Mercatus Site Feed http://mercatus.org/feeds/home/publication/adam-thierer/ppe.mercatus.org/RS%3D%5EADA9JobqEubQeNBYXdPUYJs9zwdpbo- en FSMA: No Safety, No Modernization http://mercatus.org/expert_commentary/fsma-no-safety-no-modernization <h5> Expert Commentary </h5> <p class="p1">In the midst of food prices that are already on the rise, the U.S. Food and Drug Administration’s <a href="https://www.govtrack.us/congress/bills/111/s510/text">Food Safety Modernization Act</a> (FSMA) will vastly increase costs, but it’s not likely to change food safety nor will it modernize our approach to food safety. In a <a href="http://mercatus.org/publication/regulations-implementing-food-safety-modernization-act">new research paper</a>, I examine four of the biggest of the new regulations (ultimately, there may be as many as 50) and find no evidence that they will have much effect on the safety of manufactured food, produce, imported food or animal food. And, despite the name of the law, the approach taken with all of these rules is not modern. Instead, it is trying to tell manufacturers how to produce food and inspect producers for compliance — an approach that dates back to the 1870s in the United States. In the modern information age, there is a much <a href="http://mercatus.org/publication/food-safety-21st-century">better way</a>.</p> <p class="p1">There are <a href="http://mercatus.org/sites/default/files/Ellig_10RegPrinciples_v1.pdf">two essential items</a> that should be present for a regulation to have an impact: First, there must be a problem to solve, and second, there must be some measure of effectiveness at solving that problem. Ideally, there is not an excessive cost attached to the solution. By FDA’s own analysis, each of the four regulations examined in my recent study fail in one of the two categories.</p> <p class="p1">An example of the first issue — failure to identify a large, ongoing problem to be solved — is best illustrated by a proposed rule on “<a href="http://www.fda.gov/Food/GuidanceRegulation/FSMA/ucm378628.htm">intentional adulteration</a>.” Put simply, this is a rule to prevent terrorists from poisoning food. FDA admits there has been no intentional adulteration and that it has no idea what food companies have been doing since 9/11 to protect their plants. In other words, they have absolutely no idea whether there is a problem to fix with this large and expensive solution.</p> <p class="p1">There is also scant evidence to suggest a large, systemic problem with packaged food; nevertheless, FDA does have a large and expensive rule. Using elements of a <a href="http://mercatus.org/publication/regulatory-cost-calculator">regulatory cost calculator</a>, the solution to this nonexistent problem will cost $18 billion, according to industry estimates. While there have been a few highly publicized outbreaks traced back to packaged food, <a href="https://www.federalregister.gov/articles/2014/09/29/2014-22446/current-good-manufacturing-practice-and-hazard-analysis-and-risk-based-preventive-controls-for-human">FDA notes</a> that most food safety problems occur in restaurants, other retail establishments or homes.1 These problems are not covered by the current rule.</p> <p class="p1">Then there is the second problem, when there is no effective solution presented. This is surely the case with FDA’s rule for fresh produce. Fresh produce from farms certainly can cause foodborne disease, but FDA has focused on forcing Hazard Analysis Critical Control Points (HACCP), created for manufactured food, to fit produce. Unfortunately, this method has been tried by FDA before for products that do not have a control step between harvest and mouth, e.g., raw shellfish, without success. If there is no control point, HACCP is useless.</p> <p class="p1">In some cases, Congress allowed discretion to reduce the scope of these rules, but FDA has chosen not to exercise discretion, proposing the biggest possible rules. For animal foods, FDA has evidence that contact with pet foods cause illness in humans, but no evidence that the same is true for farm animal food. Nevertheless, they proposed regulating both pet and farm animal feed with the same controls. For fresh produce, they have evidence associated with outbreaks for some fruits and vegetables, but note that others have no such associated outbreaks. Incredibly, they have adopted a philosophy that, because something <i>could</i> happen with the produce that has never been associated with an outbreak, they should be covered. It doesn’t take much of an imagination to expand that philosophy to justifying the regulation of everything on the planet.</p> <p class="p1">The biggest problem, however, comes with the entire approach, command-and-control regulation and inspection. It’s old, it’s outdated, and it’s not likely to work. FDA will never have the knowledge to tell every type of domestic and foreign producer, warehouse, transporter and retailer what the best way is to keep their products safe. Nor will they ever have enough inspectors to cover them all in a timely fashion, even though they will continue to press American taxpayers for more resources.</p> <p class="p1">What they do have is a new information age where — if/when producers make mistakes — those mistakes can often be traced back to the producers, and that information is immediately spread to millions of consumers. That creates an incentive for producers to mitigate lawsuits, recalls and diminished sales. FDA can help to determine what caused the problem, allowing everyone who might experience a similar problem to change their own practices or contracts with suppliers.</p> <p class="p1">In other words, we now have better trace-back, problem identification and communication abilities to create <i>incentives</i>. With those incentives will come both more due diligence and creation of more technologies, such as pasteurization, which historically have made the biggest difference in food safety. Those incentives are much more powerful than the old regulatory approaches and, if embraced, we may finally start to make a dent in the millions of food safety cases that plague Americans annually.</p> http://mercatus.org/expert_commentary/fsma-no-safety-no-modernization Mon, 31 Aug 2015 12:02:15 -0400 The 2015 Social Security and Medicare Trustees' Reports http://mercatus.org/expert_commentary/2015-social-security-and-medicare-trustees-reports <h5> Expert Commentary </h5> <p class="p1">The 2015 annual report released on July 22 from the trustees of the Social Security and Medicare trust funds projects a slight improvement in Social Security’s future finances as compared to last year’s projections. This is primarily a result of methodological changes in earnings, tax, and benefit projections, as well as projected slower growth in employer contributions to health insurance premiums, which would lead to an increase in taxable payroll. The disability segment of the program, which has its own trust fund, is still expected to be insolvent in 2016, as benefit payments and enrollment have grown rapidly, even after adjusting for the anticipated aging of the workforce. Hence, unless there is reform of the program or new financing, the law will require a 19 percent cut in disability benefits.&nbsp;</p> <p class="p1">The 2015 report for Medicare also shows an improvement in the outlook as compared to last year because of a significant change in the methodology, leading to a somewhat slower rate of projected growth in healthcare spending in the out years, even as actual Medicare spending grew noticeably in 2014, particularly for drugs and physicians. Because there was no consumer price inflation in the past year, mainly because of the drop in fuel prices, the trustees forecast that there will be no benefit increase for Social Security recipients in 2016, which means, by law, there will be no increase in either the Social Security taxable wage base (that is, contribution and benefits) or in Medicare Part B premiums for most, but not all, beneficiaries.&nbsp;</p> <p class="p1"><b>Social Security&nbsp;</b></p> <p class="p1">Under current law and absent reform, the Social Security trustees project that the program will suffer cash-flow shortfalls — gaps between payroll and benefit taxes and expenditures — forever. The shortfall was $74 billion in 2014 and is projected to be $84 billion in 2015. Shortfalls will increase rap- idly after 2018 as the pace of baby-boom generation retirements picks up. Note that as recently as 2009, Social Security once represented a positive cash flow to the federal budget, as tax revenue exceeded expenditures. The negative turnaround in program finances hit sooner and deeper than expected.&nbsp;</p> <p class="p1">The ‘‘theoretical combined’’ trust funds for the old age and survivors insurance (OASI) and the disability insurance (DI) programs (collectively OASDI) are projected to be exhausted of reserves in 2034, one year later than projected last year. At that point, continuing tax revenue would be sufficient to pay 79 percent of scheduled benefits, declining to 73 percent in 2089. The DI trust fund, however, is expected to run out much sooner, by the fourth quarter of 2016. When that occurs, the government must by law reduce disability payouts to 81 percent of scheduled benefits.&nbsp;</p> <p class="p1">Because the primary source of revenue for Social Security and, to a lesser extent, Medicare, is the payroll tax, the programs’ revenues and costs are traditionally expressed as percentages of taxable payroll — that is, the amount of worker earnings taxed to support the programs. (Note that taxable payroll is almost 25 percent larger for Medicare than for Social Security because the Medicare pay- roll tax is imposed on all earnings, while Social Security taxes apply only to earnings up to an annual maximum — $118,500 in 2015.) The Social Security annual cost rates are projected to increase from 13.99 percent of taxable payroll in 2014 to 16.71 percent in 2040, decline to 16.54 percent in 2050, and then rise gradually to 18.01 percent in 2090. The Social Security revenue rate — which includes payroll taxes at 12.4 percent level and income taxes on benefits — was 12.8 percent in 2014 and is expected to increase slowly over time, to 13.32 percent in 2090, because the amount of Social Security benefits excluded from income taxation is not indexed for inflation and benefit growth.&nbsp;</p> <p class="p1"><a href="http://mercatus.org/sites/default/files/Trustee-report-2015-Warshawsky.pdf">Continue reading</a></p> http://mercatus.org/expert_commentary/2015-social-security-and-medicare-trustees-reports Mon, 31 Aug 2015 11:07:11 -0400 Certificate of Need Laws No Longer Needed http://mercatus.org/expert_commentary/certificate-need-laws-no-longer-needed <h5> Expert Commentary </h5> <p class="p1">Health care in America isn’t a topic reserved only for the federal government. Debates over its future are playing out in statehouses across the country, including North Carolina’s.</p> <p class="p1">In Raleigh, it centers on decades-old laws requiring qualified doctors and medical providers to secure permission from the state in order to build or expand their own practices, by purchasing certain devices, offering particular services, or opening new facilities.</p> <p class="p1">These are known as “certificate-of-need” or “CON” laws, and North Carolina has the fourth-most restrictive program in the country.</p> <p class="p1">At some point over the past 50 years, every state had CON laws. Their aim was noble: to control costs and better distribute care to hard-to-reach areas and to the needy. But over the past few decades, many of them — and the federal government— realized that they do more harm than good.</p> <p class="p1">CON programs force any medical provider interested in opening or expanding a practice to submit to an onerous, expensive and time-consuming approval process.</p> <p class="p1">It is easier for large, established providers to navigate this process than it is for smaller providers.</p> <p class="p1">CON laws also allow existing facilities to challenge potential competitors in a public hearing that can sometimes resemble full-blown litigation.</p> <p class="p1">More important, what does this mean for those seeking care?</p> <p class="p1">Recently, my colleagues Thomas Stratmann and Jacob Russ created the most comprehensive study yet of CON laws. They found that the real effect of CON laws is simple: They stifle the amount of care available for everyone.</p> <p class="p1">Using these findings, Stratmann and I estimated that North Carolina’s CON program could mean approximately 12,900 fewer hospital beds, 49 fewer hospitals offering MRI services, and 67 fewer hospitals offering CT scans in the state.</p> <p class="p1">Does this necessarily mean that the state needs all those beds? No. What it means is that the supply of health care services is being restricted by outmoded laws.</p> <p class="p1">Most would agree that stifling the supply of health care is probably not a good thing.</p> <p class="p1">And proponents readily admit that these laws do in fact limit the supply of health care.</p> <p class="p1">Yet they argue that these restraints are worth it, and the programs are necessary, to control costs or increase the amount of charity care being provided.</p> <p class="p1">However, 40 years of evidence demonstrate that these programs do not control costs. Moreover, Stratmann and Russ find zero relationship between the presence of CON laws and any increase in charity care.