Mercatus Site Feed http://mercatus.org/feeds/home/wp-login.php/publication/publication/features/bruce-yandle en Intelligent Vehicles Could Save Lives http://mercatus.org/expert_commentary/intelligent-vehicles-could-save-lives <h5> Expert Commentary </h5> <p>The American Automobile Association estimates that 43.6 million Americans will take extended trips during this Thanksgiving holiday season. Of those, approximately 90 percent – or 39 million people – plan on traveling by car. And tragically, according to the National Safety Council, some 418 Americans may lose their lives on the roads this Thanksgiving, in addition to over 44,000 injuries from car crashes.</p><p>This is why the debate over new “intelligent vehicle” and “driverless car” technologies is so important: Anything we can do to decrease driver error will help save many lives and reduce the cost of accidents. The technologies help automate many driving functions and could be in even more vehicles soon, assuming public policies don’t throw up unnecessary roadblocks to their development.</p><p>Last holiday season, the number of traffic-related fatalities fell below the quarter-century average, but with gas prices holding well below last year’s average of $3.27 during the same time, more Americans will travel by car. With more people driving, longer distances being traveled and the increased potential for “Black Wednesday” alcohol abuse, the prospect for disaster looms large during this holiday.</p><p>Many of these accidents, and fatalities, could be a thing of the past in coming years as intelligent vehicle technology begins to mature, alleviating many of these roadway perils. With regulators acting as gatekeepers to what’s allowed on the road, however, these technologies may be condemned to bureaucratic limbo; that is, unless regulatory agencies embrace the concept of “permissionless innovation.”</p><p>The essence of permissionless innovation is the idea that, in the absence of proof that a particular technology or idea will cause real, immediate and clear harm to society, innovation should be unimpeded by preemptive regulations. The hurdles that innovators and entrepreneurs face in bringing new technologies to market should not include precautionary regulations that stifle technological development, especially as it relates to autonomous vehicles. Such prescriptions are unlikely to yield the effects regulators anticipate. They are, however, more likely to spawn unintended consequences that could, among other things, hamper innovation, decrease economic growth and result in ongoing costs to society.</p><p>Among these costs are the more than 33,000 lives lost on American roads annually, due to driver error. How many lives could be saved if some of those drivers one day used autonomous vehicles?</p><p>In addition to fatalities, the National Highway Traffic Safety Administration points out that over 2.3 million people were injured in automobile crashes in 2012 alone – over 169,000 of which were children under the age of 14. Motor vehicle crashes like these are, in fact, the leading cause of death for children between the ages of 11 and 14. Every new development that pushes us closer to integrating this new technology into the mainstream means fewer fatalities.</p><p>With these safety issues in mind, policymakers ought to embrace the concept of permissionless innovation and avoid trying to predict every possible harmful scenario that might result from the introduction of this new technology. Flexible and creative solutions that could most ideally solve problems as they arise can only develop in a policy framework that promotes regulatory patience. There will be challenges, but progress can only occur when we accept a certain amount of risk and allow experimentation with new technologies. As was the case with the telephone, radio, the Internet and almost every other modern innovation, human adaptation and social acclamation will likely provide the best solutions to how we incorporate these technologies into daily life.</p><p>We should not delay this trial-and-error process based on the mistaken perception that we can anticipate every worst-case scenario that might result from integrating driverless vehicles into our transportation system. Inaction has its costs, too. Every day, approximately 92 people die from roadway accidents caused by human error.</p><p>Unleashing the powerful potential of permissionless innovation for autonomous vehicle technology could start to alleviate some of the known, and clearly detrimental, harms to drivers and passengers this holiday season. That would be something for which we can all be truly thankful.</p> http://mercatus.org/expert_commentary/intelligent-vehicles-could-save-lives Wed, 26 Nov 2014 14:41:49 -0500 Ex-Im Helps Hillary's Friends at Boeing, Not Women-Owned Firms http://mercatus.org/expert_commentary/ex-im-helps-hillarys-friends-boeing-not-women-owned-firms <h5> Expert Commentary </h5> <p class="p1">Here’s some news that is sure to shock no one: Hillary Clinton is a big fan of the <a href="http://mercatus.org/publication/export-import-bank-assists-tiny-portion-all-us-small-business-jobs-and-firms"><b>Export-Import Bank</b></a>. During a recent address at a Little Rock event hosted by the No Ceilings Project, Clinton made a point to support the federal subsidizer of exporting multinational corporations.&nbsp;</p> <p class="p1">The perpetual presidential hopeful <a href="http://www.politico.com/story/2014/11/hillary-clinton-export-import-bank-112928.html#ixzz3JLUw2I91"><b>told the crowd</b></a> that the Ex-Im Bank is “a tool for us to be competitive in order to support our businesses exporting.” She claimed that those who oppose Ex-Im’s questionable lending practices to large, politically connected corporations are driven by ideology, not by evidence. Setting aside the fact that economists of all ideological backgrounds have amassed <a href="http://mercatus.org/publication/us-export-import-bank-review-debate-over-reauthorization"><b>mountains of evidence</b></a> that Ex-Im does not meaningfully improve U.S. exports or jobs, distorts international markets, and directly harms the 98 percent of unsubsidized workers, consumers, and exporters that don’t have friends in Washington, Hillary Clinton’s own support of Ex-Im isn’t exactly based on “evidence” either. In fact, Clinton maintains questionable political alliances with some of Ex-Im’s biggest beneficiaries.&nbsp;</p> <p class="p1">First, it is ironic, and wildly out-of-touch, that Clinton should sing Ex-Im’s praises at an event dedicated to promoting equality for women and girls. Corporate interest groups like the <a href="https://www.uschamber.com/blog/export-import-bank-fostering-spirit-enterprise-women"><b>Chamber of Commerce</b></a> try to spin Ex-Im’s corporatist lending to politically favored firms by arguing that women-owned firms greatly benefit from Ex-Im. But <a href="http://mercatus.org/publication/public-data-suggest-ex-im-bank-not-everyone"><b>the data show otherwise</b></a>.&nbsp;</p> <p class="p1">Ex-Im assistance to women-owned firms barely makes a dent as a portion of the total economy. The roughly 200 women-owned firms that Ex-Im backs each year constitute a mere 1 percent of the total 20,000 women-owned firms in the entire U.S. economy. The same is true when you look at export value backed: The $403.5 million in Ex-Im-backed export value for women-owned firms is a mere 3 percent of the roughly $15 billion in export value produced by all women-owned firms in the economy.&nbsp;</p> <p class="p1">Nor is <a href="http://www.nationalreview.com/corner/387980/ex-im-banks-war-women-veronique-de-rugy"><b>Ex-Im’s portfolio</b></a> significantly dedicated to the cause of women. Only 1.02 percent of Ex-Im authorizations and 5.8 percent of the Ex-Im firms backed from 2007 to 2014 are marked as “women-owned.” Then there’s the inconvenient fact that only 3 of Ex-Im’s 44 presidents and chairmen have been women. By all accounts, it appears that the patriarchy is alive and well down at the Export-Import Bank.&nbsp;</p> <p class="p1">This all assumes that Ex-Im’s women-owned firm assistance data is accurate. Recently, <a href="http://www.reuters.com/article/2014/11/14/us-usa-trade-exim-idUSKCN0IY1IY20141114"><b>Reuters released a bombshell report</b></a> revealing that hundreds of firms that Ex-Im records designated as “small business” firms are in reality huge corporations owned by billionaires like Warren Buffett and Carlos Slim. This means that at least $3 billion in authorizations, or 8 percent of Ex-Im’s portfolio, have been improperly categorized as small business lending. While the Reuters report did not analyze the accuracy of Ex-Im’s women-owned lending, it is possible that much of this portfolio reached less than the “100 percent accuracy” that an Ex-Im representative admitted was “unacceptable.”