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Recent Policy Studies
Budget & TaxationBy Ike Brannon, Cato InstituteRegulation, 09/20/2013
A pattern of municipal financing for sports franchises has repeated itself: teams that want a new or remodeled stadium turn to the government first and offer to cover some modest portion of the total bill by charging season ticket holders a relative pittance to hold onto their seats. Despite the occasional pushback from a legislature or city council, it has been a successful formula. What would it take to change the environment so that government money was no longer available for a National Football League stadium? Could an alternative form of financing in the form of personal seat licenses (PSL) convince Redskins owner Dan Snyder to start a revolution in how stadiums are funded?
Regulation & DeregulationBy Stephen G. Gilles, Nelson Lund, Cato InstituteRegulation, 09/20/2013
In response to the 2012 massacre at Sandy Hook Elementary School in Newtown, Connecticut, some legislatures have begun to consider new regulations requiring gun owners to purchase liability insurance. Such laws could easily be written in ways that would render them unconstitutional. This article explores some of the constitutional pitfalls, but concludes that a carefully drafted statute would probably be upheld under current constitutional doctrine. The benefits to public safety would be modest, but such a regulation would be preferable to many politically popular gun control proposals that would be ineffective, unconstitutional, or both.
Foreign Policy/International AffairsBy Richard Epstein, Hoover InstitutionDefining Ideas, 09/19/2013
In looking at Syria, it does not take much insight to realize that the Russians have played the United States for suckers. The President has put himself in an impossible position. By dithering, he has created a precipitous loss of American credibility. Right now, his Syrian policy has befuddled Congress; emboldened Russia, Syria, and Iran; weakened Israel; and thrown our European allies into disarray. Let us hope that the President can make things right. The Obama/Chamberlain comparisons over Syria and Iran are perhaps premature. But they soon won’t be unless the President stiffens his spine and exerts the leadership that is so desperately needed.
Foreign Policy/International AffairsBy Baker Spring, Brett D. Schaefer, The Heritage FoundationIssue Brief, 09/19/2013
The framework agreement for destroying Syria’s chemical weapons (CW) arsenal and its supporting infrastructure is imprecise, unrealistic, and unlikely to be fulfilled. On the basis of the requirements of the Chemical Weapons Convention (CWC), which Syria has now agreed to join, and historical experience in executing the CWC, even under ideal circumstances and assuming willing compliance, it will be years before Syria would likely eliminate all of its chemical weapons. However, there will be ample opportunity for Syrian duplicity and non-compliance. The means for verifying and ensuring Syrian compliance are expected to be addressed in a Security Council resolution. Russia has opposed previous resolutions on Syria. Nonetheless, there are certain things the Obama Administration could do to enhance verification and pressure Syria and Russia to comply.
EducationBy Frederick Hess, Max Eden, American Enterprise InstituteReport, 09/19/2013
For a decade or more, school reform has been an urban tale dominated by cities with high rates of poverty and troubling records of high-school completion and academic achievement. The urban communities in question tend to be lopsidedly liberal, making reform largely a Democratic family affair. Even notable reform Democrats have sought to temper their criticism of teachers unions by embracing “reform” unionism, denouncing Republican efforts to dramatically curtail collective bargaining, and insisting that unions must be essential partners in systemic reform. Douglas County, Colorado, one of the nation’s most affluent communities and a Republican bastion, provides a stark counterpoint to the conventional reform narrative. The result is that, in this unlikely setting, the superintendent and school board are pursuing perhaps the nation’s boldest attempt at suburban school reform.
National SecurityBy Bryan McGrath, American Enterprise InstituteNational Security Outlook, 09/19/2013
Despite the North Atlantic Treaty Organization (NATO) taking its name from the ocean that ties Canada and the United States to their European allies, for most of NATO’s history the alliance focused primarily on land power. However, with continental Europe at peace, the drawdown in Afghanistan, the rise of general unrest in North Africa and the Levant, and the American intent to pivot toward Asia, questions are increasingly arising about the capabilities of NATO’s European navies to project power and sustain operations around their eastern and southern maritime flanks. Given the significant reduction in each country’s overall defense budget, procuring new, sophisticated naval platforms has come at the cost of rapidly shrinking fleet sizes, leaving some to wonder whether what is driving the decision to sustain a broad but thin naval fleet capability is as much national pride as it is alliance strategy.
