of the border.
PhilanthropyBy Kirk MacDonald, Capital Research CenterFoundation Watch, 12/05/2012
The Rockefeller Foundation was started by a pillar of the Protestant work ethic who knew that giving money away has tremendous potential to harm as well as help. A century later, the leaders of his foundation prove him right every day.
Crime, Justice & the LawBy David J. Owsiany, Buckeye Institute for Public Policy SolutionsPolicy Brief, 12/05/2012
The American civil justice system is premised on the ability of injured plaintiffs to recover damages from the parties whose actions caused their injuries. In the context of asbestos liability, this enduring concept has been undermined. In many states, courts are clogged with asbestos-related suits, companies are paying for non-existent injuries, and truly sick plaintiffs may be left with nothing to recover in the future. This Policy Brief describes how this took place and what Ohio is doing to improve the situation in terms of transparency and fairness.
Budget & TaxationBy Cameron Smith, Douglas Holtz-Eakin, American Action ForumReport, 12/05/2012
This analysis finds that going over the fiscal cliff would not only have an effect on unemployment, but also on the financial markets as well. It notes that “cliff diving would have significant impact on financial markets, impair asset values, exacerbate credit stringency, and amplify the direct effects on the main street economy. Moreover, contrary to what some have asserted, such impacts cannot be ‘unwound’ by retroactively legislating away the fiscal cliff.” Additionally, this analysis finds that the fiscal cliff’s impact on financial markets could result in a broader economic downturn as large as 3 percent of GDP. That downturn could “persist beyond the two quarters needed to qualify as a recession.”
Economic GrowthBy American Action Forum, American Action ForumBooklet, 12/05/2012
This is chart book includes a series of nineteen charts with information on the housing market. It includes charts and graphs discussing subjects as the American Action Forum (AAF) Housing Recovery Indices, new home sales, National Association of Realtors (NAR) Housing Affordability Index, residential construction spending, mortgage debt outstanding, and homeownership rates, among many others.
Monetary Policy/Financial RegulationBy Satya Thallam, Anthony B. Sanders, American Action ForumReport, 12/05/2012
Due to anticipated regulatory burdens and the extent of current government involvement in the secondary mortgage market, the reentry of private capital assumed by advocates of the model proposed by Peter J. Wallison, Alex J. Pollock, and Edward J. Pinto is less than assured. Their proposal ignores the broad public support for the continued government backing of a wide range of mortgage options at affordable rates in favor of an ideologically sound, but practically difficult reform plan. But perhaps most importantly, it will be difficult to prevent future government intervention into housing at a time when the government remains so deeply involved in the financing of mortgages. A calculated risk-sharing model is a pragmatic, second-best reform plan to move forward with reform and limit taxpayer losses. Having a limited government backstop during times of crisis may be the only feasible way of putting government-sponsored enterprise (GSE) reform on the legislative agenda.
EducationBy Chad Miller, American Action ForumArticle, 12/05/2012
Congress is facing a tougher dilemma than is immediately obvious. The holes dug through the massive expansion of the Pell grant program and the president’s rush to usher in more generous income-based retirement (IBR) terms are only getting deeper. In order to extend Pell’s viability, keep borrower interest rates down, and maintain the IBR benefit promised to millions of borrowers, Congress is going to have to come up with $150 billion more than is budgeted for the financial aid programs right now over the next decade. It’s hard to see in the current environment how Congress and the president can do that, particularly if they somehow manage to avert jumping over the fiscal cliff on January 1.
EducationBy Sally Lovejoy, American Action ForumArticle, 12/05/2012
Given the significant gap between the amount of education expenditures and its effects on student academic outcomes, perhaps Congressional and Administration negotiators should link spending to academic results in the final budget agreement this year. For example, school districts that narrow the achievement gap and show academic gains among minority students for which these funds are targeted could receive bonus payments as a reward for their accomplishments. Conversely, a percentage of Title 1 funds could be withheld if school districts did not make academic gains for disadvantaged students. Similarly, students who receive Pell grants and do not complete the academic year in which the grant was received, could be required to repay those funds to the federal government.