&nbsp;</p> <p class="p1">Reuters concludes that Ex-Im’s misleading reporting is a “primarily political” problem. So is Hillary Clinton’s support of the bank. In April of this year, Clinton’s questionable relationship with <a href="http://mercatus.org/publication/biggest-beneficiaries-ex-im-bank?429141155="><b>Ex-Im’s top beneficiary, the Boeing Corporation</b></a>, was revealed. The <a href="http://www.washingtonpost.com/politics/for-hillary-clinton-and-boeing-a-beneficial-relationship/2014/04/13/21fe84ec-bc09-11e3-96ae-f2c36d2b1245_story.html"><b>Washington Post reported</b></a> that while serving as Secretary of State, Clinton “functioned as a powerful ally for Boeing’s business interests at home and abroad, while Boeing has invested resources in causes beneficial to Clinton’s public and political image.”&nbsp;</p> <p class="p1">Although the State Department had developed ethics guidelines against assisting Boeing because of its “frequent reliance on the government for help negotiating overseas business,” Clinton ignored these prohibitions and negotiated a $2 million deal with the aerospace giant to host a pavilion at the World’s Fair. Shortly after Clinton shepherded a <a href="http://boeing.mediaroom.com/index.php?s=20295&amp;item=1234"><b>$3.7 billion aircraft purchase deal between Boeing and the Russian government in 2010</b></a>—characterized in her own words as “<a href="http://www.state.gov/secretary/20092013clinton/rm/2009a/10/130518.htm"><b>a shameless pitch … to buy Boeing aircraft</b></a>”— Boeing <a href="http://www.prnewswire.com/news-releases/boeing-gift-to-help-reconstruct-haitis-public-education-system-100891744.html"><b>announced</b></a> it would contribute $900,000 to the William J. Clinton Foundation.&nbsp;</p> <p class="p1">More recently, Boeing’s Senior Vice President for Government Relations, <a href="http://www.boeing.com/boeing/companyoffices/aboutus/execprofiles/keating.page"><b>Tim Keating</b></a>, worked for the <a href="http://time.com/17057/hillary-clinton-2016-super-pac-ready/"><b>Ready for Hillary Super PAC</b></a>, along with an “an array of well-connected Democratic lobbyists and politicos.” In her memoir, Clinton writes that she considered her role as Secretary of State to be as <a href="http://www.bloomberg.com/news/2014-06-09/clinton-book-hints-at-campaign-message-jobs-from-abroad.html"><b>an “advocate-in-chief” for American corporations like Boeing, Caterpillar, and General Electric</b></a>, two other top Ex-Im beneficiaries. Clearly, Clinton’s support of Ex-Im stems from her cozy relationships with some of the U.S.’s most powerful corporations, not average Americans and certainly not women and girls.&nbsp;</p> <p class="p1">While Hillary Clinton and Boeing’s relationship may be “mutually beneficial,” the Export-Import Bank is certainly of no benefit to the average American. The <a href="http://mercatus.org/publication/cato-institute-study-quantifies-ex-im-winners-and-losers"><b>bank imposes annual net costs of $3 billion</b></a> on U.S. industries that are not subsidized by Ex-Im, is <a href="http://mercatus.org/publication/cbo-export-import-bank-fha-mortgage-guarantees-and-doed-student-loan-programs-yield"><b>projected by the Congressional Budget Office</b></a> to cost taxpayers $2 billion over the next decade, and <a href="http://mercatus.org/publication/us-export-import-bank-review-debate-over-reauthorization"><b>privileges politically connected corporations over everyone else</b></a>. If opposing Clinton’s brand of corporatism and political opportunism makes one an “ideologue,” then who would want to be anything else?&nbsp;</p> http://mercatus.org/expert_commentary/ex-im-helps-hillarys-friends-boeing-not-women-owned-firms Tue, 25 Nov 2014 11:00:25 -0500 Why the Berkeley Soda Tax Has Got No Fizz http://mercatus.org/expert_commentary/Berkeley-soda-tax-curb-obesity <h5> Expert Commentary </h5> <p class="p1">Just in time for Thanksgiving – the holiday season when most American put on a few pounds – citizens of Berkeley, California <a href="http://www.usatoday.com/story/news/nation-now/2014/11/05/berkeley-passes-soda-tax/18521923/">approved a ballot measure</a> that would impose a one-cent tax on each ounce of soda. Their goal is to counter the trend of increasing obesity, which advocates of the tax blame largely on soda and other sugar-sweetened drinks. But while the city’s goal to improve the health of its citizens is laudable, its policy is misguided and may in fact cause more damage than good.</p> <p class="p1">The biggest problem is that advocates treat the tax as a twofer. They <a href="http://www.berkeleyvsbigsoda.com/faq">argue</a> that the tax would both decrease soda consumption and raise revenue, which could then be used for health programs. However, if the tax raises substantial revenues, it would in fact be a failure. The measure’s ultimate goal should be to ensure that no one actually pays the soda tax but switches to healthier non-taxed options instead. Note that the city imposed the tax on soda distributors since Berkeley does not have the <a href="http://www.insidebayarea.com/News/ci_26809068/Oakland-Tribune-editorial:-Berkeley-voters-should-support-soda-tax">authority</a> to pass a sales tax directly. But the measure’s advocates <a href="http://dailycaller.com/2014/11/05/berkeley-soda-tax-supporters-hope-new-cost-hits-consumers-hard/">hoped</a> that the distributors would pass the tax on to consumers, making it effectively a sales tax.</p><p class="p1"><a href="http://www.usnews.com/opinion/economic-intelligence/2014/11/25/why-the-berkely-soda-tax-has-got-no-fizz">Continue reading</a></p> http://mercatus.org/expert_commentary/Berkeley-soda-tax-curb-obesity Tue, 25 Nov 2014 23:49:49 -0500 Overdraft Protection Rules Could Hurt Consumers More Than They Help http://mercatus.org/expert_commentary/overdraft-protection-rules-could-hurt-consumers-more-they-help <h5> Expert Commentary </h5> <p class="p1">Bank overdraft protection has come under close scrutiny from the Consumer Financial Protection Bureau. This summer, several researchers at the CFPB released a <a href="http://www.consumerfinance.gov/newsroom/cfpb-finds-small-debit-purchases-lead-to-expensive-overdraft-charges/">study</a> that provides information about the patterns of overdraft protection use by consumers at several large banks, focusing particularly on use by the small category of consumers who use overdraft protection regularly.</p> <p class="p1">While the new data and analysis provided by the CFPB advances our understanding of the use of overdraft protection, it does not address several key questions that must be answered before the CFPB <a href="http://www.americanbanker.com/issues/177_35/consumer-financial-protection-bureau-overdraft-fees-1046859-1.html">imposes new regulations</a>.</p> <p class="p1">First, while the focus of the report is on the large banks over which the CFPB exercises supervisory authority, community banks are much more heavily dependent on revenues from overdraft protection than larger banks. Twenty-seven percent of bank income at smaller banks is generated by overdraft protection fees, compared to 12% at larger banks, according to our analysis of data from the Federal Deposit Insurance Corp. If the CFPB takes steps that reduce overdraft revenue, community banks will be much more adversely impacted than large banks.</p> <p class="p1">Moreover, while large banks have dramatically curtailed access to free checking as a result of the Dodd-Frank Act, small banks continue to offer the product. Any major hit to small banks' overdraft fee revenue will inevitably be passed on to their customers in higher bank fees, higher minimum balance requirements for free checking or reduced services.</p> <p class="p1">It is also important to note that there is no evidence that low-income consumers disproportionately use overdraft protection. As we observe in our <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2499716">commentary on the CFPB report</a>, "While … many low-income consumers are beneficiaries of free checking, there is no indication that usage of overdraft protection has regressive effects. For example, an analysis of a regional&nbsp;community bank in Texas indicates that after geocoding its accounts, approximately 70% of overdraft users are classified as either upper income (30%) or middle income (40%) and 30% of active users represent moderate&nbsp;income (27%) or low income users (3%)."</p> <p class="p1">Overdraft protection started as a benefit to high-income consumers, but as a result of automated overdraft protection programs, it has filtered down to ordinary bank customers. This data is consistent with prior studies that have found consistently that the only statistically meaningful predictor of overdraft protection use is the customer's credit score. No demographic variables (including income) are predictive after controlling for customer risk. In other words, available evidence does not support the CFPB's suggestion that overdraft protection somehow preys on poor people.</p> <p class="p1">Third, before the CFPB takes steps to reduce access to overdraft protection, it must consider the costs of alternatives for consumers. Consumers who use overdraft protection frequently overwhelmingly report that they have poor credit and limited credit choices. For most frequent users of overdraft protection, payday lending is a likely alternative. This might be a more expensive option, depending on the individual customer's situation.