National SecurityBy Katherine Zimmerman, American Enterprise InstituteTestimony, 09/19/2013
The United States continues to face a threat from the al Qaeda network twelve years after declaring war against it. America’s failure to understand the complexities of the terrorist network as it has evolved over the years has led only to tactical successes on the battlefield. The strategy to disrupt the al Qaeda network by killing senior leadership in a “core group” is based on a faulty understanding that overemphasizes that group’s importance and the current intentions of affiliates to attack the United States. Targeting individuals or a specific group within the al Qaeda network will not be effective alone. The al Qaeda network is global and operates on a global level. Many al Qaeda groups operate solely on the local level, but they strengthen the broader network. The United States, therefore, needs a comprehensive global strategy to counter al Qaeda that is tailored down to the local level.
Budget & TaxationBy Mike Lee, American Enterprise InstituteSpeech, 09/19/2013
Up and down American society – which used to be defined and driven by what Tocqueville called our “yearning desire to rise” – we find a new and unnatural stagnancy. We find the underprivileged trapped in poverty, sometimes for generations. We find the middle class caught on a treadmill, running harder every year just to maintain the economic security and social cohesion that were once taken for granted. Meanwhile, at the top of our society, we find a political and economic elite that – having reached the highest rungs – has pulled up the ladder behind itself, denying others the chance even to climb. All of this points to what really is an inequality crisis in America today – a crisis not of unequal wealth of income, but unequal opportunity. This inequality crisis is the great social and economic challenge facing the United States today. It is also the great challenge facing the Republican Party.
The Constitution/Civil LibertiesBy Paul Larkin, The Heritage FoundationLegal Memorandum, 09/19/2013
The Fourth Amendment was not designed to serve as a static protection against government abuse. No provision of the Bill of Rights—particularly one outlawing “unreasonable” searches and seizures—could or should be cabined to the specific historical incidents that gave it birth. That construction would render the amendment a safeguard for the peculiar historical incidents that troubled late eighteenth century Americans rather than a guarantee that law enforcement officers act reasonably today and tomorrow. At the same time, the Framers would not have found unimaginable the need to make a trade-off between liberty and security, or to reassess that trade-off as times change. How will the Supreme Court make that trade-off with regard to technologies unheard of two decades ago, to say nothing of two centuries ago?
Budget & TaxationBy Curtis S. Dubay, The Heritage FoundationIssue Brief, 09/19/2013
House Ways and Means Committee chairman Dave Camp (R–MI) and Senate Finance Committee chairman Max Baucus (D–MT) will face many difficult decisions as they proceed on tax reform. Among them will be whether to retain certain deductions currently in the tax code, including the deduction for state and local taxes. Tax reform should eliminate the state and local tax deduction because it encourages state and local governments to raise their taxes higher than they would without it. If tax reform eliminated the deduction, state and local governments would face stronger pressure to keep their taxes low.
Monetary Policy/Financial RegulationBy Zhiwu Chen, Cato InstituteCato Journal, 09/18/2013
Since reforms started in 1978, China has made commendable progress in achieving capital freedom and individual liberty. China’s gradualist reform approach in which pragmatic economic reforms have been allowed and adopted without correcting the philosophical foundation of the country’s political, economic, and legal system. SOEs, government, and Marxist ideology still dominate the economy, politics, and business—although market forces and private ownership are a significant part of the Chinese society and still on the rise. The lack of a formal rejection of Marxist economics, as well as the lack of political reforms, has internalized forces and contradictions in the Chinese society that have the potential to reverse the many positive achievements of the last 35 years. At a minimum, such forces will continue to make it difficult for the rule of law and for justice and equity to progress further.
