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Recent Policy Studies
Information TechnologyBy Paul Rosenzweig, David Inserra, The Heritage FoundationIssue Brief, 02/14/2013
In his State of the Union address, President Obama announced that he had signed an executive order (EO) on cybersecurity. The order uses a standard-setting approach to improve cybersecurity. However, such a model will only impose costs, encourage compliance over security, keep the U.S. tied to past threats, and threaten innovation. While the EO does take some positive steps in the area of information sharing, these steps are hamstrung by the EO’s inability to provide critical incentives such as liability protection. As a result, this order could result in few modest changes, or it could result in substantial negative effects.
Budget & TaxationBy J.D. Foster, The Heritage FoundationIssue Brief, 02/14/2013
Steady, sustained deficit reduction would not hamper the recovery and may well provide modest near-term support for growth by whittling away at the debilitating uncertainty restraining growth. President Obama and Congress should work toward cutting spending in 2013 as part of a credible plan to balance the budget in 10 years in full confidence that the economy would benefit thereby.
LaborBy Richard A. Epstein, Hoover InstitutionDefining Ideas, 02/14/2013
This past Wednesday, thousands of families have been dislocated by the decision of Local 1181 of the Amalgamated Transit Union to initiate a school bus strike. Some 8,800 drivers and matrons, whose incomes average about $35,000 per year, went on strike, shutting down about 70 percent of the City’s 7,700 school bus routes. The dispute centers on New York Mayor Michael Bloomberg’s effort to introduce a system of competitive bids that would allow the City to find some lower-price providers. In short, the solution to the current problem is not for both sides to return to the bargaining table. Short-term fixes will not undo the long-term structural mistakes. The correct solution is to shut that bargaining table down and give the City the power to negotiate with the unions with the same degree of freedom that private employers have.
Budget & TaxationBy Richard A. Epstein, Hoover InstitutionDefining Ideas, 02/14/2013
The latest fiscal cliff has led the President and Congress on a manic quest to find new sources of revenue for a federal government that is congenitally unable to live within its means. That extra revenue can come in only two ways. We can raise tax rates, clamp down on tax deductions, or do some combination of the two. Also, the president’s redistributive effort to limit charitable tax deductions will hurt the poor—and everyone else.
Budget & TaxationBy Richard A. Epstein, Hoover InstitutionDefining Ideas, 02/14/2013
The golfer Phil Mickelson, who often has his name in the sports pages for his athletic feats, has recently grabbed the headlines for an unconventional reason—he has politely protested California’s new maximum tax rate of 13.3 percent. For Mickelson, who pulls down $45 million per year, that tax generates about $6 million in added revenues for a cash-hungry California; he can then deduct 40 percent of that $6 million in California taxes from his federal income tax. That tax two-step leaves him about $3.6 million short. A three-fold program is thus in order. First, progressive taxation should be abandoned in favor of a flat income or consumption tax. Second, there should be strict limitations on the ability of states to impose onerous restrictions on land use development. Finally, the exit right (moving to another state) offers a simple, low-cost way to supply partial protection against excessive taxes and regulation for current residents.
Foreign Policy/International AffairsBy Joel Rayburn, Hoover InstitutionDefining Ideas, 02/14/2013
In the days of the Ottoman Empire, British diplomats referred to the Arabic-speaking territories of the empire as “Turkish Arabia.” It was these Arabic-speaking lands that Britain and France, in the aftermath of the First World War, divided into the modern Arab states we know today: Syria, Iraq, Jordan, and Lebanon. Those arbitrary colonial boundaries have endured for the better part of a century, but the people within them have never fully acknowledged the legitimacy of the lines that British and French officials drew for them.
Budget & TaxationBy Charles Blahous, Hoover InstitutionDefining Ideas, 02/14/2013
The worthy goal of expanding health insurance coverage was one of the motivations for passing the Affordable Care Act (ACA). The ACA however lacks sufficient savings provisions to finance such a coverage expansion without severely worsening the fiscal outlook. A fiscally responsible coverage expansion will continue to elude us unless state and federal lawmakers do everything yet possible to reduce the projected cost of the ACA’s provisions before they become fully effective in 2014.
Economic and Political ThoughtBy James Huffman, Hoover InstitutionDefining Ideas, 02/14/2013
As appealing and self-evident as it seemed at the time, one person/one vote was too simple to be right for a vast and diverse republic. Sooner or later, the Electoral College will probably give way to a national popular vote for president. But rural America was set on a path of inexorable decline a half century ago when the Supreme Court rejected the plea of rural communities for representation as communities in our extended republic.
EducationBy Erwin H. Epstein, Hoover InstitutionHoover Digest, 02/14/2013
The area of research that most focuses on how schooling affects national security, economic development, wars, revolutions, and peace is comparative education, a field that applies the theories and methods of history and the social sciences to understanding international issues of education. Though having strong roots in the nineteenth century, comparative education grew up in the twentieth, guided in good measure by two of the field’s giants: Isaac L. Kandel (1881-1965) and William W. Brickman (1913–1986). The Hoover Institution Archives houses the main collections of documents from both of these influential scholars.
ImmigrationBy Gary S. Becker, Hoover InstitutionHoover Digest, 02/14/2013
Many arbitrary rules are used to limit the number of immigrants, leading to excess demand to immigrate. When companies have excess demand for their products (for example, when fewer cars are offered for sale than people want to buy), companies raise the price they charge. Conversely, as in recent years, amid a greater supply than demand, the car companies have lowered their prices, offering zero percent financing and cash discounts. This is how markets operate. Think of immigration as a market. Based on the market concept, the price to immigrate to many rich countries is too low (zero usually), so governments should try to find a price that equilibrates the desired number of immigrants and the number who want to enter. Doing this, countries will get more of the type of immigrant they hope to attract—and keep.