</p> <p class="p1">A rigorous economic analysis would consider all of the costs of overdraft protection and alternatives. For example, while other products such as payday loans may sometimes be less expensive in pure dollars, that calculation excludes the full cost, such as the time and inconvenience of acquiring a payday loan or the value of immediate access to a funds advance.</p> <p class="p1">In recent decades, overdraft protection has emerged as a valuable source of revenue for America's community banks. It promotes free checking and has served as a lifeline for many credit-impaired consumers seeking alternatives to payday lending and pawn shops.</p> <p class="p1">Wise, data-driven policy-making should be aware of the limits of currently available data and the possibility that restricting overdrafts will have unintended consequences. While information and solid empirical study such as the CFPB's admirable analysis are welcome, the agency should be aware that many unanswered questions remain before it should move on regulation in this area.&nbsp;</p> http://mercatus.org/expert_commentary/overdraft-protection-rules-could-hurt-consumers-more-they-help Tue, 25 Nov 2014 10:38:28 -0500 Taxicab Cartels Restrict Entry into Market at the Expense of Consumers http://mercatus.org/publication/taxicab-cartels-restrict-entry-market-expense-consumers <h5> Publication </h5> <p class="p1">As the debate continues about how sharing economy service providers such as Uber, Lyft, and Sidecar should be regulated, this week’s chart shows why this is such a hotly contested issue. In New York City, taxi cabs can legally operate only if they have a taxicab medallion. The inflation-adjusted prices for NYC taxicab medallions rose 133 percent, on average, from 2007 to 2013, with prices for both corporate medallions and individual medallions increasing.&nbsp;</p><p class="p1"><a href="http://mercatus.org/sites/default/files/Medallion-Prices-chart-1.jpg"><img src="http://mercatus.org/sites/default/files/Medallion-Prices-chart-1.jpg" width="585" height="373" /></a></p> <p class="p1"><span style="font-size: 11.8181819915771px;">Despite the fact that the population of New York City grew roughly 12 percent over the last 70 years, the number of taxicab licenses has actually decreased since 1937, when the Haas Act, which regulated taxis, limited the number of cab licenses in New York City to 16,900. In 2004 only 12,187 medallion cabs operated in the city. Unsurprisingly, the price of medallions has increased dramatically since then. Indeed, over the last 80 years, taxi medallions have generated an annualized 15.5 percent rate of return. Put another way, the value of a medallion doubled, on average, every four and a half years.</span></p> <p class="p1">These are staggering returns for this particular type of rent-seeking.</p> <p class="p1">The bulk of this windfall goes to the medallion owners and is used to pay the up-front costs of procuring new licenses. Under such a system, current operators gain little from increasing total production; in fact, they gain by lowering it. Limiting the supply of medallions allows the taxi cartel to maintain high fares by preventing entrepreneurs from entering the market.</p> <p class="p1">The result is lower income for cab drivers, higher fares for consumers, and worse coverage in poor and minority communities. For more on this issue, see our recent Mercatus on Policy piece, “<a href="http://mercatus.org/publication/regulation-platform-markets-transportation">Regulation of Platform Markets in Transportation</a>.”</p> http://mercatus.org/publication/taxicab-cartels-restrict-entry-market-expense-consumers Mon, 24 Nov 2014 16:53:25 -0500 What Do We Mean by Online Safety? http://mercatus.org/expert_commentary/what-do-we-mean-online-safety <h5> Expert Commentary </h5> <p class="p1">It was my great pleasure to participate in last week’s 8th annual Family Online Safety Institute conference. As a veteran of all eight annual conferences as well as a frequent participant in many other FOSI events through the years, I can say with great certainty that this year’s event was one of the very best. &nbsp;This organization and the diverse community of individuals and institutions it has brought together have accomplished a remarkable amount of good in a very short period of time.</p> <p class="p1">But formidable challenges remain. In fact, the theme of this year’s annual event, “Redefining Online Safety,” made it clear that, in many ways, our community is still struggling to figure out exactly what it is we are all trying to accomplish.</p> <p class="p1">Toward that end, FOSI asked me to join forces with Kim Sanchez, one of the sharpest experts in this field, to moderate a breakout session to consider different conceptions of “online safety” and how we might define the term going forward. We were joined by dozens of leading experts in the field and asked them to help us come up with terms and phrases that could better frame future online safety discussions.</p> <p class="p1">In his opening remarks at this year’s conference, Stephen Balkam noted that when FOSI was being formed, “the discussion around Internet safety centered around Porn, Predators, and Pedophiles,” or the so-called “3Ps” of the online safety debates.&nbsp; In recent years, however, the conversation has evolved and moved away from those concerns, Balkam said. Today the concerns most often discussed in this field range from cyberbullying and sexting, to overuse and over-sharing, to loss of privacy and reputation, or even just constant distraction and loss of attention.&nbsp;&nbsp;</p> <p class="p1">In our breakout workshop, we asked the participants to toss our various words and phrases that they associate with “online safety.” Many of the concerns that Balkam raised were reiterated. But what was remarkable about our session is how clear it became that many experts in our field want to move away from “negative” conceptions of online safety and toward more “positive” conceptions of the term.</p><p class="p1"><a href="https://www.fosi.org/policy-research/what-do-we-mean-online-safety/">Continue reading</a></p> http://mercatus.org/expert_commentary/what-do-we-mean-online-safety Mon, 24 Nov 2014 14:18:55 -0500 How a GOP Senate Can Help the Poor http://mercatus.org/expert_commentary/how-gop-senate-can-help-poor-minimum-wage-school-choice <h5> Expert Commentary </h5> <p class="p1">Right now, the Republicans are riding high due. But if they want to stay in power and help Americans in the process, they need to change their priorities.</p> <p class="p2">Emboldened and energized by their triumphant midterm victories, Republicans are eager to repeat their winning formula in the next presidential election. They have one big problem: Republican midterm gains had more to do with a sagging Democrat brand than an attractive GOP platform. Voters are simply tired of the left’s divisive political tactics, like the mythical “War on women,” <a href="http://www.thedailybeast.com/articles/2014/04/14/cynical-race-baiting-will-fail-to-save-the-democrats.html">cynical race-baiting</a>, and <a href="http://www.politico.com/story/2014/10/wendy-davis-greg-abbott-wheelchair-111827.html">indecent partisanship</a>. Exit polls suggest that Republicans made surprising inroads with rural, young, and Hispanic voters who were hurt or disappointed by the president.</p> <p class="p2">But Republicans can’t sustainably coast on merely being slightly less terrible than the Democrats for too long. To expand their relative appeal, the GOP should embrace compassionate issues that help Americans of <i>all</i> demographics and interest groups who fall through the cracks of Washington’s bad policies.</p> <p class="p2">First, Republicans should become the champions of liberalizing our education system. Education is a major key to income mobility. Unfortunately, our outdated, rigid, and centralized public school system keeps too many American children stuck in poorly-performing schools that hinder their future opportunities. The traditional “solution” of throwing money at the problem simply isn’t cutting it.</p> <p class="p2">And it isn’t for lack of funding. Over the last fifty years, the federal government spent an astounding $2 trillion on education. Total elementary and secondary education spending per pupil <a href="http://www.cato.org/blog/school-funding-system-not-broken-it-just-doesnt-work">has tripled in real terms</a>, from an average of $56,903 in 1970 to $164,426 in 2010. At the same time, the <a href="http://nces.ed.gov/fastfacts/display.asp?id=28">number of students per teacher</a> in U.S. public schools fell throughout the 1990s until 2012. But these dramatic increases in spending and teachers have not yielded a notable change in <a href="http://www.jstor.org/discover/10.2307/1164335?uid=3739832&amp;uid=2&amp;uid=4&amp;uid=3739256&amp;sid=21105255547183">overall student outcomes</a>. Data provided by education analyst Andrew Coulson shows that the National Assessment of Educational Progress scores of 17-year-olds in reading, math, and science <a href="http://www.intellectualtakeout.org/library/chart-graph/inflation-adjusted-cost-k-12-public-education-and-percent-change-achievement-17-year-olds-1970">have stagnated</a> while per pupil spending and employment growth skyrocketed.