</p> <p class="p1">Our findings shouldn’t be construed as encouragement to build an additional 13,000 hospital beds across North Carolina — unless providers think they need them based on the demand of their patients.</p> <p class="p1">No researcher, myself included, knows exactly how many medical services a state with nearly 10 million people needs.</p> <p class="p1">But neither do state administrators nor the proponents of CON laws. This is especially true now, as the provision of health care has become an increasingly innovative and rapidly evolving space.</p> <p class="p1">As Federal Trade Commissioner Joshua Wright recently noted in his call for a repeal of CON laws, competition in health care means more innovation, higher quality, and lower prices for those seeking care.</p> <p class="p1">Controlling costs and increasing charity care are certainly laudable goals, but they can be achieved through less intrusive and less costly measures.</p> <p class="p1">More than 30 years ago, the federal government realized that restraining competition is a poor way to improve Americans’ health care. Since then, 14 states have also walked away from CON programs.</p> <p class="p1">Next year, New Hampshire will join them when its repeal of CON takes effect in June 2016.</p> <p class="p1">This situation presents a particularly rich opportunity for North Carolina to reverse course on nearly 40 years of regulatory blunder and finally provide more options for those seeking care throughout the state.</p> http://mercatus.org/expert_commentary/certificate-need-laws-no-longer-needed Mon, 31 Aug 2015 10:25:39 -0400 What Can Be Done to Fix N.J., Pa. Budget Woes? http://mercatus.org/expert_commentary/what-can-be-done-fix-nj-pa-budget-woes-0 <h5> Expert Commentary </h5> <p class="p1">It's no secret that New Jersey is in a dangerous fiscal position, due largely to rising pension and health-benefit costs in deeply underfunded plans.</p> <p class="p1">In a new study based on states' audited financial reports, I rank New Jersey 49th out of 50 states for its fiscal health. Recently, I testified before the state Senate in Harrisburg on Pennsylvania's ranking, which is on a similar path at 41st. Fortunately, it may have time to change course by executing some of the same reforms that would help pull New Jersey out of its tailspin.</p> <p class="p4">Most of New Jersey's spending is determined by legislative, constitutional, and federal mandates, leading to a Gordian knot of a budget. Gov. Christie presented a $34 billion balanced budget in June only after reducing the annual pension contribution from $3.1 billion to $1.3 billion and vetoing some streams of education aid. The Legislature proposed to fill the gap with increases in the corporate tax and income tax. Will this be enough, or is New Jersey limping into another fiscal year?</p> <p class="p1">Ask the New Jersey Office of Legislative Services (OLS). It has sobering news to deliver:</p> <p class="p1">If the state fully accounted for what is needed this year to pay for pensions, school funding, transportation, and property tax rebates (that is, all of its statutory obligations), its structural deficit would be $10.2 billion. In other words, if we count up the cost for fully funding this year's bills, New Jersey's deficit is nearly one-third the size of its current budget.</p> <p class="p1">OLS notes that this is an "academic estimate," and one with which "reasonable people can disagree," but it brings home an important lesson: Balancing budgets by downplaying debts and deferring payments isn't the same thing as having healthy finances.</p> <p class="p1">New Jersey is short on cash, struggling to balance its yearly budget, and relying on pay-as-you-go financing to cover mounting Other Post Employment Benefits (OPEB). Public-sector pensions are large and underfunded.</p> <p class="p1">Pennsylvania is under similar short-term strain. At a budgetary impasse, the commonwealth faces a $2.3 billion budget deficit in 2015. Like New Jersey, Pennsylvania's fiscal troubles are largely driven by pension and health-benefit costs for public-sector workers. And with cash reserves insufficient to cover short-term expenses in the event of a recession, Pennsylvania's credit rating has also tumbled.</p> <p class="p1">Gov. Wolf's budget task force also points to the tenuous place the state finds itself with only $231,000 in the rainy-day fund. The legislature proposes structural pension reform and the governor prefers to keep the existing system open and cover the gap with pension obligation bonds. The former will stop pensions from growing, while the latter runs the risk of adding debt to the pension tab.</p> <p class="p1">Both states have shown a tendency to promise everything today while letting the next generation worry about the bill. That explains how we got here - but what can be done to fix it?</p> <p class="p1">There are few basic principles Pennsylvania and New Jersey must follow going forward:</p> <p class="p1">First, don't overlook rainy-day funds. Generally states save too little cash to cushion against recessions. Contributions to the fund should be a priority and should match the revenue loss in an average recession.</p> <p class="p1">Second, both states need to reset their retirement systems. This means moving new workers to defined-contribution systems. And it means discipline in funding existing defined-benefit plans, a promise that the state has made to its workers. Skipping on contributions may buy relief today, but it guarantees greater budgetary pressure tomorrow.</p> <p class="p1">Third, stop using short-term solutions to fix long-term problems. Avoid the temptation to address debt with more debt, the policy equivalent of using one credit card to pay for another. Pension obligation bonds have been used by many states to cover a contribution shortfall, with mixed results. Should pension investments underperform (as they did after 2007), the system has simply added to its pension bills.</p> <p class="p1">In both Pennsylvania and New Jersey, structural deficits can be solved only with structural reforms. Unstoppable spending that overwhelms revenue growth can usually be traced back to promises that were made, or risks that were taken, without fully accounting for the costs. It's going to take a new way of thinking to solve years' worth of problems.</p> http://mercatus.org/expert_commentary/what-can-be-done-fix-nj-pa-budget-woes-0 Mon, 31 Aug 2015 10:17:14 -0400 New York City Supporter and Friend Lunch http://mercatus.org/events/new-york-city-supporter-and-friend-lunch-13 <h5> Events </h5> <p>Will innovators be forced to constantly seek the blessing of public officials before they develop and deploy new devices and service? Successful innovation, which is essential to better health, safety and security, requires freedom to experiment and develop. But there is an array of government rules and processes that increasingly prohibit “permissionless” innovation.</p> <p>Mercatus Center Senior Research Fellow Adam Thierer argues that when policymakers work from a precautionary disposition, the result will be fewer services, lower quality goods, higher prices, diminished economic growth and a decline in overall standard of living. By contrast, “permissionless” innovation has the power to continue to fuel the next great industrial revolution. Please join us for a lunch discussion centered on this important topic.</p> <p>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.</p><p>To RSVP for this event, please contact Julie Burden at <a href="mailto:jburden@mercatus.gmu.edu">jburden@mercatus.gmu.edu</a> or (703) 344-3219.</p> http://mercatus.org/events/new-york-city-supporter-and-friend-lunch-13 Thu, 27 Aug 2015 11:48:17 -0400 Walmart, Katrina, and Disaster Response http://mercatus.org/video/walmart-katrina-and-disaster-response <h5> Video </h5> <iframe width="585" height="329" src="https://www.youtube.com/embed/_djmIfcLTBQ?list=PLS8aEHTqDvpJD8uxczhGvY4yZq2Osab-i" frameborder="0" allowfullscreen></iframe> <p>Steven Horwitz explains why private sector firms like Walmart outperformed FEMA in the aftermath of Hurricane Katrina.</p><p>Learn more at:&nbsp;<a href="http://mercatus.org/katrina">mercatus.org/katrina</a></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;585&quot; height=&quot;329&quot; src=&quot;https://www.youtube.com/embed/_djmIfcLTBQ?list=PLS8aEHTqDvpJD8uxczhGvY4yZq2Osab-i&quot; frameborder=&quot;0&quot; allowfullscreen&gt;&lt;/iframe&gt; </div> </div> </div> http://mercatus.org/video/walmart-katrina-and-disaster-response Fri, 28 Aug 2015 13:11:24 -0400 Learning from Katrina: How Communities Can Flourish in the Wake of Disaster http://mercatus.org/video/learning-katrina-how-communities-can-flourish-wake-disaster <h5> Video </h5> <iframe width="585" height="329" src="https://www.youtube.com/embed/v7a7MC0JGfM?list=PLS8aEHTqDvpJD8uxczhGvY4yZq2Osab-i" frameborder="0" allowfullscreen></iframe> <p>August 29th marks the 10th anniversary of Hurricane Katrina making landfall as a Category 3 hurricane. The failure of the storm surge protections from Florida to Texas, and especially in New Orleans, is considered one of the worst engineering failures by the Army Corps of Engineers in its history. The policy responses from local, state, and national public officials are also considered to have been woefully inadequate. The entire episode represents a classic case study in how government failure can compound the fury of nature through the folly of man. Peter Boettke discusses the lessons we can learn.</p><p>Learn more at: <a href="http://mercatus.org/katrina">mercatus.org/katrina</a></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;585&quot; height=&quot;329&quot; src=&quot;https://www.youtube.com/embed/v7a7MC0JGfM?list=PLS8aEHTqDvpJD8uxczhGvY4yZq2Osab-i&quot; frameborder=&quot;0&quot; allowfullscreen&gt;&lt;/iframe&gt; </div> </div> </div> http://mercatus.org/video/learning-katrina-how-communities-can-flourish-wake-disaster Fri, 28 Aug 2015 13:10:24 -0400 Basic Economics of the Export-Import Bank of the United States http://mercatus.org/publication/basic-economics-export-import-bank-united-states <h5> Publication </h5> <p class="p1">Authorization for the Export-Import Bank of the United States (Ex-Im Bank) recently lapsed for the first time in more than 80 years, though the bank may be reestablished at any time. The debate continues over whether the United States government should reauthorize funding for the Ex-Im Bank. We hear that “without an Ex-Im Bank .&nbsp;.&nbsp;. there’d be little incentive for American manufacturers to actually make their goods in the United States” and that the Ex-Im Bank is needed to balance the competitive disadvantages created by similar banks of foreign nations. Indeed, the Ex-Im Bank itself holds this view:</p> <blockquote><p class="p2">All major exporting countries, including America’s fiercest competitors in the global marketplace, have their own export credit agencies (ECAs), which support their respective countries’ exports. In fact, nearly 60 countries operate an ECA. Many of the world’s ECAs provide larger levels of financing than Ex-Im Bank, without being subject to the rules and restrictions that Ex-Im Bank follows. For example, China financed more than $100 billion of Chinese exports in 2013, compared to Ex-Im Bank’s support of $37.4 billion worth of US exports last year. Likewise, it is estimated that South Korea, which has an economy that is less than one-tenth the size of the US economy, also finances more than $100 billion per year to support exports from South Korea. In contrast, Ex-Im Bank steps in, only when needed, to help level the playing field against aggressive financing by foreign governments so US companies and workers can compete on the basis of the price and quality of their goods and services.</p></blockquote> <p class="p3">Against that view, we offer a simple, open-economy trade model to demonstrate that there is, in fact, a deadweight loss in the domestic economy when a government offers an export subsidy. In addition to a loss in economic efficiency, the Ex-Im Bank amounts to a special privilege for the connected few—big subsidies to powerful companies. For example, nearly $8 billion of the $12 billion in Ex-Im Bank loan guarantees in 2013 went to support Boeing exports. In fact, of that $12 billion, 97 percent supported the sales of only 10 firms. While Ex-Im Bank programs may indeed benefit select domestic firms, we will demonstrate that the bank’s overall impact on the US economy is negative.</p> <p class="p1"><b>The Ex-Im Bank’s Tools</b></p> <p class="p1">The Ex-Im Bank’s main tools are loan guarantees, working capital guarantees, direct loans, and export-credit insurance. Table 1 reports the 2014 approved totals for each program.</p> <p class="p3">Loan guarantees are the largest portion of the Ex-Im Bank’s financing. These guarantees allow foreign and domestic lenders to finance foreign buyers of US exports at a reduced risk. The bank charges a foreign buyer of US exports a fee based on the loan’s length, size, and risk. The bank then guarantees lenders that it will cover up to 85 percent of the contract value of the loan’s outstanding principal and interest if the foreign buyer of US exports defaults. The bank approved $1.8 billion in loan guarantees in 2014.</p> <p class="p3">The working capital guarantee program guarantees short-term loans made to qualified US exporters to fund everyday operations of a company. These guarantees are made on a one-time basis or as a revolving line of credit. The Ex-Im Bank guarantees to pay up to 90 percent of the outstanding balance of the working capital loan to the lender if the borrower defaults. The bank approved $659 million in working capital guarantees in 2014.