Monetary Policy/Financial RegulationBy Yukon Huang, Clare Lynch, Cato InstituteCato Journal, 09/18/2013
With China’s return to the position of largest global trader and second-largest economy in the world, it is not surprising that discussion of internationalizing China’s currency has resumed. While internationalization carries long-term benefits such as heightened prestige and influence, greater say in the international system, and improved trade efficiency, there are also increased risks—namely, more volatility, increased exposure to external shocks, and potential loss of control over domestic monetary policy. A critical examination of these objectives along with the necessary preconditions shows that internationalization is neither feasible nor necessarily beneficial in the short term. Overall, as China moves forward on financial liberalization, leaders should set aside the question of internationalization and consider whether these key reforms are beneficial for China’s economy in their own right.
Budget & TaxationBy Hans von Spakovsky, The Heritage FoundationIssue Brief, 09/18/2013
If President Barack Obama “shuts down” the government by vetoing a continuing resolution (CR) that funds all government operations with the exception of Obamacare, or the Senate fails to pass such a CR, crucial services will continue without interruption. That includes all services essential for national security and public safety—such as the military and law enforcement—as well as mandatory government payments such as Social Security and veterans’ benefits. The key fact, as the U.S. Department of Justice (DOJ) itself has said, is that when there is a short-term lapse in appropriations, “the federal Government will not be truly ‘shut down’…because Congress has itself provided that some activities of Government should continue.” Such a lapse in funding would be neither catastrophic nor unprecedented, but it would pare down government services to those most essential for “the safety of human life or the protection of property.”
Crime, Justice & the LawBy John Lott, Bascom Hill Publishing GroupBook, 09/18/2013
Judges have enormous power. They determine whom we can marry, whether we can own firearms, whether the government can mandate that we buy certain products, and how we define “personhood.” But who gets to occupy these powerful positions? In his rigorous yet readable style, John Lott analyzes both historical accounts and large amounts of data to see how the confirmation process has changed over time. Most importantly, Dumbing Down the Courts shows that intelligence has now become a liability for judicial nominees. With courts taking on an ever greater role in our lives, smarter judges are feared by the opposition. Although presidents want brilliant judges who support their positions, senators of the opposing party increasingly “Bork” those nominees who would be the most influential judges, subjecting them to humiliating and long confirmations. The conclusion? The brightest nominees will not end up on the bench.
Monetary Policy/Financial RegulationBy Eswar Prasad, Lei Ye, Cato InstituteCato Journal, 09/18/2013
Popular discussions about the prospects of China’s currency, the renminbi, range from the view that it is on the threshold of becoming the dominant global reserve currency to the concern that rapid capital account opening poses serious risks for China. This issue has broader ramifications, as the rise of China’s economy and its currency has implications for global macroeconomic and financial stability. The Chinese government has recently taken a number of steps to increase the international use of the renminbi. Given China’s rising shares of global GDP and trade, these steps are gaining traction and portend a rising role for the renminbi in global trade and finance.
National SecurityBy Kenneth L. Wainstein, The Heritage FoundationHeritage Lecture, 09/18/2013
In the aftermath of the Cold War, we let our guard down again and did not recognize the threat of international terrorism. Since 9/11, the U.S. has made strong efforts to bring its counterterrorism readiness more in line with fighting non-traditional adversaries. Yet, these adversaries have shifted their tactics from grand-scale attacks carried out by squads of operatives, toward the use of individuals to commit attacks without extended support networks. As a nation, we must continually gauge our readiness to meet the evolving threats to our national security.
Monetary Policy/Financial RegulationBy Jurgen Stark, Cato InstituteCato Journal, 09/18/2013
Have Europeans mastered or even resolved the currency crisis? There is evidence that the reform process at both the national and supranational level with positive results is under way. At the same time, it is a fact that more and more Eurozone countries (Cyprus and Slovenia) now require external financial assistance. It is also true that the costs of granting additional aid to fellow member states and of prolonging the timeline for economic reforms and fiscal consolidation is placing a growing strain on the donor economies.