</p> <p class="p2">Why have educational outcomes so stubbornly flat-lined in the face of this wealth of educational resources? Simple: our educational system provides few incentives for schools to improve. School districts are still based largely on residency; students remain tied to the neighborhood school regardless of how bad its performance may be. U.S. schools will receive funding and “customers” regardless of their merits (or lack thereof).</p> <p class="p2">This structure is particularly destructive for children in low-income families. Privileged children tend to live in higher-performing school districts. If parents are unhappy with their assigned school, they can send their children to private schools or choose move to a better district—which provides another incentive for their district schools to compete to retain students. Less fortunate parents should not be deprived of the ability to remove their children from poor performing schools simply because they lack the resources of their wealthier neighbors.</p> <p class="p2">Republicans should push for reforms to tie educational spending to students rather than schools. The school choice movement formed around these ideas is helping a growing number of low-income children secure access to a high-quality education. Improving our education system by applying successfully-tested school choice reforms is good for everyone, regardless of creed, color, or gender but it is particularly good for low income kids. Republicans should get behind it.</p> <p class="p2">Second, Republicans should use their political capital to end the War on Drugs once and for all. Marijuana legalization initiatives were <a href="http://www.washingtonpost.com/blogs/style-blog/wp/2014/11/18/bob-marley-branded-marijuana-will-soon-be-available-thanks-to-successful-legalization-efforts/">incredibly successful</a> in the midterm election, demonstrating that the pro-legalization trend is well on its way. Republicans should naturally oppose Big Government policies that dictate what individuals can or cannot choose to consume: whether that is sodas, salt, or sativa. What’s more, the decades-long War on Drugs has failed miserably. Despite spending over $1 trillion dollars to stop the stoner scourge, overall drug consumption has barely changed, some drug prices are falling due to technology and increasing supply, and drug addiction has gone up while seeking treatment has become more risky.</p> <p class="p2">In addition, incarceration rates for drug offenses have skyrocketed since the 1980’s due to mandatory sentencing laws, which rigidly determine who goes to prison and for how long. Nonviolent drug offenders no account for about <a href="http://www.nationalreview.com/corner/269208/prison-math-and-war-drugs-veronique-de-rugy">one-fourth of all inmates</a> in the United States, up from less than 10 percent in 1980. It destroys families and leaves children to be raised in single-family households. This is particular true for low-income African American families. Despite generally higher usage rates among white Americans, African Americans are three times more likely to be arrested for possession.</p> <p class="p2">Third, Republicans should commit to compassion in action rather than compassion in appearance. While it is tempting to embrace a federal minimum wage increase from a position of compassion, economists have long known that imposing legal price floors tends to create a surplus in markets. The same is true in the labor market.</p> <p class="p2">Research&nbsp;by economists David Neumark of the University of California, Irvine, William Wascher of the Federal Reserve Board, and Mark Schweitzer of the Cleveland Fed shows that minimum wage policies can increase poverty (<a href="http://www.clevelandfed.org/research/commentary/1999/0201.pdf">PDF</a>), so poverty reduction certainly shouldn’t be expected as&nbsp;a benefit of raising the minimum wage. That’s because while a minimum wage increase raises the wages of some people, it also reduces employment of young, low-skilled people. The Congressional Budget Office (CBO) for instance, <a href="https://www.cbo.gov/publication/44995">calculated</a> that an increase from its current $7.25 level to $10.10 per hour would cost about 500,000 jobs. This is likely a lowball number but it has the merit to illustrate the tradeoff that raising the minimum wage requires.</p> <p class="p2">Additionally, the people whose wages are lifted by the minimum wage aren’t all at the lowest end of the income spectrum. As Nick Gillespie wrote over at <i>Time</i>, “About 50 percent of all people earning the federal minimum wage live in households where total income is <a href="http://time.com/3212237/minimum-wage-labor-day-california/">$40,000 or more</a>. In fact, about 14 percent of minimum wage earners live in households that bring in six figures or more a year.”&nbsp;A better way to help the poor is to just give them cold-hard cash—and stop lecturing them about how to spend their money!</p> <p class="p2">Republicans have a rare opportunity to implement policies that are truly compassionate and transcend toxic identity politics. Whether they will seize the moment, or play the same old politics as usual, remains to be seen.</p> http://mercatus.org/expert_commentary/how-gop-senate-can-help-poor-minimum-wage-school-choice Mon, 24 Nov 2014 11:16:30 -0500 Adam Smith Discusses Ridesharing on Fox 5 http://mercatus.org/video/adam-smith-discusses-ridesharing-fox-5 <h5> Video </h5> <iframe width="560" height="315" src="//www.youtube.com/embed/TMoPb9ztuCQ" frameborder="0" allowfullscreen></iframe> <p>Adam Smith Discusses Ridesharing on Fox 5</p><div class="field field-type-text field-field-embed-code"> <div class="field-label">Embed Code:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> &lt;iframe width=&quot;560&quot; height=&quot;315&quot; src=&quot;//www.youtube.com/embed/TMoPb9ztuCQ&quot; frameborder=&quot;0&quot; allowfullscreen&gt;&lt;/iframe&gt; </div> </div> </div> http://mercatus.org/video/adam-smith-discusses-ridesharing-fox-5 Mon, 24 Nov 2014 10:53:21 -0500 New York City Supporter and Friend Lunch http://mercatus.org/events/new-york-city-supporter-and-friend-lunch-11 <h5> Events </h5> <p>Please join us for lunch on Tuesday, February 3 with George Mason University economics professor and Mercatus Center senior fellow Don Boudreaux.</p><p style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;"><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">This is not a fundraising event, and there is no charge to join us. We are pleased to have you as our guest to show our thanks and appreciation to our donors. Dress is business casual. Please invite friends or associates who might be interested.</span></p><p style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">For more information about this event, please contact Caitlyn Van Orden at&nbsp;<a href="mailto:cvanorden@mercatus.gmu.edu" style="font-size: 12px; color: #666699;">cvanorden@mercatus.gmu.edu</a>&nbsp;or (703) 993-4925.</p> http://mercatus.org/events/new-york-city-supporter-and-friend-lunch-11 Wed, 19 Nov 2014 16:41:31 -0500 The Future of Economic Development: A Conversation Between Global Thought Leaders Jeffrey Sachs and Tyler Cowen http://mercatus.org/events/future-economic-development-conversation-between-global-thought-leaders-jeffrey-sachs-and contact@mercatus.org (Mercatus.org) <h5> Events </h5> <p><b>PARTICIPANTS:</b><br /><a href="http://www.earthinstitute.columbia.edu/articles/view/1804"> Jeffrey Sachs</a>, Professor of Health Policy and Management, Columbia University<br /><span style="font-size: 12px;"><a href="http://mercatus.org/tyler-cowen">Tyler Cowen</a>, Holbert L. Harris Chair of Economics, George Mason University</span></p> <p style="text-align: left;"><b><span style="text-decoration: underline;">**Select VIP Seating Available for Media**</span></b><br /> Contact Bob Ewing, director of media relations, Mercatus Center<br /><span style="font-size: 12px;">&nbsp;703.993.4960 (office), 202.494.2567 (mobile), </span><a style="font-size: 12px;" href="mailto:bewing@mercatus.gmu.edu">bewing@mercatus.gmu.edu</a></p> <p>Jeffrey Sachs and Tyler Cowen, both <i>New York Times</i> best-selling authors, are among today’s top global leaders and most influential economists. Join these leading thinkers in a serious dialogue on the ideas and policies that will likely shape economic development in the coming years and decades.&nbsp; This is the inaugural event for the Mercatus Center’s newly established&nbsp;<i>Conversations with Tyler</i> event series.