</p> <p class="p3">The direct loan program provides loans to foreign buyers of US exports for up to 80 percent of the US contract value. The Ex-Im Bank is responsible for the total value of the loan’s outstanding principal and interest if the foreign borrower defaults. The bank approved $998 million in direct loans in 2014.</p> <p class="p3">Last, the Ex-Im Bank provides loss insurance to US banks and exporters that extend credit directly to foreign buyers. The exporter pays a fee to the Ex-Im Bank that serves as an insurance premium. The Ex-Im Bank approved $1 billion in export-credit insurance in 2014.</p> <p class="p1"><img src="http://mercatus.org/sites/default/files/Beekman-Ex-Im-Bank-Economics-table-1.png" width="585" height="196" /></p> <p class="p3">In 2014, total US exports were $2.26 trillion. In the same year, the estimated export value of Ex-Im Bank activity was $4.48 billion. Ex-Im Bank activity, therefore, amounted to 0.198 percent of total US exports in 2014.</p> <p class="p1"><b>Simple International Trade Models</b></p> <p class="p1">We model the Ex-Im Bank’s actions as a subsidy to US exporting firms. The Ex-Im Bank’s programs provide financial assistance that ordinarily would be unattainable, would have less favorable terms, or at minimum would be more expensive in the open market. As long as the Ex-Im Bank intervenes in markets, crowding out private market participants, we cannot know the true market terms and rates.</p> <p class="p3">To better understand the economics behind the Ex-Im Bank, let’s construct a simplified story for one market, the market for tires. Suppose tires are made in many countries around the globe and the global market for tires is large. We will use a competitive open-economy model to show how a country’s welfare changes when governments subsidize international trade. Assume that our economy—let’s call it Henrystonia—is small relative to the world market and that its domestic decisions have no effect on the international marketplace.</p> <p class="p3">The pleasant nation of Henrystonia has all that a free community would desire, including the right to import or export goods and services. Citizens of Henrystonia are price takers in the world marketplace; domestic consumers and producers are so few in number relative to the world market that they can’t influence the price. Thus, no consumer would pay more than the world price and no producer would accept less than the world price. Consumers and producers base their decisions to exchange in the world marketplace on the world price.</p> <p class="p1"><b>A Small-Economy Model</b></p> <p class="p1">Figure 1 depicts the market for tires in Henrystonia. The curve labeled “domestic demand” represents domestic consumers and the curve labeled “domestic supply” represents domestic producers.</p> <p class="p3">Henrystonia, however, is an open economy that participates in international trade. Domestic producers sell tires at the world price, which is assumed to be $150 per tire. We’ve illustrated this price in figure 1 by inserting the horizontal line labeled “world price” at $150. The world price is the equilibrium price in the international market for tires, made up of an international supply curve and an international demand curve.</p> <p class="p1"><img height="407" width="585" src="http://mercatus.org/sites/default/files/Beekman-Ex-Im-Bank-Economics-figure-1.png" /></p> <p class="p3">Table 2 summarizes Henrystonia’s tire market when the world price is $150 per tire. We make three observations: (1) The world price is higher than the domestic price, so local producers are interested in exchanging 120,000 tires at $150 per tire. (2) Domestic consumers are only interested in buying 80,000 tires at the higher world price. (3) Because of international trade, domestic producers are able to export 40,000 tires outside Henrystonia.</p> <p class="p1"><img src="http://mercatus.org/sites/default/files/Beekman-Ex-Im-Bank-Economics-table-2.png" width="585" height="238" /></p><p class="p1"><b></b><span style="font-size: 12px;">Table 2 reports how economic surplus in the domestic tire market is distributed in Henrystonia, as shown in figure 1. Domestic consumers have a consumer surplus equal to the area A. The producer surplus equals the area B&nbsp;+&nbsp;C&nbsp;+&nbsp;D&nbsp;+&nbsp;E&nbsp;+&nbsp;F. The total economic surplus, which measures how much better off consumers and producers are because they have exchanged tires, is equal to A&nbsp;+&nbsp;B&nbsp;+&nbsp;C&nbsp;+&nbsp;D&nbsp;+&nbsp;E&nbsp;+&nbsp;F.</span></p> <p class="p3">Now, we want to measure this free-market outcome against two alternative cases: (1) all countries except Henrystonia offer their producers a subsidy, and (2) Henrystonia’s government decides to retaliate by offering its producers a subsidy to level the playing field.</p> <p class="p3">Let’s assume that all countries except Henrystonia offer their producers a subsidy for each tire they sell in order to compete with Henrystonia’s producers. The net impact of the foreign subsidy causes the world price to decrease to $125 per tire. We’ve demonstrated this price in figure 1 with the horizontal line labeled “world price with foreign subsidy.”</p> <p class="p3">Table 2 summarizes Henrystonia’s tire market with a world price of $125 per tire. Local producers are interested in exchanging 100,000 tires at $125 per tire. Domestic consumers are interested in buying 100,000 tires at the world price. Because of the lower subsidized world price, domestic producers no longer export tires outside Henrystonia.</p> <p class="p3">Because of the lower world price, domestic consumers have a higher consumer surplus equal to the area A&nbsp;+&nbsp;B&nbsp;+&nbsp;D shown in figure 1. The domestic producer surplus decreases to the area C&nbsp;+&nbsp;E, and the total economic surplus <i>decreases</i> to equal A&nbsp;+&nbsp;B&nbsp;+&nbsp;C&nbsp;+&nbsp;D&nbsp;+&nbsp;E. The net impact of foreign governments’ subsidizing their exports harms Henrystonia—it causes Henrystonia’s total economic surplus to decrease by an amount equal to area F.</p> <p class="p3">The next question to investigate is, Does it make sense for Henrystonia to retaliate—to level the so-called “international playing field”—by subsidizing the production costs of local Henrystonia producers?</p> <p class="p3">Suppose Henrystonia offers a $25 subsidy for each tire produced in Henrystonia. Table 3 summarizes the results. Domestic consumers in Henrystonia do not receive a subsidy and therefore continue to pay $125 per tire. At this price, domestic consumers buy 100,000 tires. Each domestic producer receives $125 per tire from consumers (domestic or foreign) and $25 per tire from the government of Henrystonia. So at the combined price of $150 per tire, local producers are willing to produce 120,000 tires. Because of international trade, domestic producers are now able to export 20,000 tires outside of Henrystonia.</p> <p class="p1"><img height="393" width="585" src="http://mercatus.org/sites/default/files/Beekman-Ex-Im-Bank-Economics-table-3.png" /></p><p class="p1"><b></b><span style="font-size: 12px;">Because the price has not changed for consumers, domestic consumer surplus has not changed—it is equal to the area A&nbsp;+&nbsp;B&nbsp;+&nbsp;D in figure 1. The producer surplus now increases to the area B&nbsp;+&nbsp;C&nbsp;+&nbsp;D&nbsp;+&nbsp;E&nbsp;+&nbsp;F. The net gain of B&nbsp;+&nbsp;D&nbsp;+&nbsp;F is a rent. Producers are willing to exhaust real resources—on political activity and inefficient production decisions—to obtain and maintain this rent. The subsidy’s total cost equals the area B&nbsp;+&nbsp;D&nbsp;+&nbsp;F&nbsp;+&nbsp;G ($25 for each of the 120,000 tires produced in Henrystonia). The total economic surplus is the sum of the consumer surplus and producer surplus minus the subsidy, or A&nbsp;+&nbsp;B&nbsp;+&nbsp;C&nbsp;+&nbsp;D&nbsp;+&nbsp;E&nbsp;−&nbsp;G.</span></p> <p class="p3">The bottom line is that if Henrystonia retaliates by offering its own subsidy to “level the playing field,” Henrystonia is actually made <i>worse off</i> by the value of area G. When a foreign government decides to subsidize the production of its local producers, Henrystonia is better off—in terms of efficiency—by not retaliating. Specifically, if Henrystonia retaliates consumers are indifferent, producers win B&nbsp;+&nbsp;D&nbsp;+&nbsp;F, and taxpayers lose B&nbsp;+&nbsp;D&nbsp;+&nbsp;F&nbsp;+&nbsp;G. Retaliating is inefficient because taxpayers lose more than producers win by area G.</p> <p class="p1"><b>A Large-Economy Model</b></p> <p class="p1">Our small-economy model captures important features of many markets in which the Ex-Im Bank operates. However, a large-economy model is more appropriate for some of the Ex-Im Bank’s most conspicuous operations, such as wide-bodied aircraft financing. The key difference between a large-economy and a small-economy model is that changes to the demand and supply in a large economy affect the world price. Small-economy demand and supply shocks have no effect on the world price.</p> <p class="p3">Consider Boeing, a prominent player in the world market for wide-bodied aircraft. If the Ex-Im Bank offers a subsidy to finance Boeing exports, Boeing will increase the quantity of wide-bodied exports. Because Boeing has such a large share of the world market, when it increases its exports, the world price for wide-bodied aircraft declines.</p> <p class="p3">Figure 2 offers a stylized demonstration of the impact of a $3 million per unit subsidy on wide-bodied aircraft exports out of Henrystonia. The export subsidy causes the world price to decrease from $163 million to $162 million per unit. Domestic producers now receive $165 million per unit. This price equals the new world price plus the $3 million per unit export subsidy. Because producers in Henrystonia will receive $165 million for each exported unit, they require domestic consumers (e.g., Delta) to also pay $165 million per unit. Thus, the net impact of the export subsidy is to increase the price of wide-bodied aircraft in the domestic economy from $163 million to $165 million. At $165 million per unit, domestic producers increase their quantity sold to 129,000 units, domestic consumers decrease their quantity purchased to 68,000 units, and exports increase to 61,000.</p> <p class="p1"><img src="http://mercatus.org/sites/default/files/Beekman-Ex-Im-Bank-Economics-figure-2.png" width="585" height="383" /></p> <p class="p3">Table 4 summarizes Henrystonia’s wide-bodied aircraft market with and without the $3 million subsidy. Because of the higher domestic price, domestic consumers have a lower consumer surplus equal to the area A. Domestic producer surplus increases to area B&nbsp;+&nbsp;C&nbsp;+&nbsp;D&nbsp;+&nbsp;F&nbsp;+&nbsp;G&nbsp;+&nbsp;H&nbsp;+&nbsp;I&nbsp;+&nbsp;L&nbsp;+&nbsp;M&nbsp;+&nbsp;N&nbsp;+&nbsp;O. The cost of the export subsidy equals the area C&nbsp;+&nbsp;D&nbsp;+&nbsp;E&nbsp;+&nbsp;G&nbsp;+&nbsp;H&nbsp;+&nbsp;I&nbsp;+&nbsp;J&nbsp;+&nbsp;K, which equals $3 million for each of the 61,000 exported wide-bodied aircraft. Total economic surplus <i>decreases</i> to equal A&nbsp;+&nbsp;B&nbsp;+&nbsp;F&nbsp;+&nbsp;L&nbsp;+&nbsp;M&nbsp;+&nbsp;N&nbsp;+&nbsp;O&nbsp;−&nbsp;(E&nbsp;+&nbsp;J&nbsp;+&nbsp;K). The export subsidy generates a deadweight loss equal to the area C&nbsp;+&nbsp;E&nbsp;+&nbsp;G&nbsp;+&nbsp;H&nbsp;+&nbsp;I&nbsp;+&nbsp;J&nbsp;+&nbsp;K. The diminution of economic efficiency observed in the large-economy model is greater than what would be observed a small-economy model, <i>ceteris paribus</i>.</p> <p class="p1"><img src="http://mercatus.org/sites/default/files/Beekman-Ex-Im-Bank-Economics-table-4.png" width="585" height="307" /></p> <p class="p1"><b>Unfair Competition</b></p> <p class="p1">Different countries have different regulations, subsidies, and rules of the game. These differences are perceived to make international trade unfair. Thus, particular constituents often ask their governments to intervene with programs such as the Ex-Im Bank’s to make international trade “fairer.”</p> <p class="p1">For example, as we have demonstrated, national governments often intervene and give production subsidies to their domestic businesses. Most economists would regard those subsidies as a bad policy for the foreign government (in terms of the foreign country’s own economic efficiency). Foreign subsidies would also put domestic producers at a disadvantage, but domestic consumers would benefit because the price they pay for goods and services would decrease, compliments of the foreign government. However, if the domestic government does intervene and retaliates to “level the playing field,” there will be a deadweight loss for the overall domestic economy. The gains from a retaliatory subsidy are less than the costs of that subsidy.