Health CareBy Hadley Heath, Independent Women's ForumPolicy Focus, 02/14/2013
One important component of the Affordable Care Act (ObamaCare) is the creation of statewide “exchanges” or organizations that will oversee the sale and purchase of health insurance, mainly for people outside of the employer-sponsored insurance market. However, the exchanges are not the solution to our existing health care problems, and in fact are simply another step in the bad direction of further complicating and constricting our health system. Real reform would mean giving states – and individuals – more freedom to make their own choices.
Budget & TaxationBy Emily Wismer, Independent Women's ForumPolicy Focus, 02/14/2013
A growing economy is the real key to increasing tax revenue. Throughout history when tax rates go down, tax revenues tend to increase as people become more productive, the economy grows, and the tax base expands. Tax reform should focus on broadening the tax base by eliminating distortionary deductions and reducing penalties on behavior we want to encourage, such as working and investing. Yet tax reform alone will not close our deficit or right our economy. The key to deficit reduction is to cut spending, and reform our nation's financially unsound entitlement program so they can be there for those who need them in the future.
Retirement/Social SecurityBy Charles Blahous, e21 – Economic Policies for the 21st CenturyCommentary, 02/14/2013
Many federal policy makers are aware that the Social Security program faces a substantial financing shortfall requiring correction. This would involve either increasing program taxes or slowing the growth of benefits – most likely both, given the size to which the shortfall has already grown in addition to the fact that neither party enjoys sufficient political power to impose its preferred solution on the other. Social Security tax increases and benefit growth restraints are both politically unattractive; but at least one or the other is necessary to balance the program’s books if we intend to maintain Social Security as a self-financing program.
Monetary Policy/Financial RegulationBy George Selgin, Cato InstituteCato Journal, 02/14/2013
Should the euro begin to disintegrate, the occasion, for all the disruption and damage it must cause, will at least renew the prospect for implementing the Hayekian alternative. That, to be sure, is a rather meager bit of silver by which to line a very large, dark cloud. Yet the ability to choose freely among competing currencies remains Europeans’ best hope for a monetary regime that is both stable and sustainable.
Crime, Justice & the LawBy Carlos Pestana Barros, Ari Francisco de Araujo Jr., Joao Ricardo Faria, Cato InstituteCato Journal, 02/14/2013
This article analyzes conflicts in Brazil involving landless peasants and the violence that frequently results from their invasion and occupation of privately owned rural land for the period 2000–08. Land ownership in Brazil is overwhelmingly and historically characterized by large, family-owned estates. The unequal and inequitable allocation of land together with weak institutions, weak markets, and low asset endowment may make land reform a low priority. In the absence of effective land reforms, these factors may lead to the occupation of land by the landless poor peasants by violent means. In such an environment, land-related conflicts are common and have been previously analyzed in several studies, with a particular focus on Africa and Latin America.
Budget & TaxationBy Melissa Yeoh, Dean Stansel, Cato InstituteCato Journal, 02/14/2013
This article provides the first examination of the relationship between public expenditures and labor productivity that focuses on municipalities, rather than states or nations. We use data for 1880–1920, a period of rapid industrialization in which there were both high levels of public infrastructure spending and rapid growth of productivity. We use a simple Cobb-Douglas production function to model labor productivity in the manufacturing sector, letting total factor productivity depend on “productive” public expenditure by city governments—that is, on public spending that may raise the productivity of labor and encourage human capital accumulation.
Monetary Policy/Financial RegulationBy Adrian Urbaczka, Roland Vaubel, Cato InstituteCato Journal, 02/14/2013
For a long time, the International Monetary Fund has been criticized for subsidizing its credits. According to Walter Bagehot (1873), a lender of last resort ought to “lend freely but at a penalty.” Otherwise moral hazard results. Bakker and Schrijvers (2000) and the Saxton Report (2002) have presented estimates of the subsidy element in IMF lending. In this article, we present an improved and updated calculation. We also present evidence on another criticism of IMF policy: that it fails to enforce compliance with policy conditions. The IMF claims that it cancels its programs if debtor governments do not honor their policy commitments. We show that cancellations due to noncompliance tend to be followed by new programs very soon.
Economic GrowthBy R.W. Hafer, Cato InstituteCato Journal, 02/14/2013
This article arises from two related research programs. One examines the relationship between financial development and economic growth. The basic conclusion from this work is that countries that experience greater financial development also experience faster rates of economic growth and higher levels of income per capita. The other line of research investigates the institutional sources of economic growth. In addition to physical and human capital, researchers have considered a number of institutional factors as diverse as colonial background and religious preferences.
EducationBy Joanne Jacobs, American Enterprise InstitutePolicy Brief, 02/14/2013
This policy brief is the second in a series of in-depth case studies exploring how top-performing charter schools have incorporated civic learning in their school curriculum and school culture.
Economic and Political ThoughtBy Amy A. Kass, Leon R. Kass, American Enterprise InstituteHistorical Notes, 02/14/2013
This book discusses the origins and traditions of George Washington’s Birthday Holiday. It also provides a short biography as well as what made George Washington great. It concludes with an assessment of Washington and why he should be remembered.
Natural Resources, Energy, Environment, & ScienceBy Robert Mendelsohn, Nicholas Z Muller, American Enterprise InstituteBook, 02/14/2013
America has struggled to strike the proper balance between environmental stewardship and economic well-being when regulating air pollution. Economics Professors Nicholas Muller and Robert Mendelsohn suggest a path-breaking solution to this conundrum: an original and efficient regulatory model that they contend would lead to both clearer air and millions in industry savings.
Foreign Policy/International AffairsBy Sasha Gordon, American Enterprise InstituteReport, 02/14/2013
The trend in Yemen over the past two years has been to rely increasingly on local groups to govern outlying areas of the country, particularly as poor security has eroded Sana’a’s ability to govern its peripheries. The formation of tribal committees comprised of local fighters is part of this trend, and it too is likely to become more prevalent. Looking into the future, the unavoidable question is: can the central government rely on Yemeni tribal structure, in the form of local militias, to protect the vulnerable areas outside the capital? Judging from the experience of the past year, the answer is no. Rather, the trend is moving in the opposite direction – toward devolving security across Yemen’s peripheries.