Foreign Policy/International AffairsBy Brett D. Schaefer, Anthony B. Kim, The Heritage FoundationIssue Brief, 09/18/2013
Congress has been concerned for decades that countries receiving American foreign aid often oppose U.S. initiatives and priorities in the United Nations. A State Department annual report on the voting practices in the U.N. General Assembly (UNGA), mandated by Congress since 1983, shows that in the past 30 years voting coincidence with the U.S. surpassed 50 percent only twice. Moreover, the vast majority of recipients of U.S. foreign assistance routinely oppose U.S. diplomatic initiatives and vote against the U.S. The most recent report confirms yet again that most recipients of foreign aid voted against the U.S. in the UNGA in 2012. To address this issue, Congress should instruct State and the U.S. Agency for International Development (USAID) to take into account countries’ U.N. voting practices when allocating America’s development assistance.
Monetary Policy/Financial RegulationBy Wolfgang Munchau, Cato InstituteCato Journal, 09/17/2013
A monetary union is a hybrid between a fixed exchange rate system and a unitary state, one that is fully captured neither with closed-economy macro models nor classical international macro models of fixed exchange rates. The main general lesson from the Eurozone crisis is that a monetary union is viable only among similar countries with a willingness to integrate their economic systems—or at least among countries wishing to become similar over a clearly defined time-horizon. There would have been no euro crisis, for example, if the initial membership had been confined to Germany, France, Benelux, and Finland.
Monetary Policy/Financial RegulationBy Pedro Schwartz , Cato InstituteCato Journal, 09/17/2013
The great hopes that surrounded the euro at its birth have failed to come true. It is now reeling under the blows of a prolonged financial crisis and creating discord among the members of the European Union. Clearly, the design of the new money was defective. I will suggest that even if euro-members had kept by the rules of the game the euro could not have worked as intended. The urgency to find remedies for the present prolonged economic recession is tipping the choice toward more discretion and less independence, since the temptation to apply short-term monetary painkillers is strong even for those who would prefer a sound money constitution for Europe. Which of the two paths will the Eurozone take? The choice may turn out to be futile, given the impossibility of financing the welfare state in all European nations.
Natural Resources, Energy, Environment, & ScienceBy Emily Goff, The Heritage FoundationIssue Brief, 09/17/2013
H.R. 3080, the Water Resources Reform and Development Act of 2013, contains provisions aimed at eliminating bureaucratic red tape, reducing the project backlog of the U.S. Army Corps of Engineers, and increasing the role of local or private entities in authorized projects. However, it fails in other areas by, for example, failing to narrow the Corps’s sprawling mission. Notwithstanding the bill’s reform provisions, it should have included much bolder, fundamental reforms, including harbor maintenance tax issues, limiting the Corps’s activities, and increasing local cost share.
Monetary Policy/Financial RegulationBy Harris Dellas, George S. Tavlas, Cato InstituteCato Journal, 09/17/2013
The entry of Greece into the Eurozone in 2001 was widely expected to mark a transformation in the country’s economic destiny. Then, beginning in 2009, everything changed as Greece became the center of a major financial crisis. Between the end of 2008 and mid-2012, the economy contracted by a cumulative 20 percent (and it continues to contract), and the unemployment rate jumped from less than 8 percent to about 25 percent. What happened? And why did it happen? What are the lessons that can be drawn from a comparison between the gold standard and the Eurozone?
Monetary Policy/Financial RegulationBy Thomas M. Hoenig, Cato InstituteCato Journal, 09/17/2013
For the last 100 years, government officials and bank CEOs have insisted that new policies, rules, and laws would ensure that future financial crises, should they occur, would be more effectively handled. Incentives matter and the incentives toward risk taking among the largest financial firms remain basically unchanged from pre-crisis times. To change outcomes, you must change incentives. With the safety net, you alter the market’s incentives, create moral hazard, and drive toward leverage that creates its own set of adverse consequences. There are three steps that I suggest be taken to control these negative effects: limit the safety net’s protection, simplify and strengthen capital adequacy standards, and improve bank supervision.