</p> <p class="p1"><b>Discussion</b></p> <p class="p1">Different groups view the proposal to fund the Ex-Im Bank differently. If we use economic efficiency to judge how the bank helps or harms various groups, we learn from the small-economy example presented earlier that domestic producers benefit from the subsidy, domestic consumers are neutral, and Ex-Im Bank interventions lead to a net reduction of total economic surplus for the domestic economy. Specifically, a broad base of domestic taxpayers (who are both consumers and producers) bears the brunt of the loss in economic surplus (area B&nbsp;+&nbsp;D&nbsp;+&nbsp;F&nbsp;+&nbsp;G), but the subset of US producers that receive Ex-Im Bank assistance are better off to some degree (area B&nbsp;+&nbsp;D&nbsp;+&nbsp;F). Beyond this wealth transfer from the many to the few is a net loss in economic surplus for the US economy (area G). In the large-economy example, the export subsidy creates a deadweight loss (C&nbsp;+&nbsp;E&nbsp;+&nbsp;G&nbsp;+&nbsp;H&nbsp;+&nbsp;I&nbsp;+&nbsp;J&nbsp;+&nbsp;K), domestic producers benefit from the subsidy (B&nbsp;+&nbsp;C&nbsp;+&nbsp;D), and domestic consumers are made worse off (B&nbsp;+&nbsp;C).</p> <p class="p3">A basic question remains: Why do we have an Ex-Im Bank? Many people maintain that government should not intervene in international trade because it negatively affects overall economic efficiency. Thus, there should be no Ex-Im Bank, and its charter should not be reauthorized.</p> <p class="p3">Others argue that government must intervene and the bank’s current authorization should be renewed. There are two common arguments in support of Ex-Im Bank intervention: (1) protection of domestic jobs and (2) unavailability of traditional financing. In the next sections we briefly explore each argument for intervention.</p> <p class="p3">Regardless of the Ex-Im Bank’s effect on economic efficiency, the ultimate decision about whether to intervene is political. Economic analysis, however, can help decision makers better understand the benefits and costs of their political decisions.</p> <p class="p1"><b>Protection of Domestic Jobs</b></p> <p class="p1">Many producer groups are proponents of the Ex-Im Bank because it protects some domestic jobs. Many of these protected jobs may indeed be eliminated without the bank’s subsidies because these goods and services would be produced outside the country at a lower cost. However, the concept of comparative advantage reminds us that even if a country is better at producing everything (that is, it has an absolute advantage), each country is still better off trading. That is, free and open trade creates jobs at the same time that it destroys jobs, and it leads to better and lower-priced goods. Upon removal of a special privilege to one business or industry, other jobs may be created within other, more efficient businesses or industries. The reallocation of resources to more efficient uses can be a painful process, especially in the short run. But the Ex-Im Bank’s subsidies lower total economic efficiency because they retain workers in less-efficient industries—a so-called allocative inefficiency that adds to the deadweight loss demonstrated previously. The overall level of domestic job creation is diminished, not enhanced, as a result of Ex-Im Bank interventions.</p> <p class="p1"><b>Unavailability of Traditional Financing</b></p> <p class="p1">Ex-Im Bank supporters argue that private banks do not offer the services provided by the Ex-Im Bank. Further, proponents point out that the institution returned $1.057 billion to the US Treasury in FY 2013 and approximately $2 billion over the past five years. Proponents say that these returns demonstrate that the bank’s services are needed and that the bank is well managed.</p> <p class="p3">We must ask, though, why private financial institutions cannot provide the loans and loan guarantees rather than a government agency. In our economic analysis, we characterize the financial intervention of the Ex-Im Bank as a government subsidy of the domestic producers. The implication is that those financial products would otherwise not be available to the domestic exporters, or that if they were available, they would be priced higher. In fact, a vast majority of export transactions—99.802 percent in 2014—are financed privately, with the Ex-Im Bank stepping in to support marginal transactions that private commercial banks do not want to fund or do not want to fund on the terms that the Ex-Im Bank is willing to offer.</p> <p class="p3">It appears that the US government is bearing financial risk at below-market prices to promote additional exports. As long as the Ex-Im Bank is able to price these transactions below market rates, the private market will not be competitive in those marginal deals. The Ex-Im Bank is not solving a failure of private markets, but is instead crowding out properly priced and structured private-market transactions. If the bank were to be eliminated, we should not assume that the marginal export transactions would be unable to secure funding. The private market would likely step in for most of those transactions, though perhaps at a higher price or with additional requirements. The transactions that did not receive private funding would be ones that lenders deemed too risky at that price. Economizing on scarce capital, steering it toward the best projects and away from the worst, is a key feature of a well-functioning financial market; it is not a flaw.</p> <p class="p3">Supporters often point to the Ex-Im Bank’s successes in managing its portfolio of transactions. For example, the Ex-Im Bank’s active default rate was 0.175 percent—less than one-fifth of 1 percent—as of September 30, 2014. If the Ex-Im Bank can manage its portfolio of transactions, why couldn’t a private firm do the same, and price the risk competitively at prevailing market prices?</p> <p class="p1"><b>Conclusion</b></p> <p class="p1">The Ex-Im Bank provides financing for US exporters and their foreign buyers. There is an open debate over whether the United States should reauthorize funds to support the Ex-Im Bank. We’ve presented an economic efficiency analysis of Ex-Im Bank activities in a small and large open-economy model. We find that a domestic economy should not offer an export subsidy, whether a foreign government offers its own export subsidy or not. Finally, regardless of the Ex-Im Bank’s impact on economic efficiency, the ultimate decision about whether to intervene is political. Economic analysis can help political decision makers better understand the benefits and costs of their decisions.</p> http://mercatus.org/publication/basic-economics-export-import-bank-united-states Thu, 27 Aug 2015 10:16:52 -0400 JW Verret Analyzes the Chinese Financial Crisis for MSNBC http://mercatus.org/video/jw-verret-analyzes-chinese-financial-crisis-msnbc <h5> Video </h5> <iframe src="https://player.vimeo.com/video/137416285" width="500" height="375" frameborder="0" webkitallowfullscreen mozallowfullscreen allowfullscreen></iframe> <p class="p1"><span class="s1">The Chinese financial market correction has sent ripples through the global economy. JW Verret breaks down the situation on MSNBC.</span></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 src=&quot;https://player.vimeo.com/video/137416285&quot; width=&quot;500&quot; height=&quot;375&quot; frameborder=&quot;0&quot; webkitallowfullscreen mozallowfullscreen allowfullscreen&gt;&lt;/iframe&gt; </div> </div> </div> http://mercatus.org/video/jw-verret-analyzes-chinese-financial-crisis-msnbc Thu, 27 Aug 2015 14:36:42 -0400 Sunset Legislation in the States: Balancing the Legislature and the Executive http://mercatus.org/publication/sunset-legislation-states-balancing-legislature-and-executive <h5> Publication </h5> <p class="p1">Sunset review provisions are clauses embedded in legislation, usually at the state level, that allow a piece of legislation or a regulatory board to expire on a certain date unless the legislature takes action to renew the legislation or board. Sunset reviews are often advertised as good government policies, forcing governments to review and reconsider whether agencies and particular laws are still necessary.</p> <p class="p1">A new study for the Mercatus Center at George Mason University shows that the sunset review process can also be seen as an effective bargaining tool for the legislature to minimize the executive branch’s influence on a wide variety of state boards and agencies. It is a way for the legislature to make its veto power credible and to have influence over an agency’s agenda, which is also influenced by special interests and the executive branch.</p> <p class="p1">To read the study in its entirety and learn more about its authors, economists Brian Baugus and Feler Bose, see “<a href="http://mercatus.org/sites/default/files/Baugus-Sunset-Legislation.pdf">Sunset Legislation in the States: Balancing the Legislature and the Executive</a>.”</p> <p class="p3"><b>BACKGROUND ON SUNSET PROVISIONS</b></p> <p class="p1">Sunset reviews come in many varieties and may be used narrowly or broadly, depending on the state. A sunset provision typically includes a requirement that specific legislation or a regulatory board undergo a review, usually conducted by legislative staff or state auditors.</p> <p class="p1">The length of time between enactment/renewal and the next sunset date varies from state to state but typically runs between four and twelve years under current state laws. The process normally involves data collection, interviews with key agency staff and interested parties, financial auditing, and records review. The process results in one of four outcomes: renewal, renewal with changes, consolidation with other entities, or termination of the statute or agency.</p> <p class="p1">Sunset reviews can be broken down into four categories:</p> <ul class="ul1"> <li class="li5"><i>Comprehensive.</i> States require all statutory agencies to undergo sunset review on a preset schedule.</li> <li class="li5"><i>Regulatory.</i> States require licensing and regulatory boards to undergo sunset review.</li> <li class="li5"><i>Selective.</i> States require only selected agencies to undergo a sunset review.</li> <li class="li5"><i>Discretionary.</i> The legislature may choose which agencies and statutes undergo a sunset review.</li></ul> <p class="p3"><b>SUNSET REVIEWS HELP LEGISLATURES EXERCISE CONTROL OVER GOVERNMENT</b></p> <p class="p1">In several states examined in the study, a majority of the statutes and agencies subject to a sunset review over the last few years were allowed to continue, although many were also modified in some way as part of the renewal process.</p> <p class="p1">The study considers several theories about why state legislatures use the sunset review process and what they hope to achieve by it. Ultimately, the process is best understood as an effective bargaining method that allows a legislature to assert itself and increases its ability to influence agencies’ agendas.</p> <ul class="ul1"> <li class="li5"><i>Legislative disadvantages.</i> Legislatures tend to be part-time, which contributes to their distinct information and power disadvantages relative to the executive branch. Moreover, special interest groups with access to the executive branch can alter the role and goals of specific agencies, diverting them from their original missions as intended by the legislature.</li> <li class="li5"><i>Legislative influence.</i> While the desire to implement good government practices may drive sunset legislation to some extent, the legislature has a more self-serving reason for using sunset reviews: increasing its own influence over government. Sunset reviews allow the legislature to guarantee that some of its preferred outcomes are achieved by exercising a credible veto over executive branch execution of the laws the legislature wrote.</li></ul> <p class="p3"><b>CONCLUSION</b></p> <p class="p1">Sunset reviews provide an opportunity for part-time legislatures to have more control over the regulatory functions of the state and guarantee that regulations and enforcement agencies are not unduly influenced by the executive branch or special interests. Sunset reviews also provide the people of the state—through the legislature—with a voice in policies that have been unduly influenced by special interests and the executive branch.</p> http://mercatus.org/publication/sunset-legislation-states-balancing-legislature-and-executive Thu, 27 Aug 2015 12:49:02 -0400 Ex-Im’s Working Capital Programs Benefit Big Businesses and Banks http://mercatus.org/publication/ex-im-s-working-capital-programs-benefit-big-businesses-and-banks <h5> Publication </h5> <p class="p1">Defenders of the US Export-Import Bank (Ex-Im Bank) cite its working capital programs as evidence that the agency plays a critical role in supporting small businesses. As one of four main components of Ex-Im’s export subsidies, the working capital programs represent a relatively small component of the agency’s overall portfolio. The agency as a whole mainly benefits large, politically connected firms, as I have <a href="http://mercatus.org/publication/export-import-still-boeing-s-bank">previously</a> <a href="http://mercatus.org/publication/ex-im-bank-little-value-small-minority-owned-and-women-owned-businesses">demonstrated</a>.&nbsp;</p> <p class="p1">Even though small businesses are the main beneficiaries of the Ex-Im Bank’s working capital programs, big businesses still remain big recipients indirectly and directly. The working capital program transfers the risk of lending from the lenders (often big banks or sometimes Boeing itself) to taxpayers.</p> <p class="p1">The first chart shows the annual authorized amount of working capital loans and guarantees for small business and big business. Also included are figures for the Supply Chain Finance Guarantee Program (SCF), which the Ex-Im Bank counts as benefitting small businesses even though the ultimate beneficiaries are large exporters such as Boeing and Caterpillar.