Budget & TaxationBy William McBride, Tax FoundationFiscal Facts, 12/04/2012
The Internal Revenue Service has released new data on individual income taxes, reporting on calendar year 2010. As they do every year, the Tax Foundation presents a summary of that data along with the historical data back to 1980. A few points about the data can be made. First, as a result of the tepid economic recovery, incomes and taxes paid for all income groups increased in 2010 but not to the levels achieved during the boom years of 2006 and 2007. Second, average tax rates increased in 2010 for all except the top 1 percent, who saw a slight decrease in their average tax rate from 24.05 percent of income in 2009 to 23.39 percent in 2010. Finally, as many have noted, incomes have stagnated for low-income households in recent years, but this is true for high-income households as well.
Regulation & DeregulationBy Kathleen Hartnett White, Texas Public Policy FoundationPolicy Perspective, 12/04/2012
Key points of this Policy Perspective include 1) Texas should clarify in statute that the regulatory analysis applies to all environmental rules promulgated by TCEQ, 2) analysis of the cost-effectiveness of proposed rules in no way prevents an agency from adopting a rule, 3) The current regulatory analysis should be streamlined, 4) The required analysis should extend to state-adopted control measures in federally required State Implementation Plans (SIPs) to comply with National Ambient Air Quality Standards (NAAQS) such as ozone.
Transportation/InfrastructureBy Daryl Fleming, Robert Poole, Reason FoundationStudies, 12/04/2012
Many have argued that using toll finance to rebuild and modernize the Interstate system would be cost-prohibitive. Yet the introduction of AET has gone a long way toward making this not only a feasible option but a plausible reality. This is especially true in light of recent efforts toward establishing nationwide electronic tolling interoperability. When all data are considered, the collection cost for AET compares very favorably to the cost of collecting motor fuel taxes. Once opportunity costs are considered, including the fact that AET programs can be used to manage congestion through value, time-of-day pricing programs, AET is a much more efficient means of collecting revenue for our motorways than motor fuel taxes.
Crime, Justice & the Law
Putting “Corrections” Back in State Jails: How to Reform Texas’ Expensive, Ineffective State Jail SystemBy Jeanette Moll, Texas Public Policy FoundationPolicy Perspective, 12/04/2012
State jails are a black eye on Texas’ criminal justice system. Expensive and ineffective, the state jail felony system has strayed far from its intended purposes. Policymakers need not permit the losses to compound upon each other any longer, however. Reforming state law to return state jails to their originally intended purpose would give community supervision in Texas a powerful tool in their efforts to rehabilitate and punish offenders. Swift and sure sanctions have proven effective, and Texas lawmakers’ ingenuity in 1993 should finally be truly implemented. Strong community supervision in combination with effective, targeted rehabilitation could substantially decrease recidivism and lower costs, finally putting the “corrections” back in state jails.
Budget & TaxationBy Stephen J. Entin, Tax FoundationSpecial Report, 12/04/2012
The fiscal cliff is mainly a tax cliff, and its impact on the economy will mostly come from undermining production, not because it lowers consumer demand or government spending. The tax increases would simply make it harder, more expensive, and less desirable to produce goods and services in the United States. The tax increases on dividends, capital gains, estates, and to a lesser extent the increases in the marginal tax rates on other income and the repeal of the marriage penalty relief, would raise the cost of accumulating capital, reduce productivity, and cut employment and wages. Most of the expected revenues would be lost to a weaker economy and lower income. To be pro-growth, any solution to the current deficit and the fiscal cliff must rely mainly on spending reductions and must avoid raising taxes at the margin, especially on capital formation.
Health CareBy John C. Goodman, Peter Ferrara, National Center for Policy AnalysisIssue Brief, 12/04/2012
The National Center for Policy Analysis has developed a proposal to provide essential health care for all. We can do this with the money that is already in the system. Unlike the Affordable Care Act (“ObamaCare”), it will require no new taxes, no new spending, no individual mandate and no employer mandate. This proposal would provide patients, health care providers and insurers with the tools necessary to control costs and improve the quality of health care—without rationing by health care bureaucracies.
Economic GrowthBy Robert McTeer, National Center for Policy AnalysisBrief Analysis, 12/04/2012
Employment dropped dramatically in 2008 and 2009. The economic recovery (in gross domestic product) began in June 2009, but it has been an unusually slow recovery, with job growth even slower. As a result, jobs are the biggest issue facing the economy and policymakers. It is important to understand how job statistics are derived and what that means for public policy. This analysis concludes by stating that while having lower levels of unemployment is good, creating jobs for sake of it is not a proper goal of government policy. Indeed, jobs should not be the primary goal of public policy, but the by-product of other desirable goals Thus, government should not protect jobs made obsolete or unproductive by technology, or by creating or tolerating inefficiencies (for example, teachers’ unions). Instead it should encourage a vigorous private sector to be able to absorb those caught up in creative destruction.