Transportation/InfrastructureBy Robert W. Poole Jr., Reason FoundationPolicy Study, 09/17/2013
The Interstate highway system is America’s most important surface transportation system. The need for massive investment to transform the first-generation Interstate into what this report calls Interstate 2.0 occurs just as our 20th-century highway funding system—based on fuel taxes and state and federal highway trust funds—is running out of gas. This study seeks to address both problems: replacing the aging Interstate system with a 21st-century Interstate 2.0 and taking the first major step toward implementing mileage-based user fees. To make the transition attractive to highway users, the study proposes it be implemented on the principle of “value-added tolling.” That means tolls would only be introduced in a corridor once it was reconstructed and modernized, designed to operate at a higher “level of service” than today’s design standards call for. America needs a second-generation Interstate highway system. The one needed enabler is permission from Congress to begin this transition.
Monetary Policy/Financial RegulationBy Lawrence H. White, Cato InstituteCato Journal, 09/17/2013
“Fragility” is the well-known property of being easily breakable, of failing under moderate stress. The opposite property is “antifragility,” a term coined by Nassim Nicholas Taleb and defined as the property exhibited by “things that gain strength from stressors and get stronger from failure, like evolution.” Here I consider how we might achieve antifragile banking and monetary systems. There are reforms that can marginally reduce fragility, but I will argue that to achieve antifragility will require a serious turn away from “one-practice-fits-all” centralized regulation and toward a free market’s mixture of innovation and strict discipline. In banking it will require an end not only to “too big to fail” bailouts of uninsured creditors and counterparties, but also to other forms of taxpayer-backed depositor and creditor guarantees.
Budget & TaxationBy Ted Dabrowski, Ben VanMetre, Robert Chun, Illinois Policy InstituteSpecial Report, 09/17/2013
The city of Chicago has long been regarded as an economic engine of the Midwest. But decades of fiscal mismanagement by government agencies in Chicago have put the metropolis at a crossroads. In July 2013, the city of Chicago released a grim budget report that showed that the city owed billions of dollars in debt and unfunded pension and health insurance liabilities. But the city Chicago is not the only government agency that city residents pay taxes to – taxpayers also fund the operations Chicago Public Schools, the Chicago Transit Authority, the Chicago Park District and a large share of Cook County. All told, Chicago residents are officially on the hook for $63.2 billion in government pensions, health insurance and other debt. This staggering figure totals more than $23,000 per Chicago resident, or more than $61,000 per household.
Monetary Policy/Financial RegulationBy Steven Gjerstad, Vernon Smith, Cato InstituteCato Journal, 09/16/2013
Balance sheet crises, in which the prices of widely held and highly leveraged assets collapse, pose distinctive economic challenges. An understanding of their causes and consequences is only recently developing, and there is no agreement at all on effective policy responses. We propose that the Great Depression beginning in 1929 and the Great Recession starting in 2007 were both household-bank balance sheet crises—events that were quite distinguishable from the recessions appearing between them. Each episode, we hypothesize, was preceded by unsustainable rises in expenditures on construction of new housing units and in mortgage credit for purchases of new and existing homes. The Keynesian prescription has been to increase government expenditures and reduce taxes to stimulate growth. But we have described evidence from several countries that the contrary approach has been successful.
Foreign Policy/International AffairsBy Russell A. Berman, Hoover InstitutionDefining Ideas, 09/16/2013
A major selling point of the Obama campaign in 2008 was the promise to improve the U.S. image overseas, heal the rifts with traditional allies in Western Europe, and eliminate the anti-Americanism that had burgeoned during the Bush years. Yet his second term has begun with sudden eruptions of precisely that political hostility to the United States that he had promised to end. At stake are not the usual suspects—ideological regimes such as North Korea or Venezuela—but, worrisomely, countries with strong histories of cooperation with the U.S. and in which America has deep investments. Instead of healing the rifts of the past, the administration’s foreign policy of weakness has bequeathed a legacy that has emerged vividly in the past months: The return of anti-Americanism.