</p> <p>Throughout history, some countries’ economies have thrived while others have failed. Currently, one in six people in the world lives on less than $1 per day.</p> <p>What is the connection between a country’s economic policies and environment and its economic growth? What role does a global marketplace play in a country’s economic growth? What are potential solutions being discussed to bring greater prosperity to these countries? By exploring why some countries have grown out of poverty while others haven’t, we can better understand how to fight global poverty for future generations.</p> <p>Prof. Sachs is a leader and one of the preeminent scholars in this field. He has dedicated years of work to answering these types of questions. Please join us for what promises to be one of the most important discussions on development economics in recent years. After the program, we invite you to stay for a reception.</p><p>If you have any questions about this event, please contact Jason Wilbanks at <a href="mailto:jwilbanks@mercatus.gmu.edu">jwilbanks@mercatus.gmu.edu</a> or (703) 993-8297.</p> <p><b>About Jeffrey Sachs</b></p> <p>Sachs<b> </b>is a world-renowned professor of economics, leader in sustainable development, senior UN advisor, bestselling author, and syndicated columnist whose monthly newspaper columns appear in more than 100 countries. He was called by the <i>New York Times</i>, “probably the most important economist in the world,” and by <i>Time Magazine</i> “the world’s best known economist.” A recent survey by <i>The Economist</i> Magazine ranked Professor Sachs as among the world’s three most influential living economists of the past decade. Professor Sachs is widely considered to be one of the world’s leading experts on economic development and the fight against poverty.</p> <p><b>About Tyler Cowen</b></p> <p>Cowen is world-renowned professor of economics, co-author of the popular economics blog Marginal Revolution,&nbsp;cofounder of the award-winning online educational platform&nbsp;<a href="http://mruniversity.com/">Marginal Revolution University</a>, and chairman of the Board at the Mercatus Center at George Mason University. <i>Bloomberg Businessweek&nbsp;</i>profiled Cowen as “America’s Hottest Economist”, <i>Foreign Policy&nbsp;</i>named Cowen as one of the “Top 100 Global Thinkers,” and an&nbsp;<i>Economist</i>&nbsp;survey counted Cowen as one of the most influential economists of the last decade.</p><p><b><i>Conversations with Tyler</i> Event Series</b><br /> <i>The Future of Economic Development</i> with Jeffrey Sachs will serve as the inaugural event for the Mercatus Center’s newly established&nbsp;<i>Conversations with Tyler</i> economics series. The series will bring world-class thought leaders to the Arlington campus of George Mason University to discuss how ideas, cutting-edge research, and applied economics can bring solutions to society’s most pressing problems.</p> http://mercatus.org/events/future-economic-development-conversation-between-global-thought-leaders-jeffrey-sachs-and Wed, 19 Nov 2014 16:19:10 -0500 Scottsdale Supporter and Friend Lunch http://mercatus.org/events/scottsdale-supporter-and-friend-lunch-6 <h5> Events </h5> <p>Please join us for lunch on Thursday, January 15 with Mercatus Center senior research fellow Jason Fichtner.</p><p><span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">This is not a fundraising event, and there is no charge to join us. We are pleased to have you as our guest to show our thanks and appreciation to our donors. Dress is business casual. Please invite friends or associates who might be interested.</span></p><p>For more information about this event, please contact Caitlyn Van Orden at <a href="mailto:cvanorden@mercatus.gmu.edu">cvanorden@mercatus.gmu.edu</a> or (703) 993-4925.</p> http://mercatus.org/events/scottsdale-supporter-and-friend-lunch-6 Wed, 19 Nov 2014 14:57:32 -0500 Sidestep the FCC and the FDA http://mercatus.org/expert_commentary/sidestep-fcc-and-fda <h5> Expert Commentary </h5> <p class="p1">It is difficult to imagine rapid economic growth taking place in the United States without technological innovation. Other countries can grow by catching up to existing technology, but for us it is necessary to push the frontier.</p><p class="p1"><span style="font-size: 11.8181819915771px;">Two potential areas for rapid innovation are telecommunication and medicine. I am very concerned that these areas are regulated by the FCC and the FDA, respectively, two agencies that were established in different eras. My fear is that these agencies are culturally incapable of adapting to the environment that scientific advances have created. I have proposals for sidestepping each agency.</span></p><p class="p1"><a href="http://www.cato.org/publications/cato-online-forum/sidestep-fcc-fda">Continue reading</a></p> http://mercatus.org/expert_commentary/sidestep-fcc-and-fda Wed, 19 Nov 2014 12:47:36 -0500 Embracing a Culture of Permissionless Innovation http://mercatus.org/expert_commentary/embracing-culture-permissionless-innovation <h5> Expert Commentary </h5> <p class="p1">“Why does economic growth… occur in some societies and not in others?” asked Joel Mokyr in his 1990 book, <i>Lever of Riches: Technological Creativity and Economic Progress</i>.<sup>1</sup> Debate has raged among generations of economists, historians, and business theorists about that question and the specific forces and policies that prompt long-term growth.</p> <p class="p1">As varied as their answers have been, there was at least general agreement that institutional factors mattered most—it was really just a question of what mix of them would fuel the most growth. Those institutional factors include: government stability, the enforceability of contracts and property rights, tax and fiscal policies, trade policies, regulatory policies, labor costs, educational policies, research and development expenditures, infrastructure, demographics, and environmental factors.<sup>2</sup></p><p class="p1"><a href="http://www.cato.org/publications/cato-online-forum/embracing-culture-permissionless-innovation">Continue reading</a></p> http://mercatus.org/expert_commentary/embracing-culture-permissionless-innovation Wed, 19 Nov 2014 12:35:10 -0500 Incentive Pay for Congress http://mercatus.org/expert_commentary/incentive-pay-congress <h5> Expert Commentary </h5> <p class="p1">Most large enterprises use incentive pay like performance bonuses and stock options to better align the interests of employees, especially top managers, with those of the shareholders. To be sure, these compensation systems are often gamed, and CEOs sometimes receive a large payout even if their performance disappoints. Yet despite these imperfections, incentive pay is an indispensable tool — even startups and privately held companies, which have the strongest reasons to organize efficiently, use it extensively.</p> <p class="p1">We don’t offer incentive pay to members of Congress, but perhaps we should. Like shareholder capitalism, representative government creates a principal-agent problem: no matter how much politicians wrap themselves in the rhetoric of public service, their interests are never quite our own. Voter irrationality compounds the problem — members of Congress usually do not literally enrich themselves at the expense of voters; rather, they play to voters’ worst biases in order to get re-elected, often at the expense of good policy.<sup>1</sup></p><p class="p1"><a href="http://www.cato.org/publications/cato-online-forum/incentive-pay-congress">Continue reading</a></p> http://mercatus.org/expert_commentary/incentive-pay-congress Wed, 19 Nov 2014 12:36:21 -0500 A New Congress Must Perform Major Surgery On Dodd-Frank http://mercatus.org/expert_commentary/new-congress-must-perform-major-surgery-dodd-frank <h5> Expert Commentary </h5> <p class="p1">In the four years since the passage of Dodd-Frank, the financial regulators have written a lot of new rules. Throughout the implementation period, at least one of the chambers of Congress has been under the control of the party that passed Dodd-Frank. Agencies therefore have been spared some painful scrutiny of their Dodd-Frank implementation programs. This month's election changed that, and agencies are likely to face a lot more uncomfortable oversight in the upcoming Congress. But the new Congress, not as wedded to Dodd-Frank as its predecessors, could also make life more bearable for regulators by eliminating some of Dodd-Frank's extraneous statutory mandates.</p> <p class="p1">The Securities and Exchange Commission is a prime candidate for mandate trimming. Dodd-Frank assigned the SEC responsibilities that are far from its core mission. For example, Dodd-Frank directed the SEC to require companies to assess and report their use of minerals tied to the violence in and around the Democratic Republic of the Congo. Companies have spent many hours and dollars trying to identify whether they are using minerals that fund the conflict, but the task appears to be futile. The Department of Commerce recently published a <a href="http://www.ita.doc.gov/td/forestprod/DOC-ConflictMineralReport.pdf"><b>list</b></a> of facilities that process the minerals at issue, but stated that it could not determine "whether a specific facility processes minerals that are used to finance conflict in the Democratic Republic of the Congo or an adjoining country." In other words, the government cannot do what it is asking companies to do.