Family, Culture & CommunityBy Kay S. Hymowitz, Manhattan InstituteCity Journal, 12/04/2012
Women remain scarce in the most elite positions. And it’s by choice. Academics and policymakers in what’s called the “work/family” field believe that things don’t have to be this way. But nothing in the array of work/family policy prescriptions—family leave, child care, antidiscrimination lawsuits, flextime, and getting men to cut their work hours—will lead women to infiltrate the occupational 1 percent. They simply don’t want to.
Regulation & DeregulationBy Diana Thomas, Mercatus CenterWorking Paper, 12/04/2012
This paper highlights the unacknowledged burden regulation of health and safety has placed on low-income households. Billions of dollars are spent every year to reduce life-threatening risks that arise from auto travel, air travel, air and water pollution, food, drugs, construction, and the list goes on. Today, some form of regulation affects nearly every aspect of our lives. All of it intends (at least nominally) to make consumers better off. The types of risks subject to regulation, however, are often negligible. By focusing on the mitigation of low-probability risks with higher cost, regulation reflects the preferences of high-income households and effectively redistributes wealth from the poor to the middle class and the rich. This suggests that beyond the well-known knowledge and information problems associated with intervention, there is an additional redistributive effect.
Budget & TaxationBy Seth H. Giertz, Jacob Feldman, Mercatus CenterResearch, 12/04/2012
The U.S. faces tremendous short-term policy uncertainty, including about $5.4 trillion in tax increases over the next decade. These changes are set to take effect on January 1, 2013. It is unlikely that these changes will fully materialize, but what will happen is anyone’s guess. Over the long term, uncertainty also looms large since the U.S. federal tax system is expected to bring in far less revenue than Congress is projected to spend. In this paper, we detail the tax policy uncertainty that the U.S. faces and the economic literature to assess how this uncertainty may be affecting the economy. We then build on this literature by posing an additional avenue through which policy uncertainty may harm the economy. We argue that uncertainty fos¬ters rent-seeking, which represents a shift between productive and unproductive or destructive entrepreneurship. We present a simple empirical model that lends support to our hypothesis. We then discuss principles for tax reform that could result in more stable tax policy.
Budget & TaxationBy Matthew Mitchell, Andrea Castillo, Mercatus CenterReport, 12/04/2012
Critics of the Bush tax cuts often dismiss the tax changes as a failed experiment in free-market economics. Noting that economic growth was slower in the years following the cuts than in the years preceding them, some critics see the experience as evidence that tax cuts simply do not work. But the claim that these tax cuts exemplified free-market economic thinking is baseless. In this paper we show that the Bush tax cuts had a number of problems from a market-oriented perspective: they were phased in slowly, they were set to expire within a decade, they entailed a Keynesian emphasis on stimulating aggregate demand, and—above all—they were undertaken without any effort to reduce spending. In light of these problems, there is no reason to overturn decades of theoretical and empirical research supporting the link between low taxation and growth. The episode offers a cautionary lesson in how not to cut taxes.
Do High International Telecom Rates Buy Telecom Sector Growth? An Empirical investigation of the Sender-Pays RuleBy Eli Dourado, Mercatus CenterWorking Paper, 12/04/2012
The possible extension of the telephone system’s “sender-pays” rule to the Internet is a contentious international political issue under consideration at the World Conference on International Telecommunication (WCIT). This paper examines whether higher international telephone rates support or impede telecom sector growth in the receiving country. It uses data on international telephone rates from the US from 1992-2010 to explain growth in foreign telecom sectors during the same period. I find that higher international calling rates are correlated with slower growth in the telecom sector, which suggests that countries are not primarily using higher charges to finance additional expansion. These findings cast doubt on proposals that would extend sender-pays to the Internet sector.
Transportation/InfrastructureBy Nicole Gelinas, Manhattan InstituteCity Journal, 12/04/2012
When New Yorkers wonder why buses are clogging midtown, why there’s no world-class transit from the airport to Manhattan, and why trains to New Jersey and beyond still experience avoidable delays, the people they elect to office shouldn’t respond by blaming the Port Authority, as though its actions were incomprehensible and beyond their control. Instead, they should look in the mirror.