Monetary Policy/Financial RegulationBy Thomas F. Cargill, Gerald P. O'Driscoll, Cato InstituteCato Journal, 09/16/2013
The conventional wisdom holds that the Fed is independent, and that independence is important for price stability. It is not convincing. First, the Federal Reserve, considered to be one of the world’s more de jure independent central banks, played a key causative role in the Great Inflation from 1965 to 1985. Allan H. Meltzer’s history of the Federal Reserve demonstrates the sensitivity of the Fed to political institutions despite its de jure independent status. Federal Reserve de jure independence is far too uncritically accepted as a foundation for a stable financial and monetary environment. Not only is the foundation weak but its widespread acceptance permits central banks like the Fed to engage in suboptimal policy with political undertones. Independence is more myth than reality.
Monetary Policy/Financial RegulationBy Allan H. Meltzer, Cato InstituteCato Journal, 09/16/2013
The Federal Reserve long ago gave up some of its independence. Can it be restored? Independence is central to the Federal Reserve’s ability to choose policy actions that achieve price stability. Sacrificing much of its independence, as the Fed often has, permits others to pressure the Fed to achieve other objectives, usually short-term objectives. That is one reason that the Fed responds to short-term events often at the cost of failing to achieve longer-term objectives. The Fed should commit to a rule or quasi-rule like the Taylor rule, that aims at both reduced unemployment (or relatively stable output growth) and expected inflation. The rule incorporates the dual mandate that Congress approved and that the public seems willing to support. When the Fed followed it closely, it worked well.
Crime, Justice & the LawBy Mark C. Morril, Washington Legal FoundationLegal Backgrounder, 09/16/2013
In American Express Co. v. Italian Colors Restaurant (2013), and Oxford Health Plans LLC v. Sutter (2013), the U.S. Supreme Court in its October 2012 term took deference to party autonomy in arbitration to new heights. With exceptions sharply narrowed, a party who negotiates an arbitration agreement which defines and limits the arbitral process now has every reason to expect its choices to be upheld. In unusually blunt language, the Court also has reminded lower courts that the arbitrator’s contract construction almost always should hold, “however good, bad or ugly.” Building on these principles, American Express is an important pro-business landmark in a long-running battle over the validity of class action waivers in arbitration.
Monetary Policy/Financial RegulationBy Jeffrey A. Miron, Cato InstituteCato Journal, 09/16/2013
The 2008 financial crisis and the 2007–2009 recession have predictably spurred interest in how policy can avoid financial crises. A prior question, however, is whether policy should avoid financial crises. The answer might seem obvious. But if policymakers focus on avoiding crises, they will generate undesired side effects and typically fail to avoid crises in any case. First, avoiding crises is not, in and of itself, the right goal for policy. Second, as a matter of theory, the costs of crises are not necessarily large. Third, as a matter of evidence, the costs of crises do not seem to be enormous. Fourth, whatever the costs of crises, anti-crisis policies might be worse than the disease.
Health CareBy Joseph Antos, American Enterprise InstituteThe American, 09/16/2013
Late on July 2, the Obama administration dropped a bombshell. Despite frequent claims that the Affordable Care Act (ACA) is on track, the administration had to admit that it was delaying implementation of a major provision of the health law—the employer mandate. Will Obamacare be a train wreck? Is the president’s signature achievement doomed to failure? Or is this just another minor bump in the road, which will smooth out in the coming years? How the administration does on three critical questions will determine whether the Affordable Care Act is viewed by the American public as a success or a failure.