</p> <p class="p1"><a href="http://mercatus.org/sites/default/files/de-Rugy-Ex-Im-Working-Capital-chart-1.png"><img src="http://mercatus.org/sites/default/files/de-Rugy-Ex-Im-Working-Capital-chart-1.png" width="585" height="424" /></a></p> <p class="p1">The bar chart shows breakdowns of the Ex-Im Bank’s annual working capital loans and guarantees from fiscal year (FY) 2007 to FY 2014. The amount authorized between FY 2007 and FY 2014 fluctuated from $1.26 billion in 2007 to $2.39 billion. The funding peaked in 2012 with $3.25 billion authorized that year. The data also show that every single year, large firms benefited from the working capital program directly, and they also benefited indirectly through the SCF program to the tune of $1.28 billion of working capital over the period.</p> <p class="p1">The doughnut chart shows the proportion of total FY 2007 to FY 2014 working capital loans and guarantees. It shows that over the FY 2007 to FY 2014 period, 36 percent of the working capital programs benefitted large firms—29 percent directly and 7 percent through the SCF program.</p> <p class="p1">The second chart shows the annual total amount of working capital loans and working capital guarantees that the Ex-Im Bank authorized from FY 2007 to FY 2014.</p> <p class="p1"><a href="http://mercatus.org/sites/default/files/de-Rugy-Ex-Im-Working-Capital-chart-2.png"><img height="425" width="585" src="http://mercatus.org/sites/default/files/de-Rugy-Ex-Im-Working-Capital-chart-2.png" /></a></p> <p class="p1">The vast majority are guarantees in which the agency reimburses lenders up to 90 percent of the outstanding loan amount in the event of nonpayment. This shifts the risk from lenders—typically massive global financial institutions like PNC Bank, JPMorgan Chase, and Wells Fargo—to the taxpayers.</p> <p class="p1">The third chart shows the top ten beneficiaries of the Ex-Im Bank’s working capital programs from FY 2007 to FY 2014.&nbsp;</p> <p class="p1"><a href="http://mercatus.org/sites/default/files/de-Rugy-Ex-Im-Working-Capital-chart-3.png"><img src="http://mercatus.org/sites/default/files/de-Rugy-Ex-Im-Working-Capital-chart-3.png" width="585" height="425" /></a></p> <p class="p1">The clear winners are large corporations like Ford, Caterpillar, and Boeing. The same names of large politically connected corporations that have shown up in our <a href="http://mercatus.org/sites/default/files/C3-Top-ten-2013-2007-large.jpg">top ten Ex-Im beneficiaries of 2013 and 2007</a> appear in this context as well.</p> <p class="p1">The good news is that this textbook example of cronyism is presently shuttered because Congress failed to reauthorize the Ex-Im Bank by July 1. The bad news is that the big corporate interests who have enjoyed its largesse over the years are committed to bringing the agency back to life. Despite the rhetoric of benefits to small businesses, policymakers would do well to remember the truth: the Ex-Im Bank’s benefits have flown primarily to large politically connected businesses.</p> http://mercatus.org/publication/ex-im-s-working-capital-programs-benefit-big-businesses-and-banks Wed, 26 Aug 2015 12:47:38 -0400 The Food and Drug Administration and the Federal Food, Drug, and Cosmetic Act http://mercatus.org/publication/food-and-drug-administration-and-federal-food-drug-and-cosmetic-act <h5> Publication </h5> <p class="p1">It has become such a cliché that the civics class rendition of how a bill becomes law bears only superficial resemblance to real legislative practice that even <a href="https://www.youtube.com/watch?v=JUDSeb2zHQ0">Saturday Night Live</a> is in on the joke (after you’ve watched that clip, see our <a href="http://mercatus.org/publication/measuring-content-not-just-number-executive-orders-and-proclamations">executive orders chart</a>). The lawmaking process does not end with the president’s signature, contrary to the tidy story presented in civics books. Instead, the passage of the law might well be considered the foundation, not the end of lawmaking.&nbsp;</p> <p class="p1">The Federal Food, Drug, and Cosmetic Act (FDCA) vividly demonstrates the point. The FDCA, which President Franklin Roosevelt signed into law in 1938, revamped the legal authority for the Food and Drug Administration (FDA). In the nearly 80 years since, the FDA has built on the foundation of the FDCA and its amendments a tower of regulations, each of which has the force of law.</p> <p class="p1">With RegData, we can size up this accumulation of regulatory law. RegData counts the number of words and individual regulatory restrictions—words and phrases that identify a specific mandatory or prohibited activity—in each part-level division of the <i>Code of Federal Regulations</i> (CFR). Each CFR part is matched with the agency and department that created it. Agencies must state their statutory authority for each regulation they issue, and so RegData also associates words and restrictions with the acts of Congress that modified that authority. Taken together, these data shine a light on the regulatory growth from laws such as the FDCA.</p> <p class="p1">The FDCA itself was 19 pages long and contained about 11,700 words, as <a href="http://legisworks.org/sal/52/stats/STATUTE-52-Pg1040a.pdf">printed in the United States Statues at Large</a>. In the 2014 edition of the CFR, the regulations associated with the FDCA comprised about 2,180,000 words. About 130,000 new words were added in the previous ten years.</p> <p class="p1">The number of regulatory restrictions associated with the statute has grown over time as well. The following chart gives a timeline of regulatory accumulation associated with the FDCA and its major amendments, from 1980 (the first year RegData can associate restrictions with laws, because RegData relies on digitized text) through 2014:<iframe style="font-size: 12px;" width="585" height="452" src="//www.thinglink.com/card/691155012763516930" type="text/html" frameborder="0" scrolling="no"></iframe></p><p class="p1"><a href="http://mercatus.org/sites/default/files/McLaughlin-FDA-total-restrictions-table.png"><img height="763" width="585" src="http://mercatus.org/sites/default/files/McLaughlin-FDA-total-restrictions-table.png" /></a></p><p class="p1"><a href="http://mercatus.org/sites/default/files/McLaughlin-FDA-total-restrictions-charts.pdf"><i>Download Full Chart</i></a></p><p class="p1"><span style="font-size: 12px;">One notable feature of the graph is the decline in restrictions starting in 1996 through 1999. That period, which included the passage of the FDA Modernization Act of 1997, saw a 12 percent decrease in restrictions. Equally notable, however, is the speed with which that trend was reversed. The restriction count has grown steadily since 2000, and in 2010 it surpassed the previous high.</span></p> <p class="p1">The lesson for lawmakers—and the public—is clear: regulatory legislation is not a single event. New laws tend to empower agencies indefinitely, and courts tend to defer to agencies’ interpretation of regulatory legislation. For nearly 80 years, the FDCA, the original statutory authority, and its amendments have formed the foundation of the tower of regulations built by the FDA, and they are used to add regulations to the top.&nbsp;</p> <p class="p1">Statutory authorizations of regulatory actions, like the FDCA, effectively act as one-way ratchets in the long term—they instigate and support the accumulation of regulations over time. There is no counterbalancing mechanism, such as an agency or commission, charged with reviewing, modifying, or eliminating older regulations that exhibit obsolescence, duplication, or ineffectiveness. Congress would do well to consider not only how a new law is conceived of today, but also what it may become in the years and decades to come.</p> http://mercatus.org/publication/food-and-drug-administration-and-federal-food-drug-and-cosmetic-act Wed, 26 Aug 2015 10:20:31 -0400 Taxpayers Shortchanged by Agriculture Use-Value Assessment http://mercatus.org/expert_commentary/taxpayers-shortchanged-agriculture-use-value-assessment <h5> Expert Commentary </h5> <p class="p1">The 1.6 million people living in Manhattan, New York, and the 56,000 people living in Manhattan, Kansas are well aware that land values in the two locations are dramatically different. In fact, <a href="http://www.zillow.com/homes/for_sale/Manhattan-KS/pmf,pf_pt/land_type/2101656633_zpid/53133_rid/39.441495,-96.19011,38.937514,-96.950226_rect/10_zm/">Zillow lists a property in Manhattan, Kansas</a> for less than $30,000 an acre, whereas, the New York Fed estimates that that same $30,000 would buy just enough space to park a scooter, or a 15 square foot undeveloped lot, near the Empire State Building. However, an acre of land in the two Manhattans would have the same assessed value for property tax purposes, provided the land is used for agriculture.</p> <p class="p1">This peculiarity is the result of use-value assessment practices, which assess the value of agriculture land not based on market value, but rather based on the assumption that land has no development prospects (or locational advantages). This practice was first adopted by Maryland in 1960. By 1995, all 50 states had enacted some form of it for agriculture.</p><p class="p1"><a href="http://www.usnews.com/opinion/economic-intelligence/2015/08/24/taxpayers-shortchanged-by-agriculture-use-value-assessment">Continue reading</a></p> http://mercatus.org/expert_commentary/taxpayers-shortchanged-agriculture-use-value-assessment Tue, 25 Aug 2015 09:55:03 -0400 Sugary Soda and the Logic of Nudges http://mercatus.org/expert_commentary/sugary-soda-and-logic-nudges <h5> Expert Commentary </h5> <p class="p1">Recent preliminary results from Mexico’s soda tax, which showed a 6 percent decline in soda consumption, are renewing public enthusiasm for a similar tax in the United States. In fact last year, Berkeley, Calif., became the first city in the United States to impose a tax on sugary drinks.</p> <p class="p1">The problem with using taxes to change consumer behavior is that the politicians’ incentive to raise revenues directly contradicts their goal to reduce soda consumption. Berkeley’s proud announcement that it took in more than $116,000 during its first month and its decision to pre-apportion the taxes it expects to collect clearly demonstrate which incentive prevailed.</p> <p class="p1">Research in behavioral economics, which combines insights from economics and psychology, points to several ways in which a soda tax might work as a nudge to change consumer behavior.</p> <p class="p1">First, it may act as a reminder to consumers. Given all the things consumers have to keep an eye on while shopping — food quality, price, expiration dates, discounts — it’s easy for calorie counts to slip their minds. Second, the tax may act as a micro-incentive. Studies show that imposing even a trivial cost on a particular choice, like making students walk a few extra steps to reach the junk food in the back of school cafeteria, can have a substantial impact on consumers’ food choices.</p> <p class="p1">The logic of nudges, however, runs counter to the logic of politics. For the soda tax to work as a nudge, it should be highly visible. It has to grab consumers’ attention in order to make the drink choice salient. Yet, in order to maximize tax revenues, studies suggest making the tax as invisible as possible. Consumers under-react to less salient taxes and don’t reduce their consumption, which leads to higher tax revenues.</p> <p class="p1">Since it’s hidden from consumers, Berkeley’s soda tax is evidently designed to maximize revenues. The city imposed the tax on soda distributors who may or may not decide to pass it on to the consumers. Even if the distributors choose to raise the soda prices, the increase will be indistinguishable from the usual price volatility of food items. Nothing on the price tag or consumer’s receipt would indicate that part of the cost comes from the soda tax.</p> <p class="p1">One could argue that the less salient tax design is a byproduct of the limitations the state places on local governments’ taxation powers. Yet, the city could easily go around the limitation by posting a sign next to the soda aisle informing consumers of the soda tax. The fact that they chose not to do so indicates their greater interest in maximizing tax revenues than improving consumers’ choices.</p> <p class="p1">As a result, the tax already netted more than $116,000 in revenues during its first month and is expected to bring in around $1.2 million this year. The city council already advanced $500,000 to the newly appointed panel of experts to apportion to the various programs, and activist groups are already sparring over the best use of these funds. The advance is to be repaid from the soda tax revenues.</p> <p class="p1">Two other aspects of the soda tax implementation point to it being driven by politics rather than a desire to help consumers.</p> <p class="p1">First, the city exempts fruit juices and milk from the tax, even though sugar has the same impact on health regardless of its source. The exemptions open the door for political lobbying over what drinks should be considered healthy and exempt from the tax. One need only look at recent congressional decision to declare pizza a vegetable to see the potential for abuse.</p> <p class="p1">Second, the city exempts stores with revenues under $100,000. While sparing small businesses is good politics, it hardly serves the needs of consumers. There is no difference in the health impact of sodas purchased from a large store as opposed to a small one.