Economic GrowthBy Nicholas Eberstadt, Hans Groth, Judy Twigg, American Enterprise InstituteReport, 02/14/2013
This essay is based on interviews over the past two years with a variety of subject-matter experts in Russia and on extensive background conversations with US and European professionals currently working with Russian colleagues in these areas. It explores the parameters of international partnership with Russia in areas involving human capital. Is there still a compelling logic driving such international collaboration with Russia, given its increasingly hostile political climate? Do Russia’s own challenges affect its potential contribution to international collaboration? Is it possible, through collaboration, to help Russia address its human capital crisis? How could we construct politically viable partnerships that move beyond the outdated (and perhaps never appropriate) US-Russia assistance paradigm of the 1990s? And, finally, even beyond overarching political considerations, does it make sense to ask these questions, given that Russia has ample resources to tackle these problems?
National SecurityBy Thomas Donnelly, Phillip Lohaus, American Enterprise InstituteReport, 02/14/2013
This paper will present a series of arguments for increased and sustained funding for the F-35 Lightning II Joint Strike Fighter. Beyond question, the program is the key index of weapons modernization for US forces for at least the coming decade, so much so that it will also be a reliable indicator of America’s commitment to maintain global military preeminence. There are many positive reasons why this is so—the sheer size of the F-35 fleet would make it the centerpiece of any large-scale conventional air campaign; its reconnaissance and strike capabilities and ability to act as a “node” in a larger “network” of joint systems make it much more than a stealthy tactical aircraft; and its durability and ease of maintenance will create a capacity for large-scale, “everyday” stealth.
Monetary Policy/Financial Regulation
Bad History, Worse Policy: How a False Narrative about the Financial Crisis Led to the Dodd-Frank ActBy Peter J. Wallison, American Enterprise InstituteBook, 02/14/2013
In his new book, Bad History, Worse Policy: How a False Narrative about the Financial Crisis Led to the Dodd-Frank Act, Peter Wallison argues that the Dodd-Frank Act—the Obama administration’s sweeping financial regulation law—will suppress economic growth for years to come. Based on his essays on financial services issues published between 2004 and 2012, Wallison shows that the act was based on a false and ideologically motivated narrative about the financial crisis.
Budget & TaxationBy Nicole Gelinas, Manhattan InstituteCity Journal, 02/14/2013
Despite Governor Cuomo’s attempts to wring as much money as he can from Washington for storm repair and prevention, federal funding won’t be enough to indemnify New York fully against future hurricanes. It follows that Cuomo—along with Mayor Bloomberg and his would-be successors—must ask themselves: How much is protecting New Yorkers from storm surges worth? Is it worth getting a handle on New York’s public-employee costs, so that local and state governments, spending less money on union contracts, can spend more on infrastructure? Is it worth investigating why MTA capital projects cost so much and take so long? That leads to the real lesson to draw from the superstorm. Sandy and its aftermath weren’t departures from workaday concerns. They were simply another manifestation—a deadly one—of the problems that plague New York every day.
Crime, Justice & the LawBy Kirk C. Jenkins, Washington Legal FoundationLegal Opinion Letter, 02/14/2013
Iskanian involves a collision between Concepcion and a pre-Concepcion decision of the California Supreme Court, Gentry v. Superior Court. In Concepcion, the U.S. Supreme Court held that the Federal Arbitration Act (FAA) preempted California’sDiscover Bank rule, which held that arbitration clauses barring class arbitration were unconscionable. In Gentry, decided four years before Concepcion and squarely based on Discover Bank, the California Supreme Court instructed lower courts to invalidate arbitration agreements barring class arbitration whenever—based on a four-factor test—the court concluded that individual actions would offer only random and fragmentary enforcement of the wage-and-hour provisions of the California Labor Code. Depending on the Supreme Court’s ultimate decision, Iskanian could represent a thawing of the California courts’ hostility to the U.S. Supreme Court’s pro-arbitration decision in AT&T Mobility LLC v. Concepcion, as Evan M. Tager and Kevin S. Ranlett wrote in a WLFLegal Opinion Letter last year—or an unfortunate doubling-down on that hostility.
Crime, Justice & the LawBy Victor E. Schwartz, Phil Goldberg, Cary Silverman, Washington Legal FoundationLegal Opinion Letter, 02/14/2013
Can a product manufacturer be subject to liability for a competitor’s product? American tort law has always said, “No.” It does not matter if the products are identical. Companies are not to be their competitors’ keepers. Nor are they to be insurers of their competitor’s products. Nevertheless, last month, the Supreme Court of Alabama overturned this fundamental of tort law. It held that a manufacturer of a brand-name prescription drug can be subject to liability even when a plaintiff alleges that he or she was harmed by a generic drug made by the brand-name manufacturer’s competitor.
Crime, Justice & the LawBy Beth Z. Shaw, Washington Legal FoundationLegal Opinion Letter, 02/14/2013
There are two questions presented in the CLS en banc order. First, what test should the court adopt to determine whether a computer-implemented invention is a patent ineligible "abstract idea"; and when, if ever, does the presence of a computer in a claim lend patent eligibility to an otherwise patent-ineligible idea? Second, in assessing patent eligibility under 35 U.S.C. sec. 101 of a computer-implemented invention, should it matter whether the invention is claimed as a method, system, or storage medium; and should such claims at times be considered equivalent for sec. 101 purposes?
EducationBy The Friedman Foundation, Friedman Foundation for Educational ChoiceSchool Choice Issues, 02/14/2013
“The ABCs of School Choice” is the most comprehensive guide to every private school choice program in America, showcasing the voucher, tax-credit scholarship, education savings accounts, and individual tax credit/deduction programs currently operating in 21 states and Washington, D.C. “The ABCs of School Choice” provides policymakers, advocates, researchers, and reporters data on each program’s funding levels, eligibility rates, and participation numbers. The 2013 edition also features personal stories of the students, parents, and schools that benefit from school choice along with “Friedman Feedback” on ways states can expand each program to eventually fund all children, a vision first established by the late Milton Friedman.