Regulation & DeregulationBy Bert Gall, Lancée Kurcab, Institute for JusticePolicy Study, 12/04/2012
Food trucks do not have an “unfair” advantage over restaurants. The restaurant business model is more favorable than the food-truck business model in several ways, and food trucks actually help the local restaurant industry. There is no basis for the argument that restaurants need government intervention to “protect” them from food trucks. (And, as several federal courts have recognized, regulation for the sake of mere economic protectionism is constitutionally impermissible). Nor is there any basis for the notions that food trucks pose some special threat to public health and safety. Instead of creating public policy based on these myths, elected officials should allow food trucks to operate freely within their cities, subject only to reasonable health and safety regulations. Doing so is good for the local entrepreneurs, the local economy and the local community.
EducationBy Herbert J. Walberg, Hoover InstitutionDefining Ideas, 12/04/2012
The Texas plan differs from charter, voucher, and tax deduction plans in key ways that will give parents substantially more choice. Unlike voucher and charter school plans, enrollment isn’t capped, there are no family poverty requirements, and no new regulations on participating schools. Oversubscribed schools could enlarge or multiply the number of their campuses. Unlike tax credit plans, participation is not limited to people who pay state income taxes; every child receives the same sized grant, and no bureaucratic agencies nor regulations stand between parents and the schools they choose. For these reasons, it appears that the Texas plan may be the last, best hope for American K-12 education.
EducationBy Bruce Thornton, Hoover InstitutionDefining Ideas, 12/04/2012
In the end, focusing on the diversity of skin-tone, hair texture, and surname compromises the most important purpose of the university: imparting an education that trains students to think critically and, in so doing, that liberates their minds from the prison of group-think, whether ethnic, cultural, or political, preparing them for a life of political freedom and autonomy. To achieve that aim, the only diversity that matters is the diversity of individual, disagreeing minds.
Health CareBy Ronald W. Dworkin, Hoover InstitutionPolicy Review, 12/04/2012
The outpouring of legitimate demand for pain medications over the past two decades is an outpouring of discontent, one that expresses a deep change within Western culture. Confusion overlies that discontent, and exacerbates it, rooted in rival understandings of what pain is and how it should be treated. Each group of actors in the chronic pain field—patients, doctors, and government officials—simultaneously paralyzes the other two with its power. To the degree that policymakers can take command of this issue, their goal should be to sort out the confusion, especially the distrust between doctors and government. But the underlying contradiction fueling the growth of the pain industry will remain in force.
National SecurityBy Kenneth Anderson, Matthew Waxman, Hoover InstitutionPolicy Report, 12/04/2012
Some view automated technology developments as a crisis for the laws of war. But provided that the U.S. starts now to incorporate ethical and legal norms into weapons design, the incremental movement from automation to genuine machine autonomy already underway might well be made to serve the ends of law on the battlefield.
National SecurityBy Fen Osler Hampson, Tod Lindberg , Hoover InstitutionPolicy Review, 12/04/2012
Many lives have been lost and much treasure spent on what increasingly looks like “mission impossible” in countries like Afghanistan. After eleven years, it is still too early to say what the future holds. Nonetheless, is argued in this Policy Review, any decision to exit and finally disengage must be attentive to both the upside and the downside of withdrawal. At the same, the authors argue that the mission has to be recalibrated and ambitions scaled back. The formation of a stable democratic government is too stringent a requirement for a country like Afghanistan. So too is the notion that the Taliban can be decisively defeated. But there is a higher degree of probability that the Taliban can be fought to a draw given time, staying power, persistence, and patience. This in turn will help create the right conditions for negotiation and a political settlement. Such is the ultimate goal of a “no exit” strategy.
Budget & TaxationBy Tammy Frisby, Hoover InstitutionPolicy Review, 12/04/2012
The challenge for House and Senate Republicans is to refocus on the big win of a simpler, flatter, pro-growth tax code, instead of remaining stuck on retaining the current marginal tax rates on the highest earners. In the lame duck session of the 112th Congress, the negotiations over the tax burden for high earners offer Republicans an opportunity to voluntarily move away from the hard line defense of the top marginal tax rate. That said, if President Obama, Speaker John Boehner, and Senate Minority Leader McConnell can agree to keep the current highest marginal rate while reducing specific tax preferences or enacting a cap on total tax deductions at a level designed to affect the highest earners, that would signal that both sides are ready to enter the long process of major tax code reform with a central focus on interests rather than positions.