Monetary Policy/Financial RegulationBy Robert L. Hetzel, Cato InstituteCato Journal, 09/16/2013
Any effort to avoid future recessions must rest on an organized way to learn from the past. However, the absence of such efforts within central banks renders such learning problematic and makes likely the recurrence of episodes of recession and financial market turmoil. Critical to learning is the use by policymakers of models to evaluate the past performance of monetary policy. These models should not be the complicated, multiequation models favored by the forecasting departments of central banks. Rather, they should be simple models that require policymakers to take a stand on the basic issues in monetary economics. They should serve as a safeguard to the understandable tendency of central bankers to attribute economic disturbances exclusively to real shocks rather than monetary shocks. This article explains how learning requires that policymakers use models to disentangle causation from correlation.
Natural Resources, Energy, Environment, & Science
Last Call for Cooperative Federalism? Why EPA Must Withdraw SIP Call Proposal on Startup, Shutdown, and MaintenanceBy Patrick Morrisey, Randy Huffman, Elbert Lin, Washington Legal FoundationLegal Backgrounder, 09/16/2013
Since January 20, 2008, the Obama Administration has waged an escalating and legally suspect war on coal. In five years, federal regulation of coal extraction and utilization has dramatically increased, resulting in increased energy costs for all Americans and many lost jobs. But perhaps most troubling is the way that this increase in federal regulation has happened. Rather than working within the Clean Air Act’s framework of cooperative federalism, the Environmental Protection Agency (“EPA”) has acted well beyond its authority. One example of this EPA’s overreach is its proposed rule regarding emissions during power plant startup, shutdown, and maintenance (“SSM”). On February 22, 2013, EPA proposed to require more than two-thirds of the states to revise previously approved State Implementation Plans (“SIPs”) through a “SIP Call.” It is an unlawful exercise of administrative authority that, if adopted, would substantially and adversely affect the country’s energy-producing states.
Monetary Policy/Financial RegulationBy David Malpass, Cato InstituteCato Journal, 09/16/2013
Federal Reserve policy is on the wrong course: it is harming economic growth, hurting savers, damaging markets, setting dangerous precedents and misallocating capital away from job-creating parts of the economy. The best exit strategy would be for the government to adopt growth-oriented tax, spending, and regulatory policies in parallel with a growth-oriented Fed resolve to provide sound money and downsize its role in the economy. The combination would encourage investment and hiring in the U.S. private sector. The damage from the Fed’s balance sheet holdings and its imposition of zero percent interest rates would diminish, allowing the development of sound money, market-based allocation of capital, and forward-looking private sector confidence—an expectation that the Fed would interfere less with interest rates and debt markets.
Blueprint for School System Transformation: A Vision for Comprehensive Reform in Milwaukee and BeyondBy Frederick M. Hess, Carolyn Sattin-Bajaj, Rowman & LittlefieldBook, 09/16/2013
Despite widespread recognition that school systems need to do profoundly better, those seeking improvement have been persistently frustrated by the mediocre results of popular reforms. School and system leaders, policymakers, and funders lack clear guidance as to the steps necessary to dramatically and effectively transform an educational ecosystem. Would-be reformers need a playbook outlining clear strategies for rethinking outdated approaches to school and system governance, resource allocation, quality control, talent management, and data use for the 21st century. In this volume, a team of national experts addresses the major elements necessary for system redesign, describing in detail the steps needed at the community, school, district, and state level.
Monetary Policy/Financial RegulationBy Kevin M. Warsh, Cato InstituteCato Journal, 09/16/2013
The Federal Reserve’s independence is essential to the conduct of monetary policy. But while the Fed is independent within government, it is not independent of government. The grant of authority to the Fed comes from Congress, to which the Fed is ultimately accountable. In my view, the Fed was granted significant powers by Congress, but those powers were not unlimited. The grant of authority was constrained. So by my measure, the Fed is a powerful institution, but a bounded one. The limits on the Fed in the conduct of monetary policy—that is, limits in the grant of government powers and in the efficacy of its actions to facilitate economic growth—are too often forgotten in Washington. We should acknowledge and understand these limits, not seek to manage or circumvent them.