Economic GrowthBy Nicholas Bloom, Fraser InstituteFraser Alert, 02/14/2013
Policy conflict and fiscal cri sis in the United States and Europe have spurred concerns about policy uncertainty and its economic effects. Many policymakers, business people, and the media suggest that the political crisis in Washing- ton is leading firms and consumers to postpone hiring and spending decisions, stalling the recovery from the 2007-2009 recession. This essay seeks to investigate this assertion by answering three questions. First, is economic policy uncertainty high in the US and Canada? Second, if so, is this damaging the economy? Finally, what are the prospects for future policy stability and economic growth?
LaborBy Raymond J. LaJeunesse, Federalist SocietyEngage, 02/14/2013
After the 2008 election of President Barack Obama and Democrat majorities in both houses of Congress, labor organizations were confident that the “Employee Free Choice Act” (EFCA)—popularly called the “Card-Check Bill”—would be enacted. EFCA would have made union organizing easier, by among other things, requiring employers to recognize unions without a secret-ballot election supervised by the National Labor Relations Board (NLRB or Board) if a union obtained signatures on union-authorization cards or a petition of a majority of the employees in an appropriate bargaining unit. However, despite President Obama’s support for EFCA, for a number of reasons organized labor was unable to overcome a threatened Senate filibuster in 2009 and 2010, and EFCA became a “dead letter” when Republicans took the House and made significant gains in the Senate in the 2010 elections. This paper analyzes union organizing and the NLRB under the Obama Administration.
The Constitution/Civil Liberties
The America Invents Act May Be Constitutionally Infirm if It Repeals the Bar Against Patenting After Secret Commercial UseBy Ron Katznelson, Federalist SocietyEngage, 02/14/2013
The America Invents Act (AIA) is perhaps the most sweeping and consequential patent legislation since 1870. It contains a provision that will become effective on March 16, 2013, but its constitutional implications have yet to be discussed. This paper analyzes the constitutionality of the new conditions for patentability set forth in the recently passed AIA.
LaborBy Amelia W. Koch, Jennifer McNamara, Laura Carlisle, Federalist SocietyEngage, 02/14/2013
The ability of employees to proceed collectively under the Fair Labor Standards Act (FLSA) is a well-settled right. So, too, is the employer’s right to negotiate for arbitration of employment disputes. A judicial clash between these two principles has emerged with class/collective action waivers in the employment context. This article addresses the current split in the federal courts over the legality of class/collective action waivers in employment agreements and analyzes the historical development of the competing rights to collective action and arbitration in hopes of anticipating the direction federal courts will take going forward. Though the Supreme Court has not weighed in on the debate, at least one case sitting on its doorstep could provide an opportunity to examine the tension between its twin commitments to collective actions and arbitration.
Regulation & DeregulationBy Robert T. Miller, Federalist SocietyEngage, 02/14/2013
This article examines two recent cases in the Delaware Court of Chancery addressing the Revlon duties of directors when the company’s financial advisor has a conflict of interest related to the proposed business combination transaction.
The Constitution/Civil LibertiesBy Gail Heriot, Alison Somin, Federalist SocietyEngage, 02/14/2013
A brief look at the Thirteenth Amendment might suggest that it has rather limited application in today’s world. And today there has been a growing movement in both academia and the halls of Congress to use the Thirteenth Amendment’s Section 2 to address a variety of social ills thought to be in some way traceable back to slavery. This movement has had its greatest recent success with the Matthew Shepard and James Byrd, Jr. Hate Crimes Prevention Act (HCPA). In passing that law, Congress relied solely on its Section 2 constitutional authority for its ban on crimes motivated by race and color. In this essay, we discuss some issues presented by a broad conception of Section 2. We also survey the literature calling for legislation based on a broad conception of Section 2 and briefly note that conception’s potential to be a double-edged sword.
LaborBy Hans Bader, Federalist SocietyEngage, 02/14/2013
This article discusses the Supreme Court’s decision in Ledbetter v. Goodyear Tire & Rubber Co., as well as two subsequent pieces of legislation, the Lilly Ledbetter Fair Pay Act of 2009 and the Paycheck Fairness Act. The examples given in this article are at odds with the assumption of many supporters of the Paycheck Fairness Act and the Ledbetter Act that pay disparities are simply the result of gender bias or sexism.
Natural Resources, Energy, Environment, & ScienceBy Richard A. Samp, Cory L. Andrews, Federalist SocietyEngage, 02/14/2013
This paper analyzes the FDA’s “Park Doctrine” for prosecutions against corporate officials under the Federal Food, Drug, and Cosmetic Act.
Health CareBy Don King, Timothy S. Jost, Federalist SocietyEngage, 02/14/2013
The essay is divided into four sections. Section I briefly describes the effects that policies enacted prior to the Affordable Care Act (ACA) (pre-ACA) have had on health care prices and expenditures. Section II summarizes the likely effects that major ACA provisions will have on prices and expenditures. Section III outlines an approach to health care reform that would lead to greater individual ownership of health care funds and increase each person’s options for health insurance and medical care. Section IV describes how these latter reforms may be more effective than comprehensive insurance at increasing access to care for low-income, high-risk, and older Americans.
Budget & TaxationBy Robert M. Costrell, Jeffery Dean, Education NextEducation Next, 02/14/2013
In this study, we examine the Bureau of Labor Statistics data to compare the costs to districts for teacher health insurance with similar costs to private-sector employers. We find that insurance costs for teachers are 26 percent higher than they are for private-sector professionals, and this is partly explained by greater unionization in the public sector. We also examine data newly available from Wisconsin to quantify the impact of that state’s recent change in collective bargaining law: we find a reduction in district costs of 13 to 19 percent, the result of lower-cost policies and higher teacher contributions.