Monetary Policy/Financial RegulationBy Alex J. Pollock, American Enterprise InstituteThe American, 12/04/2012
Does interest rate risk matter if you’re the Fed? It’s not that clear. But it is clear that holding a mortgage investment portfolio bigger than Fannie Mae’s or Freddie Mac’s, along with a massively expanded government bond portfolio, does put the Fed into uncharted waters of interest rate risk.
Monetary Policy/Financial RegulationBy Reuven Brenner, American Enterprise InstituteThe American, 12/04/2012
Centralization of powers and the thinning of capital markets are the most dangerous parallels to the 1930s. What model of society will people bet on as these trends continue, and Europe and the United States get into mazes of error? The 1920s and 1930s offer warnings.
Economic and Political ThoughtBy Steve E. Rhoads, American Enterprise InstituteReport, 12/04/2012
Free markets with flexible prices coordinate the activities of millions of people in a remarkable and typically sensible way. Understanding both the principles that drive this outcome and how to apply them to new situations is what allows economists to see themselves as uniquely equipped to design sound public policies. Economists of the past thought it was part of their task to remind readers that there are high and low pleasures, that we aspire to tastes better than our current ones, and that such aspirations are sometimes hindered by profit-seeking businesses. Economics today is more technical and more insular. The older economists read widely beyond economics, and they felt the need to respond when one such as Thomas Carlyle said they were professing a “pig philosophy.” Economists will be able to defend themselves more effectively when they can see the limitations as well as the uses of the self-interest assumption.
National SecurityBy Mackenzie Eaglen, Julia Pollak, American Enterprise InstituteReport, 12/04/2012
Defense R&D help drive innovation and results in economic growth. It underpins the information revolution, vitalizes the American economy, and keeps America safe. But defense R&D spending is declining precipitously—at a time when the private sector is least able to take the hit. Nonetheless, there are options: first among these is to stabilize R&D funding. Though this may squeeze other accounts in the short term, investment now will help ensure the long-term safety and prosperity of America. The choice before Congress is simple: will it make a strategic investment in the future, or will it concern itself only with the troubles of the present?
Foreign Policy/International AffairsBy Leon Aron, Yale University PressBook, 12/04/2012
Leon Aron considers the “mystery of the Soviet collapse” and finds answers in the intellectual and moral self-scrutiny of glasnost that brought about a profound shift in values. Reviewing the entire output of the key glasnost outlets in 1987-1991, he elucidates and documents key themes in this national soul-searching and the “ultimate” questions that sparked moral awakening of a great nation: “Who are we? How do we live honorably? What is a dignified relationship between man and state? How do we atone for the moral breakdown of Stalinism?” Contributing both to the theory of revolutions and history of ideas, Aron presents a thorough and original narrative about new ideas’ dissemination through the various media of the former Soviet Union. Aron shows how, reaching every corner of the nation, these ideas destroyed the moral foundation of the Soviet state, de-legitimized it and made its collapse inevitable.
Foreign Policy/International Affairs
For Dignity in Democratic Citizenship: Russia’s Unfinished Moral Revolution and Anti-authoritarian Movements TodayBy Leon Aron, American Enterprise InstituteRussian Outlook, 12/04/2012
A close examination of the causes of the Russian Revolution of 1987–91 indicates that it was precipitated not by the traditional structural calamities of economic or financial crises, military defeat, or natural disasters but by a moral and intellectual awakening of the Soviet people. The tug of war between the power of the state and the conscience of the citizen became a source of widening conflict. Moral and intellectual revolution of the late 1980s attempted to recover people’s dignity by constructing democratic citizenship rooted in economic and political liberty and personal responsibility. Russia’s revolution is an example of moral renewal generated from “below” by civil society rather than the state. In Russia today, burgeoning grassroots movements appear to continue what glasnost started by seeking to inculcate and widen modern, enlightened, democratic citizenship.
