Many observers think that it is impossible to cut federal government spend- ing as a percentage of Gross Domestic Product (GDP). But it can be done. And the evidence is hidden in plain sight: it’s called the 1990s. Between 1990 and 2000, federal spending fell from 21.85 percent of GDP to 18.22 percent, a drop of 3.6 percentage points. Most of the reduction was in defense spending after the Cold War ended. Domestic spending also fell slightly as a percentage of GDP. This drop cannot be attributed to higher economic growth in the 1990s because average growth in the 1990s was the same as growth in the previous two decades.
In a new study for the Mercatus Center at George Mason University, economist Robert Krol demonstrates that governments are more likely to set up barriers to new technology when the performance advantage of the new technology is small or incremental and lobbying costs are low. Incumbent businesses threatened by a new technology may use the government to block businesses using the new technology from entering the market. Ultimately, government protection of incumbent businesses reduces consumer well-being.
The idea that banks are special was most succinctly summarized by Gerald Corrigan more than 30 years ago in an analysis prepared for the Federal Reserve Bank of Minneapolis, where Corrigan was president at the time. With the help of his mentor, then Federal Reserve Chairman Paul Volcker, his analysis pondered the characteristics of banks that make them special; justified the provision of a supporting safety net for banks based on financial stability concerns; and detailed the costs and restrictions that banks must subject themselves to. But the years since Corrigan’s analysis have seen two severe financial crises,and as the crisis of 2007–2009 clearly revealed, banks are not special, as the
safety net was applied to a wide range of nonbank institutions. The Dodd-Frank Act was intended to cut back on the safety net by giving financial authorities wide discretion, but the right approach to rein in the safety net would be to cut back its beneficiaries…
According to the model presented in this paper, the ACA’s incentives and ultimately its behavioral effects will vary substantially across groups, with the elderly experiencing hardly any new incentives and female workers being most likely to cut their work schedules to 29 hours per week.
Ex-Im Bank advocates emphasize its importance to small businesses and economic growth. A new analysis of government data reveals that Ex-Im Bank’s top 10 overseas buyers are large corporations that primarily purchase exports from multinational conglomerates. Ex-Im Bank’s small business narrative is challenged by the fact that the buyers receiving the most subsidies are—like the exporters—major corporations.
We present a short history of the Virginia School of Political Economy in its institutional settings of University of Virginia (UVA), Virginia Polytechnic Institute and State University, or Virginia Tech (VPI), and George Mason University (GMU). We discuss the original research and educational project as envisioned by Buchanan at UVA, its maturity into a normal science at VPI, and its continuation at GMU.
Reforming the congressional budget process is no substitute for actual policy changes that can correct the government’s fiscal problems. Yet according to a new study published by the Mercatus Center at George Mason University, the right kinds of process reforms can open up new potential for agreement between Congress and the president and can focus attention on long-term spending commitments.
Social Security’s trustees have long warned Congress to address the troubled finances of the Disability Insurance (DI) program. Given the DI trust fund’s projected exhaustion date of 2016, legislation will be required during this Congress to prevent large, sudden benefit cuts.
Has the US economy kicked off third quarter’s running cleats and slipped on bedroom shoes with very soft soles? The running pace has changed abruptly. As the accompanying chart tells us, the second estimate for growth in the fourth quarter of 2014 fell to 2.2 percent from the third quarter’s hair-raising 5.0 percent. Is this the economic engine that is pulling the world economy?
Rebounding after disasters like tsunamis, hurricanes, earthquakes, and floods can be daunting. Communities must have residents who can not only gain access to the resources that they need to rebuild but can overcome the collective action problem that characterizes post-disaster relief efforts.