Defined-benefit pension plans for state and local government employees have imposed rising costs and financial risk on government budgets. In response, some reformers have proposed shifting newly hired public employees into defined-contribution plans similar to 401(k)s. But critics of this proposed reform have argued that closing a pension plan to new entrants would impose “transition costs” on plan sponsors as liabilities under the old defined-benefit plan are paid down.
A new study for the Mercatus Center at George Mason University explores how closing a pension plan to new entrants affects existing liabilities and whether there are significant costs imposed when transitioning to a defined-contribution, 401(k)-type plan. In fact, transition costs are very small, and they are more than offset by the reduction of newly accrued liabilities.
Despite decades of a war on poverty that came with proliferating programs and ballooning budgets, the official poverty rate in the United States has stubbornly refused to break from its narrow historical range. This failure stems largely from the methods used to pursue the alleviation of poverty. Policymakers should turn to block grants to states, a policy that has real-world empirical support and that would alleviate the knowledge problem suffered by the federal government. States, in turn, should administer income support programs tailored to the individual causes of poverty, implementing work requirements for people who are temporarily disadvantaged and providing direct income to people who are truly unable to work.
New technology can cause significant changes in an industry, potentially improving both consumer welfare and governance. The initial reaction of many regulators to the advent of “ridesharing” platforms such as Uber and Lyft was either to outlaw them or to burden them with the same level of regulations as taxis. But policymakers are now beginning to take a new approach. They are aiming to achieve regulatory parity between ridesharing platforms and taxis by deregulating taxis. In a new study, “Rethinking Taxi Regulations: The Case for Fundamental Reform,” Mercatus research fellows Michael Farren and Christopher Koopman and senior research fellow Matthew Mitchell determine that taxi regulation is outdated in light of the transformative technology changes and business innovations of the last few years. Now is an opportune time for fundamental reform of the entire regulatory regime to create a fair, open, and competitive transportation market.
Since its inception more than a century and a half ago, the US Department of Agriculture (USDA) has experienced enormous growth in both size and complexity—as has the industry it seeks to serve. Today the USDA is among the largest federal employers and its 2014 budget exceeded $160 billion. Its spectrum of activities span from the protection of rural farm interests to urban food assistance. Consequently, the department is the target of a wide range of interest groups besides farmers, including food assistance advocates and advocacy groups interested in issues such as obesity, animal welfare, food safety, the environment, and more. The disparate agendas of these groups make it difficult for Congress to assemble a unified policy package each time USDA’s programs are due for reauthorization. The latest reauthorization, the Agricultural Act of 2014, was signed into law two years late in February 2015.
In a new study for the Mercatus Center at George Mason University, economist Jayson L. Lusk documents the changes in American agriculture since the USDA’s inception and the expansion of the department’s mission. Much of the USDA’s regulation is outdated, wasteful, and conflicting.
Thomas Piketty’s Capital in the Twenty-First Century has ignited a debate over inequality that has significantly impacted public perceptions and policy debates in the United States. Piketty uses hundreds of years of income data to make bold predictions about future income inequality and justify aggressive policy reforms—including a global tax on capital—to tackle the issue. But are Piketty’s conclusions and policy prescriptions really grounded in economic theory and solid empirical results?
In a new study from the Mercatus Center at George Mason University, economist Mark J. Warshawsky reviews and critiques Piketty’s analysis and proposals. Warshawsky finds several significant flaws in Piketty’s methodology for estimating future inequality and in his suggested reforms to the tax code. Warshawsky’s review also summarizes the criticism of Piketty’s book by other academics and Piketty’s responses to this criticism.
Near-zero GDP growth. Strong dollar. Weak exports. Factory recession. Fed hesitancy. Low inflation and low interest rates. Solid consumer spending. Accelerating construction. Rising home sales. China turning the corner? These keywords seen frequently in recent news stories pretty well describe the 2016 midyear economy.
A new study for the Mercatus Center at George Mason University ranks each US state’s financial health based on short- and long-term debt and other key fiscal obligations, such as unfunded pensions and healthcare benefits.
A new study for the Mercatus Center at George Mason University examines recent trends in state fiscal policy and details how well these efforts conform to widely accepted “best practices” in tax reform. It examines the tax and the expenditure patterns of five states and finds that, while there is no one correct way to enact economically beneficial tax reform, it is possible to discern some clear trends.
Economist Robert Krol examines the problem of highway congestion, looking at how congestion pricing has been successful in the past and why it could be an attractive option in the future. There is mixed evidence about whether congestion pricing is regressive, but governments implementing congestion pricing could use several policy solutions to help reduce inequity. These include reducing other regressive taxes such as the gasoline tax and giving commuters the option to choose between toll lanes and toll-free lanes.
Puerto Rico is facing a severe fiscal crisis, and new crises will be almost inevitable in the absence of major institutional changes in the commonwealth. History has bequeathed the island inefficient state-run enterprises and a government unable to balance its budget, but Puerto Rico could have a bright future if it undertakes the right reforms.
Central banks' part in the Great Recession, and the lackluster recovery since, are reviving interest in monetary rules. That revival raises crucial questions. Might the Federal Reserve and other central banks have performed better if they’d adhered to monetary policy rules? Could rules have avoided the crisis altogether? Can they avoid future crises? If so, which rules work best? Can a monetary policy rule work even in a world of near-zero, or negative, interest rates?
Rebounding after disasters like tsunamis, hurricanes, earthquakes, and floods can be daunting. How do residents of these communities gain access to the resources they need to rebuild while overcoming the collective action problem that characterizes post-disaster relief efforts?
Please join the F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University for a panel discussion featuring Hayek Program Senior Fellow Virgil Storr and his new book Community Revival in the Wake of Disaster: Lessons in Local Entrepreneurship.
As the world’s first decentralized digital currency, Bitcoin has the potential to revolutionize online payment systems and commerce in ways that benefit both consumers and businesses. Individuals can now avoid using an intermediary such as PayPal or submitting credit card information to a third party for verification—both of which often involve transaction fees, restrictions, and security risks—and instead use bitcoins to pay each other directly for goods or services.