National SecurityBy Mackenzie Eaglen, American Enterprise InstituteReport, 12/04/2012
It’s time for defense planners to be forthright about what the U.S. military can and cannot do, and about the increased risk that the Department, and America, is running as a result of our declining power. America is operating with a force structure that is substantially smaller than that established by the first Quadrennial Defense Review (QDR) at the beginning of the Clinton Administration; before the global war on terror, before the rise of Chinese power, and before the resurgence of Russian ambitions. Much of today’s equipment is aging, difficult to maintain, and increasingly unreliable. As an example, half of the Navy’s deployed aircraft is not ready for combat. The force is stressed, tired, and demoralized. The acquisition system is broken, and it cannot be fixed without a stable funding plan that is impossible if budgets swing wildly every time Washington has a fiscal crisis.
Foreign Policy/International AffairsBy Danielle Pletka, American Enterprise InstituteTestimony, 12/04/2012
It is possible that the U.S. will not be able to steer the Middle East down a more moderate path; indeed, it is possible that with the best of intentions and the cleverest use of America’s power, it will fail. Right now, however, the United States is sitting on the sidelines and watching as the region transitions from secular autocracy to Islamist autocracy. That is a dangerous mistake.
Information TechnologyBy Jeffrey Eisenach, American Enterprise InstituteTestimony, 12/04/2012
The current sound recording performance right is imperfect, most notably because of the distortions associated with the fact that it does not apply to terrestrial broadcasters. Over the course of nearly 20 years, however, Congress has moved gradually in the direction of expanding the sound recording right and, in so doing, increasing the role of market forces in allocating the economic resources used to produce, distribute and consume musical entertainment. As long as government remains enmeshed in the process of setting rates, there will be calls from interested parties for Congress to intervene on their behalf. Such calls should be seen, however, for what they are, and resisted. There is no public policy case in favor of the Internet Radio Fairness Act (IRFA), only a political one.
Economic GrowthBy Kevin A. Hassett, Ed., American Enterprise InstituteBook, 12/04/2012
The American Enterprise Institute (AEI) brought together experts from a variety of fields to discuss the issue of competitiveness and how it may influence their disciplines. This volume is composed of the nine papers that were presented at three conferences attempting to answer the question: if "competitiveness" were to have a rigorous and relevant meaning in your field, what might that be? The volume begins with a chapter outlining the arguments surrounding competitiveness and a discussion of the Tiebout model along with its application to the international stage. From there, the chapters address the subjects of competitive tax policy, education policy, immigration, innovation, health care, international trade, and measuring international competitiveness. The conclusions these papers reach enrich the debate on what competitiveness is and how policymakers should strive to support it.
National SecurityBy Morgan Lorraine Roach, Jessica Zuckerman, The Heritage FoundationIssue Brief, 11/30/2012
Almost three months after the September 11 attack on the U.S. facility in Benghazi, there are still many unanswered questions about what led to the deaths of four Americans. Despite Congress’s efforts to investigate the events surrounding the attack, little has been learned about how the United States can respond to similar attacks in the future. It is therefore necessary for Congress to establish a select committee, preferably bicameral, to examine the attack and determine what should be done to improve U.S. diplomatic security.
Health CareBy Alabama Policy Institute, Alabama Policy InstituteGuide to the Issues, 11/30/2012
Alabama should continue with its plan to not implement a Health Insurance Exchange (HIX). While the allure of federal subsidies to set up a HIX is understandable, the consequences are far-reaching. The HIX recommended by the AHIESC would be paid for through fees imposed on insurance policies issued outside of the HIX. In other words, Alabamians who gain no benefit from the HIX would be charged for its continued operation. If fees are not sufficient to keep the HIX operating, all Alabamians could face tax increases in the future. In short, Alabama should explore other options for improving competition in the health insurance marketplace without government intervention.
National SecurityBy Rebeccah Heinrichs, Baker Spring, The Heritage FoundationBackgrounder, 11/30/2012
The Obama Administration is apparently considering further reductions of U.S. nuclear forces based on the misguided notion that the world is safer when America adopts a nuclear deterrence posture based on a minimal level of effectiveness. In contrast, a sound targeting policy consistent with a “protect and defend” strategy for the U.S. and its allies and friends indicates that the U.S. should maintain approximately 2,700 to 3,000 operationally deployed warheads and be flexible enough to permit continuous updates. These numbers also assume that the U.S. will modernize its delivery systems and upgrade its command and control structure to meet counterforce targeting requirements. Increasing and maintaining the U.S. military’s asymmetric advantage will protect the ability of the U.S. to shape events, rather than be controlled by the wills of other nations.