</p> <p class="p1">Another mandate that imposes tremendous burdens on the SEC and companies without proportionate benefit for investors is the so-called pay ratio rule. Under Dodd-Frank, the SEC is working on the rule, which requires companies to disclose the ratio of their median employee compensation to the CEO's pay. Writing such a rule might be a simple task if all companies had no more than ten full-time employees working in a single location, but it is quite a bit more complicated to write such a rule for multinational companies that employ thousands of employees working a mix of full- and part-time schedules.</p> <p class="p1">The conflict mineral and pay ratio mandates do not further the SEC's tripartite mission-protecting investors; facilitating capital formation; and maintaining fair, orderly, and efficient markets. Rather they distract from the considerable work the SEC has to do in these areas. For example, the economy's precarious health depends on the ability of financial markets to direct investable funds to the parts of the economy that need it most. Would-be entrepreneurs and growing small businesses face many obstacles to getting the money they need-obstacles that the SEC could work on removing if it were not so preoccupied with pointless Dodd-Frank mandates.</p> <p class="p1">The Financial Stability Oversight Council is another agency that could use some congressional refocusing. The FSOC, a creation of Dodd-Frank, had the potential to play the important role of bringing regulators together to share information, ideas, and concerns about the financial system. Congress, however, loaded the agency down with the responsibility of identifying companies that are systemically important. This function has absorbed considerable regulatory time and has caused undue angst in the market; designated companies will face substantial regulatory costs and are likely candidates for future taxpayer bailout. If Congress were to eliminate this responsibility, the FSOC could focus on the more important task of bringing regulators together to think holistically about financial system regulation. Eliminating the designation exercise would have the added benefit of preventing the emergence of a new category of too-big-to-fail entities.</p> <p class="p1">Removing the FSOC's power to designate also would free the Federal Reserve of the responsibility of regulating entities like insurance companies about which it has no expertise. Congress could further refocus the Fed on its role as a lender of last resort by quashing the Fed's Dodd-Frank-fueled ambitions of being the regulator of last resort. The Fed will be able to focus on its core central bank functions if Congress shifts its regulatory responsibilities to other bank regulators.</p> <p class="p1">Regulators are not looking forward to heightened congressional oversight of their activities, but the new Congress offers them something to offset the pain. Unencumbered by having voted for Dodd-Frank, the incoming Congress can jettison unnecessary statutory mandates so that agencies can get back to their core missions.</p> http://mercatus.org/expert_commentary/new-congress-must-perform-major-surgery-dodd-frank Wed, 19 Nov 2014 09:56:27 -0500 Together They Bargain? http://mercatus.org/expert_commentary/together-they-bargain <h5> Expert Commentary </h5> <p class="p1">Last Friday, America’s four postal employee unions organized a mass protest against Postmaster General Patrick Donahoe’s plan to shut down 80 distribution centers in January 2015. The postal workers, quite understandably, see their livelihoods at stake. Many reformers, however, see the rising share of public sector unionization as a drain on our tax dollars and a likely source of government growth—which, as new research reveals, may not be the case.</p> <p class="p1">Regardless of where one falls on controversies like the postal worker strike or the attempted recall of Wisconsin Governor Scott Walker in 2012, most of us recognize the need for states to keep their promises to government workers, retirees, and citizens who rely on essential state services like education, Medicaid and public safety. In a <a href="http://mercatus.org/publication/public-sector-unions-and-government-policy-reexamining-effects-political-contributions-0">study</a> published today by the <a href="http://mercatus.org/">Mercatus Center</a> at George Mason University, we outline just how challenging this can be for policymakers. Public sector unions are highly effective at securing pay and benefits for their members, but appear to have no effect on overall government spending. This leaves an obvious question: How are we paying for everything?</p> <p class="p1">In our new research, we examine public sector union lobbying and collective bargaining activity. Because unions have several tools at their disposal to influence policy, it is difficult to gauge each tool’s effect on workers and taxpayers. To address this, we measured the impact of unions’ collective bargaining rights and political contributions on state budgets and employee compensation. After controlling for a number of factors, we made two important findings:</p> <p class="p1">First, political activity by public sector unions works. Specifically, more collective bargaining tends to mean more government jobs, and more union political spending tends to mean higher growth in employees’ incomes. Rather than demonize unions, we should recognize that they are responding to strong political incentives. Their job is to take care of their members, and they do this extremely well. In economic terms, public sector unionization functions as a “club good” where members pay dues and, in return, receive higher salaries.</p> <p class="p1">Second, while many public sector union critics believe they are a driving force behind government growth—according to the numbers we examined—union political activity does not appear to lead to higher state government spending. Instead, our findings suggest that it is geared toward securing a larger share of an existing pie, rather than growing the government pie. There appears to be a tradeoff between spending on public services and spending on employees.</p> <p class="p1">We also find similar results for teachers’ unions: They take care of their members, and the data clearly indicate that stronger unions and more activity guarantee higher salaries for teachers. But, again, a larger spillover effect is that the data do not show an obvious correlation between increased teachers’ union spending leading to increases in state spending. So it’s reasonable to wonder if in-classroom funding is suffering.</p> <p class="p1">In our current economic environment—where wages are stagnated and state budgets are already being squeezed by less revenue—these findings are doubly important for policymakers. Budgets are unlikely to rise, so increased public sector union activity seems likely to come at the cost of other services. As a result, we can expect to hear more stories like those coming from Detroit, San Bernardino, and Stockton, California—municipal bankruptcies driven in large part by policymakers’ inability to balance union priorities with financial commitments to the general public.</p> <p class="p1">While our data indicate that the unions may not drive much new spending growth, they carve out such a large share of budgets for their members that municipal governments seem destined to fail. If the nationwide pension crisis—which could very well be related to the dynamic we’ve uncovered—is any indication, the longer politicians wait to address the problem, the more painful the fix will be for public workers and retirees.</p> <p class="p1">The scene from failing cities is not all that different from what we’re seeing this week with postal employees: Their unions are fighting hard to protect their members and are willing to go down swinging to get the job done. But with states either unable or unwilling to increase the overall size of government, the result for American taxpayers is an increasingly squeezed public sector that is being asked again and again to do more with less.</p> <p class="p1">Policymakers have a different job: to balance the priorities of different interest groups and the general public. Let’s hope they’re up to the challenge.