Budget & TaxationBy Charles Blahous, e21 – Economic Policies for the 21st CenturyCommentary, 02/13/2013
Last month the New York Times printed an op-ed piece (“Social Security: It’s Worse than You Think”) by professors Gary King of Harvard and Samir Soneji of Dartmouth. Their piece asserted that the Social Security actuaries’ methods for projecting mortality are “antiquated,” prone to “interference from political appointees,” and result in projections that underestimate the Social Security financing shortfall. The piece was accompanied by a graphic showing certain “crazy” demographic projections purportedly arising under current methods, for example that “everyone who happens to be 55–59 in 2028 would die.” Despite the author’s own concerns about Social Security finances, he does not find the allegations printed in the Times to be persuasive. This article presents some reasons as to why, in addition to some basic background information about the trustees’ projection process.
Budget & TaxationBy Charles Blahous, e21 – Economic Policies for the 21st CenturyCommentary, 02/13/2013
The CBO report paints a disturbing portrait of unsustainable federal debt accumulation driven entirely by spending, and by entitlement spending in particular. To spare our children and grandchildren from unprecedented levels of taxation and/or indebtedness, entitlement reforms that slow these programs’ growth are desperately needed, the sooner the better.
ImmigrationBy James R. Edwards, Center for Immigration StudiesBackgrounder, 02/13/2013
In January 2013, the Centers for Medicare and Medicaid Services and the Department of Health and Human Services issued a proposed rule implementing health reform’s Medicaid, Children’s Health Insurance Program (CHIP), and Exchanges provisions. The proposal includes details of the statutory requirements for verifying the immigration or citizenship status of those applying for Medicaid and CHIP. This Backgrounder describes the proposed verification process and standards.
ImmigrationBy Steven A. Camarota, Center for Immigration StudiesBackgrounder, 02/13/2013
It is difficult to overstate the size of the pool of potential workers that now exists in the United States. If through enforcement a significant fraction of illegal immigrants returned to their home countries rather than being allowed to stay with legal status, there would seem to be an ample supply of idle workers to replace them, particularly workers who have relatively little education. The contention that there is a general labor shortage that has to be satisfied by giving work authorization and/or citizenship to illegal immigrants rather than encouraging them to return to their home countries is entirely inconsistent with the available evidence. Further both the President and the "gang of eight" have proposed increasing legal immigration, including for jobs that require relatively little formal education. Again the data do not support the contention that there is a general labor shortage in the United States or a shortage of less-educated workers.
ImmigrationBy David North, Center for Immigration StudiesBackgrounder, 02/13/2013
Those interested in or advocating “comprehensive immigration reform” should examine the thoroughly researched, well-documented findings of a federal commission that spent more than five years—and numerous hearings—dealing with exactly that subject. Its work was summed up in these words: The credibility of immigration policy can be measured by a simple yardstick: people who should get in, do get in; people who should not get in are kept out; and people who are judged deportable are required to leave. Most of the recommendations were unanimous. There was a single dissent on the second and fifth group of proposals by one of the commissioners, the former executive director of the American Immigration Lawyers Association. This Backgrounder provides more detail on the Commission’s recommendations, and speculates on why such a rational package should have emerged.
Elections, Transparency, & AccountabilityBy Kevin Mooney, Capital Research CenterOrganization Trends, 02/13/2013
Formed in the midst of the nation’s struggle to guarantee equal rights to all Americans, regardless of race, the Lawyers’ Committee for Civil Rights Under Law has morphed into just another left-wing pressure group trying to gain special privileges for its favored constituencies, even if that means undermining the voting rights of Americans of every race.
Natural Resources, Energy, Environment, & ScienceBy Brian Seasholes, Capital Research CenterGreen Watch, 02/13/2013
This year marks the fortieth anniversary of the Endangered Species Act, which has been criticized for blocking construction projects, destroying jobs, and allowing the virtual confiscation of people’s property by making land unusable. In the future, the ESA may be used to justify government policies related to “global warming.” Yet one of the most-cited examples of ESA success, saving the American alligator from extinction, simply never happened. The alligator had been well-protected before the ESA was passed. Was it ever endangered at all?
Regulation & DeregulationBy Sam Batkins, American Action ForumReport, 02/13/2013
With more than $350 billion in regulatory burdens on the manufacturing sector, and a dozen pending rulemakings, this important industry is hardly under-regulated. Reform is typically plodding but both Congress and the White House have shown their desire to reform the regulatory state. One solution could simply codify the major components of the President’s executive order and establish a regulatory baseline for the manufacturing sector. With stagnant economic growth, even some certainty in the regulatory future could provide a needed boost for manufacturers.
Crime, Justice & the LawBy Mary-Christine Sungalia, Scott Nelson, Washington Legal FoundationOn the Merits, 02/13/2013
Plaintiffs are several retail businesses who accept American Express cards for their customers’ purchases. Plaintiffs each entered into an agreement with American Express that contains, among other things, a class-arbitration waiver. Plaintiffs filed a class action complaint alleging that American Express’s “Honor All Cards” policy, which requires those merchants who accept American Express charge cards to accept American Express credit cards as well, constitutes an unlawful tying arrangement under § 1 of the Sherman Act. The named plaintiffs purported to bring suit on behalf of “all merchants that have accepted American Express charge cards.”
Regulation & DeregulationBy Andrew N. Kleit, Robert J. Michaels, Texas Public Policy FoundationPolicy Analysis, 02/13/2013
This paper examines the potential value of a capacity market in Texas. In a capacity market the government rather than the market determines when supplies of electricity are adequate to meet long-term reliability needs. We begin with a critique of the economic theory behind capacity markets, which we find deeply flawed. We then apply that theory to the Electricity Reliability Council of Texas (ERCOT). In the process, we reexamine research on investment adequacy in ERCOT and the value of energy prices as signals for generation investment. We conclude that investment in generation in ERCOT is likely to continue and, as it has in the past, provide sufficient reserves to maintain reliability. Shifting to a capacity market is unnecessary, and would in reality be a source of inefficiency and a barrier to competition that would likely increase the cost of electricity for consumers.