</p> <p class="p1">Most research on soda or fat taxes focuses on whether the tax could be effective in improving consumers’ choices. Yet, the real question is whether politicians have the incentives to prioritize public health over revenues. As Berkeley’s experience demonstrates, the answer to the last question is a resounding “no.”</p> http://mercatus.org/expert_commentary/sugary-soda-and-logic-nudges Mon, 24 Aug 2015 10:12:12 -0400 Kim Kardashian vs. FDA http://mercatus.org/expert_commentary/kim-kardashian-vs-fda <h5> Expert Commentary </h5> <p class="p1">Kim Kardashian has 43.5 million followers on <a href="https://instagram.com/kimkardashian/">Instagram</a> and 34.5 million on <a href="https://twitter.com/kimkardashian">Twitter</a>. Recent <a href="https://twitter.com/KimKardashian/status/631318023513616384">tweets</a> include messages like, “My good friend @BySimoneCamile has the cutest bags &amp; they are on sale!!!!” That product promotion may have been okay, but she apparently crossed the line with an Instagram <a href="http://www.nbcnews.com/health/health-news/fda-warns-kim-kardashian-about-instagram-endorsement-n408021">post</a> about a drug that helped her with morning sickness. While the cutest bag sale may have been useful for some, advising her millions of followers that a drug helped her overcome morning sickness caused the United States Food and Drug Administration to become apoplectic.</p> <p class="p1">The FDA objected on the grounds that Kardashian was paid to promote the drug, and by not disclosing the potential side effects, she violated FDA regulations. But the real issue is that FDA’s laws governing drugs are <a href="http://www.fda.gov/AboutFDA/WhatWeDo/History/ProductRegulation/PromotingSafeandEffectiveDrugsfor100Years/">nearly 60 years old</a> (and <a href="http://www.emergogroup.com/resources/history-us-medical-device-regulation">40 years old</a> for medical devices), which long predate the dawn of the internet. In this age of communicating to the masses at light speed with a few keystrokes, Kardashian’s statements are instantly part of the vast web of information now available to the public.</p> <p class="p1">Given that there are <a href="http://www.wsj.com/articles/regulation-run-amokand-how-to-fight-back-1431099256">175,000 pages</a> of regulations with well over one million commandments — and quite a few those belong to the FDA — it’s not surprising that Kardashian was unaware of not just the penchant for control of information but the authority as well. FDA regulates all sorts of communications about drugs, not only what is on the label and the patient package inserts but also “<a href="http://press.princeton.edu/titles/9205.html">brochures, reprints of scientific papers and press releases</a>.” Oh, and now it’s including Hollywood tweets.</p> <p class="p1">Dr. Jennifer Niebyl&nbsp;notes that as many as 90% of all women get morning sickness when pregnant, which <a href="http://www.webmd.com/baby/features/battle-morning-sickness">includes nausea and vomiting</a>. The physician goes on to say that as every woman and every pregnancy is different, there’s no one-size-fits–all remedy. After seeing the advice of their favorite celebrity, some women may Google more information, but others might just talk to their doctor. Either way, a physician must prescribe it.</p> <p class="p1">In a further attempt to control medication advertising, the FDA ensures that manufacturers cannot advertise new uses for drugs no matter how helpful those uses. For example, the anti-infection&nbsp;drug Bacitracin is often <a href="http://www.managedcaremag.com/archives/0704/0704.formfiles.html">prescribed</a> for children, and 97% of those uses are not on the FDA-approved label. Patients and physicians living in less urban areas may not have access to information that you would find in a large urban hospital, which would let them know about important new applications for medication, although a <a href="http://www.usnews.com/news/business/articles/2015/08/07/court-sides-against-fda-in-off-label-drug-promotion-case">recent court case</a> may start to change that.</p> <p class="p1">Trying to exert control over every bit and byte of information by a centralized agency is, at the same time, both quaint and counterproductive. We need to allow the flow of information to be unrestricted. After all, we are beginning to see wonderful things happen as patient groups with every imaginable condition share their experiences about what works — and what doesn’t — with each other.</p> <p class="p1">The average American neither can nor should have to be aware of the FDA’s vast library of commandments on what they shall or shall not do. Is it time for Congress to take a hard look at what the FDA’s role should be in the information age? The solution almost certainly isn’t going to be doling out more resources and more authority to the FDA to control speech. Instead, we need to find new ways to get faster and cheaper approvals of new drugs and devices&nbsp;to ensure that all Americans have access to the medical care that best fits their needs.</p> http://mercatus.org/expert_commentary/kim-kardashian-vs-fda Tue, 25 Aug 2015 13:18:09 -0400 Mercatus Disaster Recovery Research http://mercatus.org/expert_commentary/mercatus-disaster-recovery-research <h5> Expert Commentary </h5> <p class="p1">The products of the <a href="http://mercatus.org/Katrina">Mercatus Center Gulf Coast Recovery Project</a> continue to flow. Research projects among graduate students and alumni continue in the area of the entrepreneurial market process, the constitutional level of analysis and strategic behavior within government, and the informal rules that enable social groups to engage in effective collective action, in addition to the growing literature on disasters. Below is a list of books, journal articles, and policy papers that are a result of this research program to date.</p><p class="p1"><b>Books</b></p> <ul class="ul1"> <li class="li2">Chamlee-Wright, Emily.&nbsp;<i><a href="http://grad.mercatus.org/publication/cultural-and-political-economy-recovery-social-learning-post-disaster-environment">The Cultural and Political Economy of Recovery: Social Learning in a Post-Disaster Environment</a>:&nbsp;</i>New York, NY: Routledge, 2010.&nbsp;</li> <li class="li1">Chamlee-Wright, Emily and Virgil Storr (eds.)&nbsp;<a href="http://ppe.mercatus.org/publication/political-economy-hurricane-katrina-and-community-rebound"><i>The Political Economy of Hurricane Katrina and Community Rebound</i></a><i>. </i>Cheltenham, UK: Edward Elgar, 2010.&nbsp;</li> <li class="li1">Coyne, Christopher.&nbsp;<a href="http://ppe.mercatus.org/publication/doing-bad-doing-good"><i>Doing Bad by Doing Good: Why Humanitarian Action Fails</i></a>. Stanford, CA: Stanford University Press, 2013.</li> <li class="li1">Storr, Nona Martin, Emily Chamlee-Wright, and Virgil Storr. <i><a href="http://mercatus.org/katrinarecovery/katrinarecovery.html">How We Came Back: Voices from Post-Katrina New Orleans</a>:</i>&nbsp;Arlington, VA: Mercatus Center, 2015.</li> <li class="li1">Storr, Virgil, Stefanie Haeffele-Balch, and Laure E. Grube. <i><a href="http://ppe.mercatus.org/publication/community-revival-wake-disaster">Community Revival in the Wake of Disaster: Lessons in Local Enterpreneurship</a>:</i>&nbsp;New York, NY: Palgrave Macmillan<i>,&nbsp;</i>2015.</li> </ul> <p class="p1"><b>Journal Articles</b></p> <ul class="ul1"> <li class="li1">Boettke, Peter, Emily Chamlee-Wright, Peter Gordon, Sanford Ikeda, Peter Leeson, and Russell Sobel,&nbsp;<a href="http://ppe.mercatus.org/publication/political-economic-and-social-aspects-katrina">“The Political, Economic, and Social Aspects of Katrina,” </a><i>Southern Economic Journal </i>74, no. 2 (2007): 363-376<i>.</i>&nbsp;</li> <li class="li3">Brito, Jerry,&nbsp;<a href="http://mercatus.org/publication/sending-out-sos-public-safety-communications-interoperability-collective-action-problem">“Sending out an S.O.S.: Public Safety Communications Interoperability as a Collective Action Problem,”</a> <i>Federal Communications Law Journal </i>59 (2007): 457-92.&nbsp;</li> <li class="li1">Chamlee-Wright, Emily,&nbsp;<a href="http://grad.mercatus.org/publication/long-road-back">“The Long Road Back: Signal Noise in the Post-Katrina Context,”</a> <i>The Independent Review </i>12, no. 2 (2007): 235-259<i>.</i>&nbsp;</li> <li class="li1">Chamlee-Wright, Emily,&nbsp;<a href="http://mercatus.org/publication/signaling-effects-commercial-and-civil-society-post-katrina-reconstruction">“Signaling Effects of Commercial and Civil Society in Post-Katrina Reconstruction,”</a> <i>International Journal of Social Economics </i>35, no. 8 (2008): 675-626<i>.</i>&nbsp;</li> <li class="li1">Chamlee-Wright, Emily,&nbsp;<a href="http://grad.mercatus.org/publication/reflections-methodology-disasters-and-social-learning">“Reflections on Methodology, Disasters, and Social Learning,”</a> <i>Studies in Emergent Order </i>4 (2011): 87-104.&nbsp;</li> <li class="li1">Chamlee-Wright, Emily and Virgil Storr,&nbsp;<a href="http://ppe.mercatus.org/publication/role-social-entrepreneurship-post-katrina-community-recovery">“The Role of Social Entrepreneurship in Post-Katrina Community Recovery,”</a> <i>International Journal of Innovation and Regional Development </i>2, no. 1 (2010): 149-164, and<i>&nbsp;</i>i<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">n&nbsp;</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;"><a style="font-size: 12px; color: #666699;" href="http://ppe.mercatus.org/publication/political-economy-hurricane-katrina-and-community-rebound"><i>The Political Economy of Hurricane Katrina and Community Rebound</i></a>,&nbsp;</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">edited by</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">&nbsp;<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">E. Chamlee Wright and V. Storr.</span></span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">&nbsp;</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">Cheltenham, UK: Edward Elgar, 2010.</span></li> <li class="li1">Chamlee-Wright, Emily and Virgil Storr,&nbsp;<a href="http://ppe.mercatus.org/publication/social-capital-lobbying-and-community-based-interest-groups">“Social Capital, Lobbying and Community-Based Interest Groups,"</a> <i>Public Choice </i>149, nos. 1-2 (2011): 167-185.&nbsp;</li> <li class="li1">Chamlee-Wright, Emily and Virgil Storr,&nbsp;<a href="http://ppe.mercatus.org/publication/social-capital-collective-narratives-and-post-disaster-community-recovery">“Social Capital as Collective Narratives and Post-Disaster Community Recovery,”</a> <i>Sociological Review </i>59, no. 2 (2011): 266-282.&nbsp;</li> <li class="li1">Chamlee-Wright, Emily and Virgil Storr,&nbsp;<a href="http://ppe.mercatus.org/publication/commercial-relationships-and-spaces-after-disaster">“Commercial Relationships and Spaces after Disaster,”</a> <i>Society </i>51, no. 6 (2014): 656-664.&nbsp;</li> <li class="li1">Chamlee-Wright, Emily and Virgil Storr,&nbsp;<a href="http://ppe.mercatus.org/publication/expectations-government-s-response-disaster">“Expectations of Government's Response to Disaster,”</a> <i>Public Choice </i>144, no. 1 (2008): 253-274.&nbsp;</li> <li class="li1">Chamlee-Wright, Emily and Virgil Storr,&nbsp;<a href="http://ppe.mercatus.org/publication/club-goods-and-post-disaster-community-return-0">“Club Goods and Post-Disaster Community Return,”</a> <i>Rationality and Scoiety </i>21, no. 4 (2009a): 429-458.&nbsp;</li> <li class="li2">Chamlee-Wright, Emily and Virgil Storr,&nbsp;<a href="http://ppe.mercatus.org/publication/theres-no-place-new-orleans">“There's No Place Like New Orleans: Sense of Place and Community Recovery in the Ninth Ward after Hurricane Katrina,”</a> <i>Journal of Urban Affairs </i>31, no. 5 (2009b): 615-634.</li> <li class="li1">Coyne, Christopher and Jayme Lemke,&nbsp;<a href="http://ppe.mercatus.org/publication/polycentricity-disaster-relief">“Polycentricity in Disaster Relief,”</a> <i>Studies in Emergent Order </i>3 (2011): 45-57.&nbsp;</li> <li class="li1">Coyne, Christopher and Jayme Lemke,&nbsp;<a href="http://ppe.mercatus.org/publication/lessons-cultural-and-political-economy-recovery-0">“Lessons from 'The Cultural and Political Economy of Recovery,”</a> <i>American Journal of Economics and Sociology </i>71, no. 1 (2012): 215-228.&nbsp;</li> <li class="li1">D'Amico, Daniel,&nbsp;<a href="http://grad.mercatus.org/publication/whos-blame-all-heartache-response-anti-capitalistic-mentalities-after-katrina">“Who's to Blame for all the Heartache? A Response to Anti-Capitalistic Mentalities after Katrina,”</a> <i>International Journal of Social Economics&nbsp;</i>35, no. 8 (2008): 590 - 602.&nbsp;</li> <li class="li2">Horwitz, Steven,&nbsp;<a href="http://grad.mercatus.org/publication/best-responders-post-katrina-innovation-and-improvisation-wal-mart-and-us-coast-guard">“Best Responders: Post-Katrina Innovation and Improvisation by Wal-Mart and the U.S. Coast Guard,”</a> <i>Innovations </i>4, no. 2 (2009a): 93-99.</li> <li class="li2">Horwitz, Steven,&nbsp;<a href="http://mercatus.org/publication/wal-mart-rescue">“Wal-Mart to the Rescue: Private Enterprise's Resposne to Hurricane Katinra,”</a> <i>The Independent Review </i>13, no. 4 (2009b): 511-28.&nbsp;</li> <li class="li2">Leeson, Peter,&nbsp;<a href="http://rd.springer.com/article/10.1007/s10657-011-9228-9">“Race, Politics, and Punishment: Democratic Failure in the New Orleans Mayoral Election,”</a> <i>European Journal of Law and Economics </i>31, no. 3 (2011): 265-285.