</p> http://mercatus.org/expert_commentary/together-they-bargain Wed, 19 Nov 2014 09:09:36 -0500 Less Food Policy, Not More http://mercatus.org/expert_commentary/less-food-policy-not-more <h5> Expert Commentary </h5> <p class="p1">The United States has created supermarkets full of the widest variety of food that has ever been available to any country. But for some, this achievement is seen as creating more problems than it solves. One suggestion, the subject of a recent <a href="http://www.washingtonpost.com/opinions/how-a-national-food-policy-could-save-millions-of-american-lives/2014/11/07/89c55e16-637f-11e4-836c-83bc4f26eb67_story.html">Washington Post piece</a>, suggests that we need a national food policy. Those that suggest that we need additional government programs and initiatives focused on healthy eating should consider the programs the government already has in place and the results – or lack of results – they’ve produced.<br /><span style="font-size: 11.8181819915771px;"><br />One program is the Department of Health and Human Service’s 10-year plan, </span><a style="font-size: 11.8181819915771px;" href="https://www.healthypeople.gov/">Healthy People 2020</a><span style="font-size: 11.8181819915771px;">. This little-known endeavor has a variety of information available on its website but provides little information about how it plans to actually achieve its goals. Additionally, there is the U.S. Department of Agriculture’s Dietary Guidelines for Americans, which “forms the basis of federal nutrition policy” and is now flirting with issues beyond nutrition, such as promoting vegetarianism and sustainable agriculture.</span></p><p class="p1"><span style="font-size: 11.8181819915771px;"><a href="http://www.usnews.com/opinion/economic-intelligence/2014/11/17/end-farm-subsidies-for-better-food-policy">Continue reading</a></span></p> http://mercatus.org/expert_commentary/less-food-policy-not-more Mon, 17 Nov 2014 14:43:40 -0500 Working Around the Budget Process: Will We See More Supplemental Funding With the New Congress? http://mercatus.org/publication/working-around-budget-process-will-we-see-more-supplemental-funding-new-congress <h5> Publication </h5> <p class="p1">The Obama administration recently sent a request to Congress for an additional $11.7 billion in additional funding for fiscal year 2015 to combat the Ebola virus and Islamic extremists in the Middle East. Funding the federal government’s operations outside of the regular budget process—and thus outside of limits intended to restrain spending—is a practice that has been abused in recent years. In addition to bypassing budget caps, supplemental bills can become a vehicle for excessive and haphazard appropriations because Congress often passes them in a rush.&nbsp; &nbsp;</p><p class="p1"><a href="http://mercatus.org/sites/default/files/figure-2-spending-vero_0.jpg"> <img height="408" width="585" src="http://mercatus.org/sites/default/files/figure-2-spending-vero_0.jpg" /></a></p><p class="p1"><span style="font-size: 11.8181819915771px;">This week’s chart displays the annual amount of real (2014 $) federal supplemental funding since 1980. As the chart shows, supplemental spending exploded in 2000s during the administration of George W. Bush and a largely Republican-controlled Congress. The increases were driven by the GOP’s preference for skirting budget limits by funding the wars in the Middle East outside of the regular budget process. While this might have been justifiable at the outset of hostilities, the practice of treating war spending as if it were “unforeseen” quickly became dubious.&nbsp;</span></p> <p class="p1">After peaking at $207 billion in fiscal year 2009, supplemental spending has decreased in recent years. Gridlock on Capitol Hill and relatively mild hurricane seasons—with the exception of 2013’s destructive Hurricane Sandy—helped. The winding down of combat operations in Afghanistan and Iraq under the Obama administration is another factor. However, it’s worth noting that the Congressional Budget Office data used to construct this chart omits funding from the 2009 American Recovery and Reinvestment Act (AARA, a.k.a. the economic “stimulus” bill). According to the CBO’s original score of ARRA, an additional $585 billion was added to the federal coffers from FY 2009 to FY 2014 (approximately 85 percent of the funding occurred in the first two years).&nbsp;</p> <p class="p1">With relatively more hawkish Republicans back in control of Congress and problems in the Middle East beginning to boil, a return to the massive supplemental spending of the mid-2000s is a justifiable concern. At the very least, Congress should offset any additional supplemental spending with real budget cuts elsewhere. Taking that approach with the Obama administration’s recent supplemental request would be a good start.&nbsp;</p><p class="p1"><sup>Data notes: Supplemental appropriations are net of recessions. The data does not include the 2009 American Recovery and Reinvestment Act (“stimulus”), which provided for an estimated $585 billion in budget authority from FY 2009 to FY 2014. The 1991 uptrend reflects supplemental spending for Desert Storm, the costs for which were repaid through allied burden sharing. CBO reports no supplemental spending in 2011 and 2012.</sup></p> <p class="p2"><sup>Full sources: Author’s compilations based on Congressional Budget Office, “Supplemental Appropriations in the 1970s” (1981), “Supplemental Appropriations in the 1980s” (1990), “Supplemental Appropriations in the 1990s” (2001), and “Supplemental Appropriations from 2000 to 2006” (2007).&nbsp;</sup></p> http://mercatus.org/publication/working-around-budget-process-will-we-see-more-supplemental-funding-new-congress Fri, 21 Nov 2014 15:23:49 -0500 Why Treasury Debt Matters More Than the End of QE http://mercatus.org/expert_commentary/why-treasury-debt-matters-more-end-qe <h5> Expert Commentary </h5> <p class="p1">Large markets for standardized goods tend to be impersonal. The market's ability to function depends more on the quantity and quality of goods for sale than on who buys the goods. This applies to markets for financial assets too — and it's important to keep in mind when weighing the potential effects of the current volume of U.S. Treasury debt against the impact of the Federal Reserve's decision to <a href="http://www.federalreserve.gov/newsevents/press/monetary/20141029a.htm">end quantitative easing</a>.</p> <p class="p1">Under the Fed's historic bond-buying program, the central bank purchased longer-term Treasury debt and Fannie Mae and Freddie Mac mortgage-backed securities from <a href="http://www.ny.frb.org/markets/pridealers_current.html">primary dealer banks</a> like JPMorgan Chase and Citigroup. The Fed then paid the banks by putting credits into their accounts with the Fed, known as reserves. Increasing banks' reserves was supposed to stimulate the economy by encouraging banks to lend, and possibly even removing some risk from bank balance sheets by purchasing the mortgage-backed securities. Any evidence that it worked seems limited at best.</p> <p class="p1">Some critics worried that quantitative easing could cause severe price inflation, possibly even a hyperinflation, since increasing bank reserves also means boosting traditional measures of the money supply. That doesn't seem to have happened. Banks have earned interest on reserves similar to the interest they would earn on <a href="http://www.federalreserve.gov/monetarypolicy/reqresbalances.htm">short-term U.S. Treasury debt</a>. Professor John Cochrane at the University of Chicago observed in 2010 that <a href="http://www.voxeu.org/article/sense-and-nonsense-quantitative-easing-debate">this helps make dealer banks indifferent</a> between reserves or short-term Treasury debt and may well limit the extent to which banks turn excess reserves into new loans. If banks aren't significantly boosting lending, there's a cap on the potential for big spending increases to drive up prices. So for now, at least, quantitative easing appears to have been a wash.</p> <p class="p1">It's also interesting to note that the effect of quantitative easing may have been mitigated by the fact that the Federal Reserve operates like a private, regulated monopoly banking corporation that pays a very high tax rate. It has a monopoly on issuing U.S. dollars, and earns income in the form of the interest it receives from asset holdings like Treasuries. The Fed then pays its expenses and dividends to member banks and turns the rest back over to the Treasury. As an active participant in the market for Treasuries, the Fed through quantitative easing simply changed who holds the debt.</p> <p class="p1">Going forward, a bigger concern is the quantity of Treasury debt, which as of Oct. 28 was just shy of $18 trillion, and whether the market will want to hold that amount in the future. For now Treasuries are in high global demand: foreign central banks and investors here and abroad want them. (Fed economist Carol Bertaut and co-authors show in a <a href="http://www.federalreserve.gov/econresdata/carol-bertaut.htm">series of papers</a> that this global element of demand may in fact be what keeps Treasury debt prices high and yields low.) Basel-type bank capital requirements favor the use of highly-rated sovereign debt like Treasuries; Treasuries also play a key role as collateral in many financial transactions. As long as demand exists, the large quantity of Treasury debt isn't a problem.