Crime, Justice & the LawBy Jeanette Moll, Texas Public Policy FoundationPolicy Perspective, 02/13/2013
The Texas Juvenile Justice Department (TJJD) serves an essential role for the state in protecting our communities and working to rehabilitate youths away from a life of crime. As essential as it is, however, its budget must also respond to significant agency changes, such as the two-thirds reduction in youth populations. The questions raised in this budget brief may have altogether valid answers, warranting that TJJD stay the budget course it charts today. It may also expose significant taxpayer savings that the Legislature can and should demand, if necessary.
Budget & TaxationBy William McBride, Tax FoundationFiscal Facts, 02/13/2013
The Congressional Budget Office (CBO) takes a sanguine view of the long-term effects of recent tax increases on high-income earners and investors. CBO’s long-term model of economic growth is driven by capital and labor, as it should be according to the standard neoclassical understanding. However, CBO wrongly assumes that capital and labor grow in the long run independently of taxes on capital and labor. Obviously, taxes are a cost and they should be taken into account in CBO’s model just as they are by investors, employers, and workers. Because of this omission, CBO underestimates the long-term drag on economic growth that will result from recent increases in the tax costs of investing, hiring, and working. If we assume CBO’s other assumptions about the economy are correct, that means economic growth will be slower and high unemployment and low tax revenue will persist longer than CBO predicts, probably beyond 2017.
Budget & TaxationBy Scott Drenkard, Tax FoundationFiscal Facts, 02/13/2013
Retail sales taxes are one of the more transparent ways to collect tax revenue. While graduated income tax rates and brackets are complex and confusing to many taxpayers, the sales tax is easier to understand: people can reach into their pocket and see the rate printed on a receipt. Less known, however, are the local sales taxes collected in 37 states. These rates can be substantial, so a state with a moderate statewide sales tax rate could actually have a very high combined state-local rate compared to other states. This report provides a population-weighted average of local sales taxes in each state in an attempt to give a sense of the statutory local rate for each state. See Table 1 at the end of this Fiscal Fact for the full state-by-state listing of state and local sales tax rates.
Budget & TaxationBy Elizabeth Malm, Stephen J. Entin, Tax FoundationFiscal Facts, 02/13/2013
Although Governor LePage has made a commitment to income tax reductions during his term, some state legislators this year have suggested increasing rates on high-income earners. Despite pressures to make up revenues elsewhere, changes to the way in which the state indexes for inflation should not to be used as a quick tool to fill a budget gap. Indexing is intended to ensure that taxpayers’ taxes do not grow faster than their real incomes. Further, since local governments in Maine depend on the state for a significant portion of their overall revenues, suspending revenue sharing for even two years could force localities to shift to other revenue sources, such as increased property taxes. Temporary changes such as these make it difficult for taxpayers and local governments alike to effectively make long-term plans.
Budget & TaxationBy Veronique de Rugy, Reason FoundationReason, 02/13/2013
In January, as part of a deal to avert the fiscal cliff, Congress increased marginal tax rates on higher-income earners to Clinton-era levels while preserving existing Bush-era rates for most taxpayers. This article discusses the different economic decisions made as a result of higher taxes.
Budget & Taxation
How Privatization Can Streamline Government, Improve Services, and Reduce Costs for Kansas TaxpayersBy Leonard Gilroy, Harris Kenny, Todd Davidson, Kansas Policy InstituteStudies, 02/13/2013
Kansas policymakers, like their peers around the U.S., must confront the “new normal” in governance, one based on a constrained fiscal environment with looming cost increases and challenges in areas like healthcare and pensions. Meanwhile taxpayers want government to deliver better service at a better price. But with proper attention to best practices, due diligence, and case studies in implementation, policymakers can use privatization as a powerful way to streamline government, improve services, and lower costs for taxpayers.
Health CareBy John C. Goodman, Greg Scandlen, Devon M. Herrick, National Center for Policy AnalysisStudies, 02/13/2013
The problem with most Medicare reform plans, including the Affordable Care Act, is that they do not change the incentives for any entity involved. The National Center for Policy Analysis (NCPA’s) reforms, however, would dramatically change incentives. Specifically, Medicare patients would have a direct financial interest in seeking out low-cost, high-quality care. Providers would have a direct financial interest in producing efficient, high-quality care. And workers/savers would have a financial interest in a long-term financing system that promotes efficient, high-quality care for generations to come.
Monetary Policy/Financial RegulationBy Thomas L. Hogan, Neil Meredith, Xuhao Pan, Mercatus CenterWorking Paper, 02/13/2013
Risk-based capital (RBC) ratios are an important component of US banking regulation, yet empirical evidence on the effectiveness of RBC regulation has been mixed. Avery and Berger (1991) find that the RBC ratio improves upon the standard capital ratio of equity over assets. This paper identifies some potential flaws in the Avery and Berger (1991) methodology and proposes a more direct method of comparing capital and RBC. We evaluate the capital and RBC ratios of US commercial banks from 2001 through 2011 and find the standard capital ratio to be a significantly better predictor of bank performance than the RBC ratio. The results have significant implications for US banking regulation.
Foreign Policy/International AffairsBy Morgan Lorraine Roach, Brett D. Schaefer, The Heritage FoundationIssue Brief, 02/13/2013
After launching a counteroffensive against Islamist forces in Mali earlier this year, French President François Hollande is eager to transfer ownership of the mission to the African International Support Mission (AFISMA) under the direction of the United Nations. While the United States should continue to support French efforts to stabilize Mali, history shows that the U.N. is not effective at peace enforcement. A U.N. peacekeeping operation should be deployed only after French and African forces have restored stability. Moreover, the U.N. should not lead the effort in Mali but instead be a complementary partner to an African-led AFISMA.