&nbsp;</li> <li class="li1">Leeson, Peter and Russell Sobel,&nbsp;<a href="http://ppe.mercatus.org/publication/blame-weather-natural-disasters-fema-and-corruption-america">“Blame the Weather? Natural Disasters, FEMA, and Corruption in America,”</a> <i>Administrative and Regulatory Law News </i>36, no. 4 (2011): 10-11.&nbsp;</li> <li class="li1">Leeson, Peter and Russell Sobel,&nbsp;<a href="http://ppe.mercatus.org/publication/governments-response-hurricane-katrina">“Government's Response to Hurricane Katrina: A Public Choice Analysis,”</a> <i>Public Choice </i>127, no. 1-2 (2006): 55-73.&nbsp;</li> <li class="li1">Leeson, Peter and Russell Sobel,&nbsp;<a href="http://ppe.mercatus.org/publication/centralization-proves-inadequate-disaster-aid">“Centralization Proves Inadequate to Disaster Aid,”</a> <i>Journal of Internantional Peace Operations </i>3, no. 4 (2008a): 11-12.&nbsp;</li> <li class="li1">Leeson, Peter and Russell Sobel,&nbsp;<a href="http://ppe.mercatus.org/publication/use-knowledge-natural-disaster-relief-management">“The Use of Knowledge in Natural Disaster Relief Management,”</a> <i>Independent Review </i>11<i>, </i>no. 4 (2008b): 519-532 and i<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">n&nbsp;</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;"><a style="font-size: 12px; color: #666699;" href="http://ppe.mercatus.org/publication/political-economy-hurricane-katrina-and-community-rebound"><i>The Political Economy of Hurricane Katrina and Community Rebound</i></a>,&nbsp;</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">edited by</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">&nbsp;<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">E. Chamlee Wright and V. Storr.</span></span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">&nbsp;</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">Cheltenham, UK: Edward Elgar, 2010.</span></li> <li class="li1">Leeson, Peter and Russell Sobel,&nbsp;<a href="http://ppe.mercatus.org/publication/weathering-corruption">“Weathering Corruption,”</a> <i>Journal of Law and Economics </i>51, no. 4 (2008): 667-681.&nbsp;</li> <li class="li2">Skarbek, David,&nbsp;<a href="http://grad.mercatus.org/publication/occupational-licensing-and-asymmetric-information">“Occupational Licensing and Asymmetric Information: Post-Hurricane Evidence from Florida,”</a> <i>Cato Journal </i>28, no. 1 (Winter 2008): 73-82.&nbsp;</li> <li class="li3">Skarbek, Emily,&nbsp;<a href="http://grad.mercatus.org/publication/chicago-fire-1871-bottom-approach-disaster-relief">“The Chicago Fire of 1871: A Bottom-up Approach to Disaster Relief,”</a> <i>Public Choice </i>160, no. 1-2 (2014): 155-180.&nbsp;</li> <li class="li4">Smith, Daniel and Daniel Sutter,&nbsp;<a href="http://grad.mercatus.org/publication/response-and-recovery-after-joplin-tornado">“Response and Recovery after the Joplin Tornado,”</a> <i>The Independent Review </i>18, no. 2 (2013): 165-188.&nbsp;</li> <li class="li1">Sobel, Russell, Christopher Coyne, and Peter Leeson,&nbsp;<a href="http://mercatus.org/publication/political-economy-fema-did-reorganization-matter">“The Political Economy of FEMA: Did Reorganization Matter?,”</a> <i>Journal of Public Finance and Public Choice </i>17, no. 2-3 (2009): 49-65.&nbsp;</li> <li class="li1">Storr, Virgil and Laura Grube,&nbsp;<a href="http://ppe.mercatus.org/publication/capacity-self-governance-and-post-disaster-resiliency-0">“The Capacity for Self-governance and Post-disaster Resiliency,”</a> <i>Review of Austrian Economics </i>27, no. 3 (2014): 301-324.&nbsp;</li> <li class="li1">Storr, Virgil and Stefanie Haeffele-Balch,&nbsp;<a href="http://ppe.mercatus.org/publication/post-disaster-community-recovery-heterogeneous-loosely-connected-communities-0">“Post-disaster Community Recovery in Heterogeneous, Loosely-connected Communities,”</a> <i>Review of Social Economy </i>70, no. 3 (2012): 295-314.&nbsp;</li> <li class="li1">Sutter, Daniel, Harold Brooks, and Charles Doswell,&nbsp;<a href="http://grad.mercatus.org/publication/comments-low-level-winds-tornadoes-and-potential-catastrophic-tornado-impacts-urban">“Low-Level Winds in Tornadoes and Potential Catastrophic Tornado Impacts in Urban Areas,” </a><i>American Meteorological Society </i>89, no 1 (2008): 87-90.&nbsp;</li> <li class="li4">Sutter, Daniel and Somer Erickson,&nbsp;<a href="http://grad.mercatus.org/publication/time-cost-tornado-warnings-and-savings-storm-based-warnings">“The Time Cost of Tornado Warnings and the Savins with Storm-Based Warnings,”</a> <i>American Meteorological Society </i>2, no. 2 (2010): 103-112.&nbsp;</li> <li class="li1">Sutter, Daniel, Bradley Ewing, Jamie Kruse,&nbsp;<a href="http://grad.mercatus.org/publication/overview-hurricane-katrina-and-economic-loss">“An Overview of Hurricane Katrina and Economic Loss,”</a> <i>Journal of Business Valuation and Economic Loss Analysis </i>4, no. 2 (2009).&nbsp;</li> <li class="li1">Sutter, Daniel and Nicole Sadowski,&nbsp;<a href="http://grad.mercatus.org/publication/mitigation-motivated-past-experience-prior-hurricanes-and-damages">“Mitigation Motivated by Past Experience: Prior Hurricanes and Damages,”</a> <i>Ocean and Coastal Management </i>51, no. 4 (2008): 303-313<i>.</i>&nbsp;</li> <li class="li4">Sutter, Daniel and Kevin Simmons,&nbsp;<a href="http://grad.mercatus.org/publication/tornado-shelters-and-housing-market">“Tornado Shelters and the Housing Market,”</a> <i>Construction Management and Economics </i>25, no. 11: (2007a).&nbsp;</li> <li class="li4">Sutter, Daniel and Kevin Simmons,&nbsp;<a href="http://grad.mercatus.org/publication/tornado-shelters-and-manufactured-home-parks-market">“Tornado Shelters and the Manufactured Home Parks Market,”</a> <i>Natural Hazards </i>43, no. 3 (2007b): 365-378.&nbsp;</li> <li class="li4">Sutter, Daniel and Kevin Simmons,&nbsp;<a href="http://grad.mercatus.org/publication/tornado-warnings-lead-times-and-tornado-casualties-empirical-investigation">“Tornado Warnings, Lead Times, and Tornado Casualties: An Empirical Investigation,”</a> <i>American Meteorological Society </i>23, no. 2 (2008): 246-258.&nbsp;</li> <li class="li4">Sutter, Daniel and Kevin Simmons,&nbsp;<a href="http://grad.mercatus.org/publication/false-alarms-tornado-warnings-and-tornado-casualties">“False Alarms, Tornado Warnings, and Tornado Casualties,”</a> <i>Weather, Culture and Society</i> 1 (2009): 38-53.&nbsp;</li> <li class="li4">Sutter, Daniel and Kevin Simmons,&nbsp;<a href="http://grad.mercatus.org/publication/tornado-fatalities-and-mobile-homes-united-states">“Tornado Fatalities and Mobile Homes in the United States,”</a> <i>Natural Hazards </i>53, no. 1 (2010): 125-137.&nbsp;</li> <li class="li4">Sutter, Daniel and Kevin Simmons,&nbsp;<a href="http://grad.mercatus.org/publication/economic-and-societal-impacts-tornadoes">“Economic and Societal Impacts of Tornadoes,”</a> <i>American Meteorological Society </i>1, no. 1 (2011): 38-53.&nbsp;</li> <li class="li2">Weiser, Phillip,&nbsp;<a href="http://mercatus.org/sites/default/files/Communicating-During-Emergencies-Toward-Interoperability-and-Effective-Information-Management-.pdf">“Communicating During Emergencies: Toward Interoperability and Effective Information Management,”</a> <i>Federal Communications Law Journal </i>59, no. 3 (2007): 547-573<i>.</i>&nbsp;</li> </ul> <p style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;" class="p1"><b>Book Chapters</b></p><ul style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;" class="ul1"><li style="font-size: 12px;" class="li1">Bleckley, Jeb and Joshua Hall. “School choice and post-Katrina New Orleans: an analysis.”<span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">&nbsp;</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">In&nbsp;</span><span style="font-size: 12px;"><a href="http://ppe.mercatus.org/publication/political-economy-hurricane-katrina-and-community-rebound" style="font-size: 12px;"><i>The Political Economy of Hurricane Katrina and Community Rebound</i></a>,&nbsp;</span><span style="font-size: 12px;">edited by</span><span style="font-size: 12px;">&nbsp;<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">E. Chamlee Wright and V. Storr.</span></span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">&nbsp;</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">Cheltenham, UK: Edward Elgar, 2010.</span></li><li style="font-size: 12px;" class="li1">Boettke, Peter and Daniel Smith.&nbsp;<a style="font-size: 12px;" href="http://ppe.mercatus.org/publication/book-chapter-private-solutions-public-disasters-self-reliance-and-social-resilience">“Private Solutions to Public Disasters: Self-reliance and Social Resilience.”</a>&nbsp;<i style="font-style: normal;">In</i><i> The Economics of Unnatural and Unnatural Disasters</i><i style="font-style: normal;">, </i>edited by W. Kern,<i style="font-style: normal;">&nbsp;</i>87-102. Kalamazoo, MI: University of Michigan Press, 2010.</li><li style="font-size: 12px;" class="li1">Chamlee-Wright, Emily. “Pastor’s Response in Post-Katrina New Orleans: Navigating the Cultural Economic Landscape.” In<i style="font-style: normal;">&nbsp;</i><a style="font-size: 12px;" href="http://ppe.mercatus.org/publication/culture-and-economic-action"><i>Culture and Economic Action</i></a><i style="font-style: normal;">, </i>edited by&nbsp;<i style="font-style: normal;"><span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">L. Grube and V. Storr. Cheltenham, UK:</span>&nbsp;</i>Edward Elgar, 2015.</li><li style="font-size: 12px;" class="li1">Chamlee-Wright, Emily and Virgil Storr.&nbsp;<a style="font-size: 12px;" href="http://ppe.mercatus.org/publication/book-chapter-community-resilience-new-orleans-east-deploying-cultural-toolkit-within">“Community Resilience in New Orleans East: Deploying the Cultural Toolkit within a Vietnamese-American Community.”</a>&nbsp;In<i>&nbsp;Community Disaster Recovery and Resiliency: Exploring Global Opportunities and Challenges,</i>&nbsp;edited by J. Rivera and D. Miller. New York: Taylor &amp; Francis, 2010.</li><li style="font-size: 12px;" class="li1">D'Amico, Daniel. “Rock Me Like a Hurricane!: How Music Communities Promote Social Capital Adept for Recovery.”&nbsp;<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">In&nbsp;</span><span style="font-size: 12px;"><a href="http://ppe.mercatus.org/publication/political-economy-hurricane-katrina-and-community-rebound" style="font-size: 12px;"><i>The Political Economy of Hurricane Katrina and Community Rebound</i></a>,&nbsp;</span><span style="font-size: 12px;">edited by</span><span style="font-size: 12px;">&nbsp;<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">E. Chamlee Wright and V. Storr.</span></span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">&nbsp;</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">Cheltenham, UK: Edward Elgar, 2010.</span></li><li class="li1" style="font-size: 12px;">Grover (<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">née Agemy)</span>, Erin. “Improving Academics in the Aftermath: A Case Study of New Orlean's Experiment with Charter schools.”&nbsp;<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">In&nbsp;</span><span style="font-size: 12px;"><a href="http://ppe.mercatus.org/publication/political-economy-hurricane-katrina-and-community-rebound" style="font-size: 12px;"><i>The Political Economy of Hurricane Katrina and Community Rebound</i></a>,&nbsp;</span><span style="font-size: 12px;">edited by</span><span style="font-size: 12px;">&nbsp;<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">E. Chamlee Wright and V. Storr.</span></span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">&nbsp;</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">Cheltenham, UK: Edward Elgar, 2010.</span></li><li style="font-size: 12px;" class="li1">Haeffele-Balch, Stefanie and Virgil Storr.&nbsp;<a style="font-size: 12px;" href="http://ppe.mercatus.org/publication/book-chapter-austrian-contributions-literature-natural-and-unnatural-disasters">“Austrian Contributions to the Literature on Natural and Unnatural Disasters.”</a>&nbsp;In<i style="font-style: normal;">&nbsp;</i>C. Coyne and V. Storr (eds.),<i style="font-style: normal;">&nbsp;New Thinking in Austrian Political Economy (Advances in Austrian Economics, Vol. 19), </i>edited by C. Coyne and V. Storr.<i style="font-style: normal;">&nbsp;</i>Emerald, 2015. &nbsp;</li><li style="font-size: 12px;" class="li1">Horwitz, Steven. <a style="font-size: 12px;" href="http://mercatus.org/publication/doing-right-things-private-sector-response-hurricane-katrina-case-study-bourgeois">“Doing the Right Things: The Private Sector Response to Hurricane Katrina as a Case Study in the Bourgeois Virtues.”</a>&nbsp;In<i style="font-style: normal;">&nbsp;</i><i>Accepting the Invisible Hand: Market-Based Approaches to Social Economic Problems</i><i style="font-style: normal;">, edited by M. White.</i><i style="font-style: normal;">&nbsp;</i>London: Palgrave Macmillan, 2010.&nbsp;</li><li style="font-size: 12px;" class="li1">Krasnozhon, Leonid and Daniel Rothschild. “Lessons from Post-flood Recovery of New Orleans and Prague.”&nbsp;<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">In&nbsp;</span><span style="font-size: 12px;"><a href="http://ppe.mercatus.org/publication/political-economy-hurricane-katrina-and-community-rebound" style="font-size: 12px;"><i>The Political Economy of Hurricane Katrina and Community Rebound</i></a>,&nbsp;</span><span style="font-size: 12px;">edited by</span><span style="font-size: 12px;">&nbsp;<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">E. Chamlee Wright and V. Storr.