Natural Resources, Energy, Environment, & ScienceBy Angela Logomasini, Competitive Enterprise InstituteStudies, 11/30/2012
This year marks the 50th anniversary of biologist Rachel Carson’s 1962 book, Silent Spring, which argued that man-made chemicals represented a grave threat to human health and the environment. History has proven Carson’s claims wrong. As the world reexamines Carson’s anti-pesticide legacy, this paper focuses on the importance of chemicals designed for crop production. These agrochemicals represent one of many technologies and practices which increase farming efficiency. Other technologies include biotechnology, better soil and water management. Policies that allow the application of such tools will continue to facilitate the Green Revolution and increase agriculture’s ability to feed the world’s growing population. High-yield agriculture reduces the amount of land necessary to meet those needs. Unfortunately, these benefits are at risk as Carson’s legacy of misinformation lives on within the politically organized environmental movement, who promote bureaucratic regulations designed to discourage the use of these technologies and practices, thereby leading to lower food production, higher food prices, and fewer environmental benefits.
National SecurityBy Michaela Bendikova, The Heritage FoundationIssue Brief, 11/30/2012
In 2013, senior officials at the Pentagon will broadly examine U.S. national defense strategy, force posture, and weapons modernization in a congressionally mandated process called the Quadrennial Defense Review (QDR). The QDR establishes a defense planning program that will direct the Department of Defense’s budget and determine how many vehicles, tanks, ships, aircraft, and other essential equipment the services will procure in the next two decades. It is essential that Congress establish an independent QDR review panel that would allow a transparent discussion about the size and scope of future U.S. military forces.
Budget & Taxation
Six Bipartisan Entitlement Reforms to Solve the Real Fiscal Crisis: Only Presidential Leadership Is NeededBy J.D. Foster, Alison Acosta Fraser, The Heritage FoundationBackgrounder, 11/30/2012
The United States faces a real fiscal crisis, and the impending fiscal cliff of massive tax hikes and spending cuts in January is only the first act. In early 2013, the federal government will exhaust its ability to issue debt legally. Yet as large and as major a concern as federal budget deficits are today, they are of secondary consequence compared with the fiscal quagmire of unaffordable entitlement spending in the next decade. Fortunately, the entitlement problem can be resolved by six simple reforms to improve the fiscal future for Social Security and Medicare. But to implement these reforms, President Barack Obama must lead.
Budget & TaxationBy David B. Muhlhausen, The Heritage FoundationIssue Brief, 11/29/2012
Senator Joseph Lieberman (I–CT) has filed an amendment to the National Defense Authorization Act for Fiscal Year 2013 (S. 3254) that would reauthorize the ineffective fire grant program. The amendment is a revised version of the Fire Grants Reauthorization Act of 2011 (S. 550), and it reauthorizes a grant program that has significant shortcomings.
Budget & TaxationBy Illiya Atanasov, Pioneer Institute for Public Policy ResearchWhite Paper, 11/29/2012
Pension fund management can benefit from three broad sets of reforms: 1) Adopting and continuously updating a system of clear benchmarks consistent with actuarial and target returns as well as with the dual mandate of capital preservation and reliable returns. 2) Moving away from more volatile and illiquid asset classes such as commodities and private equity towards assets that generate free cash flows and would improve fundamental diversification such as blue-chip convertibles/revertibles and REITs, while maintaining a suitable cushion of liquidity in cash equivalents to prevent fire sales of securities due to market fluctuations. 3) Boosting the transparency of decision-making and adopting the best practices of continuous review and improvement. The adoption of these reforms can significantly improve the performance of retirement systems statewide and reduce the costs of funding public pension benefits.
Budget & TaxationBy Romina Boccia, James Sherk, Katie Tubb, The Heritage FoundationIssue Brief, 11/29/2012
The nation is now firmly on track to go over the fiscal cliff in January 2013 unless Washington takes action. The uncertainty leading up to the fiscal cliff—especially Taxmageddon—is already hurting the economy today and, according to projections by the Congressional Budget Office, could send the country back into recession in 2013. Individuals, families, businesses, and the military would all be hit hard by the fiscal cliff, but Congress and the President have yet to act to avoid this economic and defense disaster. Here are specific recommendations for how to avoid the four main parts of the fiscal cliff.