Foreign Policy/International AffairsBy Dean Cheng, The Heritage FoundationIssue Brief, 02/13/2013
Two recent speeches by new Chinese leader Xi Jinping have attracted attention, providing the first insights into the views of China’s new leadership. One is focused on China’s internal political situation; the other discusses Chinese foreign policy. In combination, they could indicate the direction of Chinese policy for the next 10 years of Xi Jinping’s tenure as senior leader of the People’s Republic of China (PRC). However, what has been revealed thus far offers an instructive narrative for rising tensions in the East China Sea. The U.S. should respond in a calibrated, firm fashion in support of its Japanese allies
Budget & TaxationBy Romina Boccia, The Heritage FoundationBackgrounder, 02/13/2013
America is on a dangerous budget path. Current spending and debt are dangerously high, and future spending and debt are on track to rise even higher in large part due to increasing entitlement spending. Academic research shows that advanced economies like the United States are at risk of significant and prolonged reductions in economic growth when public debt reaches levels of 90 percent of GDP. High public debt threatens to drive interest rates up, to crowd out private investment, and to raise price inflation. The implications would be severe and pronounced for all Americans, but most especially for the poor, the elderly, and the middle class. U.S. policymakers should learn from Greece and Japan and avoid a fiscal crisis and economic stagnation brought about by public debt overhang.
National SecurityBy James Jay Carafano, et al., The Heritage FoundationBackgrounder, 02/13/2013
March 2013 marks the 10th anniversary of the creation of the U.S. Department of Homeland Security (DHS)—a direct response to 9/11. DHS was established to prevent and mitigate terrorist attacks on the United States. Ten years later, the concept of homeland security has come to embody an “all hazards” approach, focusing not only on terror threats, but also on natural disasters and technological accidents. Along with the evolution of the homeland security mission, the past decade has seen the institutionalization of DHS itself. Five national security analysts detail key adjustments to DHS to make the department as effective as it should be—which the Homeland Security Secretary should consider for DHS’s second Quadrennial Homeland Security Review, due at the end of 2013.
Regulation & DeregulationBy Joshua Hall, Michael Williams, Mercatus CenterResearch Studies, 02/12/2013
The concern that American businesses are overly burdened by regulations has legitimate grounds. In 2011, American companies had to comply with over 1 million federal regulatory restrictions, compared with about 860,000 a decade earlier. However, to truly address concerns about overregulation, policy makers cannot focus exclusively on the growth of new regulations. Attention must also be paid to the lack of an effcient and effective regulatory review process for preexisting rules. In this paper, authors Joshua Hall and Michael Williams offer a detailed process to identify, evaluate, and eliminate unnecessary, ineffcient regulations. Combining lessons from two successful government reform programs—the Administrative Burden Reduction Programme in the Netherlands and the Base Realignment and Closure Act in the United States—the proposed framework would identify the regulatory costs associated with an existing piece of legislation and create a target for reducing regulatory costs.
Budget & TaxationBy Eileen Norcross, Mercatus CenterWorking Paper, 02/12/2013
Current government accounting standards result in US public pension plans understating the size of pensions promised to workers. The result is that state plans are more deeply underfunded than is recognized. Delaware reports an overall funding ratio of 81 percent, but on a market-valuation basis average funding of its plans is 40 percent. Accounting reforms contained in Government Accounting Standards Board (GASB) 67 meant to correct the measurement problem are likely to only increase the amount of risk plans take with pension assets.
Budget & TaxationBy Adam J. Hoffer, William F. Shughart II, Michael D. Thomas, Mercatus CenterWorking Paper, 02/12/2013
Revenue shortfalls have undermined states’ ability to balance their budgets. Particularly attractive places for new revenue creation are taxes levied selectively on specific goods whose consumption public policy makers want to discourage, arguing that they impair the consumer’s health, generate negative externalities, or both. These selective taxes collectively are known as “sin taxes” because of their historical association with vice. This paper explores three criticisms of sin taxes. First, the taxation of selected goods as a source of general budget revenue contradicts the standard Pigouvian social welfare argument. Second, the economic burden of sin taxes falls disproportionately on low-income households. Third, the expanding number of goods being taxed in this way results in unproductive preventive and defensive lobbying by the affected industries.
Economic GrowthBy Wendell Cox, Manhattan InstituteCity Journal, 02/12/2013
The American economy has had little to cheer about since the 2008 financial meltdown and the resulting recession. One bright spot in the general gloom, however, is Texas, which began shining long before 2008. Not only has Texas created jobs at a stunning rate; it has also—pace critics like theNew York Times’s Paul Krugman—created lots of good jobs. Indeed, the rest of the nation could turn to the Lone Star State as a model for dynamic growth, as a close look at employment data shows. The reasons for this success includes low taxes and sensible regulations; a high-quality workforce (Texas ranked second only to Utah in that category in 2012); and a pleasant living environment (an eighth-place finish, slightly below sixth-place Florida but, perhaps surprisingly, far better than 28th-place California).
The Constitution/Civil LibertiesBy Jim Harper, Institute for Policy InnovationQuick Study, 02/12/2013
Between government and the private sector, government is the clearest threat to privacy. Governments have the power to take information from people and use it in ways that are objectionable or harmful. h is is a power that no business has: People can always turn away from businesses that do not satisfy their demands for privacy. Privacy advocates and concerned citizens should be far more concerned about governments as potential abusers of privacy.
Natural Resources, Energy, Environment, & ScienceBy Lee Lane, Hudson InstituteBriefing Paper, 02/12/2013
Hydraulic fracturing (HF) is one of the technologies that have enabled large increases both in the current production of natural gas and in estimates of recoverable reserves. However, as new technology has triggered a boom in onshore U.S. gas exploration and production (E&P), environmental concerns have multiplied. Much of the concern centers on use of HF. As public concern has risen, so have calls for federal regulatory control. The Interior Department has adopted tighter controls on the use of HF on public lands. Also, two former Obama White House aides, Carol Browner and Jody Freeman, have argued for more EPA regulation of all use of HF in oil and gas drilling. To achieve this control, they propose to repeal the partial oil and gas exemption under the Safe Drinking Water Act (SDWA). Bills to this effect, dubbed the FRAC Act, were proposed in the last two Congresses, but they were not adopted.