</p> <p class="p1">Should the Treasury signal that it <a href="http://www.pbs.org/newshour/bb/politics-july-dec13-debtceiling_10-03/">cannot pay back</a> its bond-holders, however, the demand to hold them would vanish. Herein lies the hyperinflationary scenario. For example, if Congress decided not to raise the debt ceiling, that might trigger events leaving the U.S. Treasury no choice but to default on the debt. This would lead people in the U.S. and abroad drop Treasuries at the same time, leaving only taxes and the money-printing presses to finance government spending, which could in turn produce hyperinflation. For this reason, discussions about how to curtail future government spending have become particularly urgent in recent years.</p> <p class="p1">As Alexander Hamilton once <a href="http://mkwinc.com/blog/wp-content/uploads/2012/12/USGovtDebtAlwaysHasBeenDifferent-Sylla1.pdf">observed</a>, "A national debt, if it is not excessive, will be to us a national blessing." With quantitative easing out of the way, it's time to focus on curbing the excessive volume of U.S. Treasury debt by addressing spending.</p> http://mercatus.org/expert_commentary/why-treasury-debt-matters-more-end-qe Mon, 17 Nov 2014 13:10:56 -0500 The Internet of Things and Wearable Technology: Addressing Privacy and Security Concerns without Derailing Innovation http://mercatus.org/publication/internet-things-and-wearable-technology-addressing-privacy-and-security-concerns-without <h5> Publication </h5> <p class="p1">The “Internet of Things”—smart devices that are connected to both the Internet and other devices—and wearable technology promise to usher in the next great wave of Internet-enabled services and data-driven innovation. The Internet will be “baked in” to almost everything that consumers own. Some critics are worried about the privacy and security implications of the Internet of Things and wearable technology, so they are proposing regulation.</p> <p class="p1">In a new study for the Mercatus Center at George Mason University, scholar <a href="http://mercatus">Adam Thierer</a> shows that preemptive, top-down regulation would derail the many life-enriching innovations that could come from these new technologies. The study argues that permissionless innovation, which allows new technology to flourish and develop in a relatively unabated fashion, is the superior approach to the Internet of Things. Combining public education, oversight, industry best practices, and transparency in a balanced, layered approach will be the proper way to address concerns about the Internet of Things—not prospective regulation based on hypothetical scenarios.</p> <p class="p1">While some argue that the worst-case scenarios that could result from emerging technology demand intervention before any harm might occur, even if the possibility is remote, Thierer concludes that other solutions—such as tort law in the legal system or the development of industry best practices—are the better approach to regulating new technology, unless there is clear evidence of direct, immediate risk to health or property. Living in fear of the worst-case scenarios and basing public policy on them can lead to the best-case scenarios never arising. Forbearance and humility by regulators is crucial to developing new products and services that could enrich the lives of all consumers.</p> <p class="p2">To read the full study, see “<a href="http://mercatus.org/sites/default/files/Thierer-Wearable-Tech.pdf">The Internet of Things and Wearable Technology: Addressing Privacy and Security Concerns without Derailing Innovation</a>.”</p> <p class="p4">GROWTH OF THE INTERNET OF THINGS AND WEARABLE TECHNOLOGY</p> <p class="p1">The Internet of Things and wearable technology simply means widespread device connectivity. Appliances and machines that consumers use on a daily basis—such as cars, refrigerators, lights, watches, jewelry, eyeglasses, and even clothing—will be networked, sensing, automated, and able to communicate with one another. These new technologies will give consumers more control over their own lives and save time by automating routine tasks and chores. Many of these changes to daily life are just a few years away, and some can already be seen today.</p> <ul class="ul1"> <li class="li5">Within a few years, tens—if not hundreds—of billions of connected devices will be in use globally.</li> <li class="li5">The biggest impact of connected devices will be seen in health care, energy, transportation, and retail services.</li> <li class="li5">Today, wearable technology is already popular for health and fitness monitoring, allowing users to share data with others and log their daily activity and well-being.</li> <li class="li5">Devices will also have profound implications for health care, as technology assists with surgery and emergency care, treatment, and diagnosis of disease. For example, colon cancer screening may soon become less invasive and abrasive, with patients able to swallow a pill that wirelessly transmits video images of the inside of the body back to doctors.</li></ul> <p class="p4">CHALLENGES TO PRIVACY NORMS AND LEGAL STANDARDS</p> <p class="p1">As technological innovation progresses, thorny ethical and legal questions will arise, including what people should be able to do with their own bodies. Emerging technology will also challenge existing health and safety regulations imposed by government agencies. Additionally, concerns about the collection and dissemination of data, which devices routinely do as part of their design, will become particularly sensitive. Questions about how to deal with data and privacy concerns are unanswered at this time, and so are the capabilities of regulators to deal with such questions without knowing the positive implications of new technology. There are several approaches to regulating connected devices:</p> <ul class="ul1"> <li class="li5"><i>Industry best practices.</i> In response to emerging questions relating to wearable technology and privacy, regulators have pushed device manufacturers to adopt industry-wide best practices, but these actions often run into definitional problems because the technology is so new.</li> <li class="li5"><i>Notice and choice.</i> Regulators have also suggested that manufacturers notify consumers of the collection and use of data and make it easier for them to opt out of having their data used for various purposes.</li> <li class="li5"><i>Use-based restrictions.</i> Restricting when and where devices can be used may be an appropriate method of regulation. For example, prohibiting use of Google Glass in restrooms or while operating a vehicle may be a potential avenue for regulation. Others want use-based restrictions limiting how data is used to make other determinations, especially when sensitive personal information is being collected.</li> </ul> <p class="p1">Regulators should be cautious about implementing use-based restrictions, however. The preferences of regulators should not be substituted for the judgment and choice of consumers. Such “privacy paternalism” can make choice meaningless for consumers or remove it altogether, which limits freedom and innovation. Moreover, regulators should be mindful of First Amendment concerns when restricting use by consumers: some activities, such as photography or reporting based on data collection, may be protected by the Constitution’s guarantee of free speech.</p> <p class="p4">RESISTANCE, ADAPTATION, AND ASSIMILATION:<br /> THE CYCLE OF CONSUMER ATTITUDE TOWARD TECHNOLOGY</p> <p class="p1">Attitudes toward new and emerging technology often go through a familiar cycle of resistance, gradual adaptation, and finally assimilation. In other words, citizens gradually come to accept new technology as it emerges and become more resilient in the process. As with the ultimate adaptation of photography—considered in the late 1800s to be a radical and invasive new technology with profound privacy concerns—citizens will eventually understand and seek out the benefits of technology that can improve lives. Regulators should understand that there is no one-size-fits-all approach to regulating new technology. The goal should be to encourage, rather than limit, freedom and choice for consumers.</p> <p class="p4">CONCLUSION</p> <p class="p1">Concerns about wearable technology can be dealt with using a combination of educational efforts, technological empowerment, social norms, public and watchdog pressure, industry best practices and self-regulation, transparency, and targeted enforcement of existing legal standards (especially tort law) as needed and appropriate. Regulators should also not underestimate the ability of individuals to adapt to these new technologies, just as they have with so many other technologies in the past. Policymakers should allow new technology to flourish and grow rather than impeding or stalling it by an overabundance of caution and concern leading to preemptive regulation.</p> http://mercatus.org/publication/internet-things-and-wearable-technology-addressing-privacy-and-security-concerns-without Wed, 19 Nov 2014 10:12:20 -0500