Elections, Transparency, & AccountabilityBy Jason Mercier, Washington Policy CenterPolicy Brief, 09/16/2013
In November the people of Washington will vote on Initiative 517. The measure would make several changes to state law concerning signature gathering for initiatives and referendums by increasing the time period for gathering signatures, requiring that proposals which have an adequate number of valid signatures must proceed to the ballot, changing the penalties for interfering with signature gathering, and increasing the number of locations, both public and private, where signature gathering can occur. The people’s right of initiative and referendum should be robustly protected, but signature gathering rules should not be expanded to infringe on the private property rights of business owners who do not want to engage in a given political debate.
Monetary Policy/Financial RegulationBy Charles I. Plosser, Cato InstituteCato Journal, 09/16/2013
The last five years have been an extraordinary time for the global economy and monetary policymakers. The financial crisis and the severe global recession that followed have tested our resolve, our patience, and our economic theories. To restore the health of ailing financial markets and economies, central banks have driven short-term interest rates to essentially zero, expanded their balance sheets to unprecedented levels, and engaged in market interventions that have blurred the lines between monetary policy and fiscal policy. These extraordinary efforts were well intentioned. Although it will be some time before we fully understand the effectiveness of various actions, some have credited them with preserving financial markets and saving the global economy from an even deeper recession. Yet, these actions also carry long-term risks for our economies and for central banks.
Monetary Policy/Financial RegulationBy Satya Thallam, American Action ForumResearch, 09/16/2013
Despite the near hundred years of experience in central banking in the United States, “the financial and economic crisis that started in 2007 tested central banks as they had not been tested.” As a result, central banks, led aggressively by the U.S.’s Federal Reserve Board, developed, deployed, and in most cases later shuttered, a number of tools aimed at injecting liquidity and supporting financial markets. While their response to the financial crisis is certainly open to criticism, it’s clear in reviewing the new and expanded facilities the Federal Reserve operated that they were for the most part targeted at calming and providing liquidity to entire financial sub-markets rather than specific institutions. Some of the Federal Reserve’s earliest crisis responses were targeted at specific institutions when it perhaps appeared the crisis could be contained.
Monetary Policy/Financial RegulationBy John B. Taylor, Cato InstituteCato Journal, 09/16/2013
Considering the overall performance of the American economy, the past 30 years divide naturally into two parts. During the first part economic performance was quite good, but during the second part it was quite poor. In terms of monetary policy, there is a corresponding natural division with a steadier rules-based approach to policy in the first part and a much less predictable discretionary approach to policy in the second. A change in monetary policy to a more rules-based approach as in the 1980s and 1990s and until recently would help the economy as it did in those decades. Putting in place a more rules-like policy in a period where other policies—fiscal, regulatory, international—are creating so much uncertainty would soon improve economic conditions. It is in uncertain times like today that predictable rules are especially needed.
ObamaCare Exchanges: Just Because You Are Eligible For a Subsidy Doesn't Mean You Will Qualify for OneBy David Hogberg, Sean Parnell, National Center for Public Policy ResearchNational Policy Analysis, 09/16/2013
The ObamaCare exchanges are supposed to subsidize the health insurance of everyone earning between 138 percent ($15,856 for an individual) and 400 percent ($45,960) of the federal poverty level (FPL) in a state that has expanded Medicaid and 100 percent ($11,490) and 400 percent FPL in a state than has not expanded Medicaid. However, an examination of the 15 exchanges that have released age-specific data on their insurance prices shows that many in those income ranges will not receive a subsidy. Younger people will be less likely to receive an exchange subsidy. These people will pay full price for insurance on the exchange, making it far more attractive to forgo buying coverage. With a subsidy structure that makes insurance less attractive to the young and healthy but quite attractive to those who are older and sicker, the ObamaCare exchanges are likely headed for an insurance “death spiral.”