Budget & TaxationBy Trey Kovacs, Capital Research CenterLabor Watch, 02/12/2013
Few Americans are aware that, through their tax dollars, they finance labor unions through a practice known as “official time” or “release time.” The cost to taxpayers is skyrocketing, while—thanks to Obama administration stonewalling—accountability is declining. Fortunately, reformers are working to rein in this costly, corrupt practice.
Budget & TaxationBy Christopher Snowdon, Competitive Enterprise InstituteStudies, 02/12/2013
In his study, The Wages of Sin Taxes, Chris Snowdon reveals that these taxes not only do little to limit the use of “bad” products, they do nothing to reduce societal costs. Most remarkably, Snowdon demonstrates that those shockingly large estimates of the costs that the consumption of alcohol, tobacco, sugar, and fat supposedly impose on society have little basis in reality. As Snowdon shows, the myth that “sinners”—those who drink, smoke, and eat unhealthful foods—cost more to society than everyone else has been perpetuated in large part because “government has no incentive to tell the public that these groups are being exploited and the affected industries dare not advertise the savings that come from lives being cut short by excessive use of their products.” As Snowdon brilliantly demonstrates, sin taxes do not promote public safety and do nothing to reduce costs to society, and fleece taxpayers.
EducationBy Frederick M. Hess, American Enterprise InstituteEducation Outlook, 02/11/2013
When it comes to reforming American education, today’s would-be reformers only get it half right. On the one hand, they correctly argue that statutes, rules, regulations, and contracts make it difficult for schools and school system leaders to drive improvement and lead. On the other hand, they wrongly overlook the fact that school officials have far more freedom to transform, reimagine, and invigorate teaching, learning, and schooling than is widely believed. This “culture of can’t” in K–12 education threatens to undermine the success of hard-won reforms, and makes policy impediments appear more burdensome than they truly are. Reformers must help district superintendents and principals combat the culture of can’t by encouraging these leaders to better understand teacher contracts, hire reform-minded lawyers, and partner with the advocacy, business, and philanthropic communities.
Natural Resources, Energy, Environment, & ScienceBy Nicolas Loris, The Heritage FoundationBackgrounder, 02/11/2013
With the glut of natural gas and low gas prices in the United States, energy producers are seeking to liquefy and ship domestic natural gas to foreign markets. Exporting natural gas would provide a huge boon to the U.S. economy since it would expand market opportunities for American companies, and the higher prices would act as incentives for more exploration and production domestically. Unfortunately, the U.S. Department of Energy has delayed decisions on export licenses, preventing America from realizing its energy export potential. The Heritage Foundation’s Nicolas Loris explains how the economic benefits of exporting natural gas are immense, why the economic concerns are exaggerated, and why Congress should lift restrictions on natural gas exports.
EducationBy John D. Merrifield, Nathan L. Gray, Cato InstituteCato Journal, 02/11/2013
On April 22, 1998, the Children’s Educational Opportunity Foundation announced the availability of CEO Horizon Scholarships to residents of the Edgewood Independent School District (EISD) in San Antonio, Texas. The CEO Foundation did not limit eligibility to students with proof of superior academic talent, so the scholarships were really privately funded tuition vouchers. As such, we shall refer to them as the Edgewood Voucher Program. The EVP was a working model of Milton Friedman’s (1955, 1962) original idea for a universal voucher program, except that it was set to last only 10 years. This article analyzes the EVP’s immediate economic development effects, including the impact on the property tax base, housing growth and values, and business formation. We begin with an overview of the EVP, review the existing literature, describe the benchmark for our impact estimates, and then discuss the estimates and their significance for universal tuition vouchers.
Budget & TaxationBy Thomas Grennes, Cato InstituteCato Journal, 02/11/2013
The quality of fiscal institutions and fiscal policy in the United States has declined in the last decade. The government debt ratio is now extraordinarily high relative to its historical mean, and it has risen to a point where it is no longer sustainable. By exceeding estimated debt/growth thresholds, the debt ratio threatens to reduce the rate of economic growth. Failure to address the long-run debt issue has led to a diminution of credibility that fiscal institutions had built up over a period of more than 200 years. Procrastination about crucial spending, taxation, and debt issues has also increased uncertainty faced by private investors. The European Union also faces a fundamental fiscal problem, but its origin is different. The current European fiscal problem is related to violating more recent rules. Fundamental reform of fiscal relationships is essential but failure to enforce old rules will make it difficult to achieve credibility for new ones.
International Trade/FinanceBy James A. Dorn, Cato InstituteCato Journal, 02/11/2013
In 2001, the U.S. gross public debt was about $6 trillion; a decade later it was $14 trillion; by the end of 2012 it exceeded $16 trillion. A large part of that increase was absorbed by foreign holders, especially central banks in China and Japan. With the U.S. government gross debt ratio now in excess of 100 percent of GDP, not including the trillions of dollars of unfunded liabilities in Social Security and Medicare, it is time to stop blaming China for the U.S. debt crisis. The following sections examine financial repression in China and its impact on the U.S. debt crisis, the rebalancing that needs to occur in China to advance the role of the market and limit the power of government, the problems with China’s attempt to build a “harmonious society,” and the reforms that need to occur in China and the United States to achieve lasting peace and prosperity.
Natural Resources, Energy, Environment, & ScienceBy Paul Ballonoff, Cato InstituteCato Journal, 02/11/2013
The traditional problem often called “electricity development” is to improve and expand services from an established monopolistic electricity supplier. The lack of an effective dominant utility, however, is a defining condition for the 1.4 billion people without access for electricity, the so-called unserved. Therefore, the issues that arise are different from those of traditional utility service as a mandated monopoly. This article shows how free markets can help resolve the problem of serving the unserved.