</span></span><span style="font-style: normal; font-family: Helvetica, Arial, sans-serif; font-size: 12px;">&nbsp;</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">Cheltenham, UK: Edward Elgar, 2010.</span></li><li style="font-size: 12px;" class="li1">Martin, Adam. “Uncertainty in the post-Katrina Big Easy.”&nbsp;<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">In&nbsp;</span><span style="font-size: 12px;"><a href="http://ppe.mercatus.org/publication/political-economy-hurricane-katrina-and-community-rebound" style="font-size: 12px;"><i>The Political Economy of Hurricane Katrina and Community Rebound</i></a>,&nbsp;</span><span style="font-size: 12px;">edited by</span><span style="font-size: 12px;">&nbsp;<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">E. Chamlee Wright and V. Storr.</span></span><span style="font-style: normal; font-family: Helvetica, Arial, sans-serif; font-size: 12px;">&nbsp;</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">Cheltenham, UK: Edward Elgar, 2010.</span></li><li style="font-size: 12px;" class="li1">Norcross, Eileen and Anthony Skirba. “The Road Home: Helping Homeowners in the Gulf after Katrina.”&nbsp;<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">In&nbsp;</span><span style="font-size: 12px;"><a href="http://ppe.mercatus.org/publication/political-economy-hurricane-katrina-and-community-rebound" style="font-size: 12px;"><i>The Political Economy of Hurricane Katrina and Community Rebound</i></a>,&nbsp;</span><span style="font-size: 12px;">edited by</span><span style="font-size: 12px;">&nbsp;<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">E. Chamlee Wright and V. Storr.</span></span><span style="font-style: normal; font-family: Helvetica, Arial, sans-serif; font-size: 12px;">&nbsp;</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">Cheltenham, UK: Edward Elgar, 2010.</span></li><li style="font-size: 12px;" class="li1">Runst, Petrik. “Entrepreneurship and Social networks in Post-Disaster Environments.”&nbsp;<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">In&nbsp;</span><span style="font-size: 12px;"><a href="http://ppe.mercatus.org/publication/political-economy-hurricane-katrina-and-community-rebound" style="font-size: 12px;"><i>The Political Economy of Hurricane Katrina and Community Rebound</i></a>,&nbsp;</span><span style="font-size: 12px;">edited by</span><span style="font-size: 12px;">&nbsp;<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">E. Chamlee Wright and V. Storr.</span></span><span style="font-style: normal; font-family: Helvetica, Arial, sans-serif; font-size: 12px;">&nbsp;</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">Cheltenham, UK: Edward Elgar, 2010.</span></li><li style="font-size: 12px;" class="li1">Skarbek, David. “Restricting Reconstruction: Occupational Licensing and Natural Disasters.”&nbsp;<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">In&nbsp;</span><span style="font-size: 12px;"><a href="http://ppe.mercatus.org/publication/political-economy-hurricane-katrina-and-community-rebound" style="font-size: 12px;"><i>The Political Economy of Hurricane Katrina and Community Rebound</i></a>,&nbsp;</span><span style="font-size: 12px;">edited by</span><span style="font-size: 12px;">&nbsp;<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">E. Chamlee Wright and V. Storr.</span></span><span style="font-style: normal; font-family: Helvetica, Arial, sans-serif; font-size: 12px;">&nbsp;</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">Cheltenham, UK: Edward Elgar, 2010.</span></li><li class="li1" style="font-size: 12px;">Skarbek, Emily. “Earth, Wind, and Fire! Federalism and Incentive in Natural Disaster Response.”&nbsp;<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">In&nbsp;</span><span style="font-size: 12px;"><a href="http://ppe.mercatus.org/publication/political-economy-hurricane-katrina-and-community-rebound" style="font-size: 12px;"><i>The Political Economy of Hurricane Katrina and Community Rebound</i></a>,&nbsp;</span><span style="font-size: 12px;">edited by</span><span style="font-size: 12px;">&nbsp;<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">E. Chamlee Wright and V. Storr.</span></span><span style="font-style: normal; font-family: Helvetica, Arial, sans-serif; font-size: 12px;">&nbsp;</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">Cheltenham, UK: Edward Elgar, 2010.</span></li></ul><p class="p1"><b>Policy Papers and Testimony</b></p><ul class="ul1"> <li class="li1">Chamlee-Wright, Emily and Daniel Rothschild,&nbsp;<a href="http://mercatus.org/publication/disastrous-uncertainty-how-government-disaster-policy-undermines-community-rebound">“Disastrous Uncertainty: How Government Disaster Policy Undermines Community Rebound,”</a> <i>Mercatus Policy Series, Policy Comment No. 9, </i>2007.</li> <li class="li1">Chamlee-Wright, Emily and Daniel Rothschild,&nbsp;<a href="http://mercatus.org/publication/mercatus-policy-hosting-disaster">“Hosting a Disaster.”</a> <i>Mercatus on Policy 23,</i>&nbsp;2008</li> <li class="li2">Chamlee-Wright, Emily and Virgil Storr,&nbsp;<a href="http://ppe.mercatus.org/publication/entrepreneurs-role-post-disaster-community-recovery-0">“The Entrepreneur's Role in Post-Disaster Community Recovery: Implications for Post-Disaster Recovery Policy,”</a> <i>Mercatus Policy Series, Policy Primer No. 6,&nbsp;</i>2008.</li> <li class="li1">Chamlee-Wright, Emily and Virgil Storr,&nbsp;<a href="http://ppe.mercatus.org/publication/filling-civil-society-vacuum-post-disaster-policy-and-community-response">“Filling the Civil Society Vacuum: Post-Disaster Policy and Community Response,”</a> <i>Mercatus Policy Series, Policy Comment No. 22,</i>&nbsp;2009.</li> <li class="li1">Coyne, Christopher, Peter Leeson, and Russell Sobel,&nbsp;<a href="http://ppe.mercatus.org/publication/impact-fema-reorganization-implications-policy">“The Impact of FEMA Reorganization: Implications for Policy,”</a> <i>Mercatus Policy Series, Policy Comment No. 24, </i>2009.&nbsp;</li> <li class="li1">Gordon, Peter and Richard Little,&nbsp;<a href="http://mercatus.org/publication/building-walls-against-bad-infrastructure-policy-new-orleans">“Building Walls against Bad Infrastructure Policy in New Orleans,”</a> <i>Mercatus Policy Series, Policy Primer No. 10,</i>&nbsp;2009.</li> <li class="li1">Gordon, Peter and Sanford Ikeda,&nbsp;<a href="http://mercatus.org/publication/power-neighborhoods-devolution-authority-post-katrina-new-orleans">“Power to the Neighborhoods: The Devolution of Authority in Post-Katrina New Orleans,”</a> <i>Mercatus Policy Series, Policy Comment No. 12,</i>&nbsp;2007.</li> <li class="li1">Horwitz, Steven,&nbsp;<a href="http://mercatus.org/publication/making-hurricane-response-more-effective-lessons-private-sector-and-coast-guard-during">“Making Hurricane response More Effective: Lessons from the Private Sector and the Coast Guard during Katrina,”</a> <i>Mercatus Policy Series, Policy Comment No. 17, </i>2008<i>&nbsp;</i>and i<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">n&nbsp;</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;"><a style="font-size: 12px; color: #666699;" href="http://ppe.mercatus.org/publication/political-economy-hurricane-katrina-and-community-rebound"><i>The Political Economy of Hurricane Katrina and Community Rebound</i></a>,&nbsp;</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">edited by</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">&nbsp;<span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">E. Chamlee Wright and V. Storr.</span></span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">&nbsp;</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">Cheltenham, UK: Edward Elgar, 2010.</span></li> <li class="li1">Leeson, Peter,&nbsp;<a href="http://grad.mercatus.org/publication/flirting-disaster">“The Impact of FEMA on U. S. Corruption: Implications for Policy,”</a> <i>Mercatus Policy Series, Policy Comment No. 8,</i>&nbsp;2007.</li> <li class="li1">Leeson, Peter and Russell Sobel,&nbsp;<a href="http://www.cato.org/publications/policy-analysis/flirting-disaster-inherent-problems-fema">“Flirting with Disaster: The Inherent Problems with FEMA,”</a> <i>Cato Institute, Policy Analysis No. 573,&nbsp;</i>2006.</li> <li class="li3">Marlett, David,&nbsp;<a href="http://mercatus.org/publication/potential-impact-optional-federal-charter-social-resiliency-hazard-prone-regions">“Insuring Resiliance: The Potential Impact of an Optional Federal Charter on the Social Resiliency of Hazard-Prone Regions,”</a> <i>Mercatus Policy Series, Policy Comment No. 27,&nbsp;</i>2010.</li> <li class="li3">Nelson, Robert,&nbsp;<a href="http://mercatus.org/publication/fire-national-forest-system-california-solutions-california-problem">“Fire in the National Forest Sytem: California Solutions for a California Problem,”</a> <i>Mercatus on Policy, No. 16,&nbsp;</i>2008.</li> <li class="li1">Rothschild, Daniel, Emily Chamlee-Wright and Mario Villarreal-Diaz,&nbsp;<a href="http://mercatus.org/uploadedFiles/Mercatus/Publications/20070628_Written_Testimony_on_Rebuilding_New_Orleans_after_Hurricane_Katrina.pdf">“Rebuilding New Orleans after Hurricane Katrina: What's Working,”</a> <i>Mercatus Center, Written Testimony, </i>2007.</li> <li class="li1"><span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">Skarbek</span>, Emily,&nbsp;<a href="http://mercatus.org/publication/housing-voucher-choice-program-more-just-lagniappe-new-orleans">“The Housing Voucher Choice Program: More Than Just a Lagniappe for New Orleans,”</a> <i>Mercatus Policy Series, Policy Comment No. 13 and Mercatus on Policy No. 4,&nbsp;</i>2007.</li> <li class="li1">Sutter, Daniel,&nbsp;<a href="http://mercatus.org/publication/ensuring-disaster-state-insurance-regulation-coastal-development-and-hurricanes">“Ensuring Disaster: State Insurance Regulation, Coastal Development, and Hurricanes,”</a> <i>Mercatus Policy Series, Policy Comment No. 14, and Mercatus on Policy, No. 5,&nbsp;</i>2007.</li> <li class="li2">Sutter, Daniel,&nbsp;<a href="http://mercatus.org/publication/building-safe-port-storm-private-vs-public-choices-hurricane-mitigation">“Building a Safe Port in the Storm: Private vs. Public Choices in Hurricane Mitigation.</a><a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1350515">”</a> <i>Mercatus Policy Series, Policy Comment No. 21,&nbsp;</i>2008.</li> <li class="li2">Sutter, Daniel,&nbsp;<a href="http://mercatus.org/publication/optional-federal-chartering-insurers-and-hurricane-risk">“Optional Federal Chartering of Insurers and Hurricane Risk,”</a> <i>Mercatus on Policy 46.</i>&nbsp;2009a.</li> <li class="li3">Sutter, Daniel,&nbsp;<a href="http://mercatus.org/publication/reversing-rising-tide-goals-reforming-texas-windstorm-insurance-association">“Reversing a Rising Tide: Goals for Reforming the Texas Windstorm Insurance Association,”</a> <i>Mercatus on Policy, No. 48,&nbsp;</i>2009b.</li> <li class="li1">Yandle, Bruce and Mark Adams,&nbsp;<a href="http://mercatus.org/publication/regulatory-flexibility">“Regulatory Flexibility: How to Mitigate the Effects of Katrina and Other Disasters,”</a> <i>Mercatus Policy Series, Policy Comment No. 28,&nbsp;</i>2010.&nbsp;&nbsp;</li> <li class="li1">Yandle, Bruce, Daniel Rothschild, Daniel Sutter, Frederic Sautet, Peter Boettke, Steven Horwitz, Tim Roemer, Veronique de Rugy, Curtis Melvin,&nbsp;<a href="http://mercatus.org/publication/local-knowledge"><i>Local Knowledge: Is the Gulf Coast Open for Business?.</i></a><i> </i>Mercatus Center, 2008.</li> </ul> <p class="p1"><b>Mercatus Working Papers</b></p><ul style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;" class="ul1"><li style="font-size: 12px;" class="li1">Chamlee-Wright, Emily,&nbsp;<a style="font-style: normal;" href="http://mercatus.org/publication/after-storm-finding-success-wake-hurricane-katrina">“After the Storm: Finding Success in the Wake of Hurricane Katrina,”</a>&nbsp;<i>Mercatus Working Paper</i><i style="font-style: normal;">, </i>2006.&nbsp;</li><li style="font-size: 12px;" class="li2">Cordis, Adriana and Jeff Milyo,&nbsp;<a style="font-size: 12px;" href="http://mercatus.org/sites/default/files/Cordis-Disaster-Aid-Corruption.pdf">“Don't Blame the Weather: Federal Natural Disaster Aid and Public Corruption, ”</a>&nbsp;<i>Mercatus Working Paper</i><span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">,&nbsp;</span><span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">2015.</span></li><li style="font-size: 12px;" class="li2">Gordon, Peter and Richard Little,&nbsp;<a style="font-size: 12px;" href="http://mercatus.org/publication/can-new-orleans-benefit-market-approaches-flood-protection">“Can New Orleans Benefit from market Approaches to Flood Protection?,”</a>&nbsp;<i>Mercatus Working Paper</i><span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">,&nbsp;</span><span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">2008.</span></li><li style="font-size: 12px;" class="li2">Gordon, Peter and Sanford Ikeda,&nbsp;<a style="font-size: 12px;" href="http://mercatus.org/publication/gales-creative-destruction-innovative-governance-and-entrepreneurial-development-post">“Gales of Creative Destruction: Innovative Governance and Entrepreneurial Development in Post-Katrian New Orleans,”</a>&nbsp;<i>Mercatus Working Paper</i><span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">,&nbsp;</span><span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">2007.</span></li><li style="font-size: 12px;" class="li2">Martin, Adam,&nbsp;<a style="font-size: 12px;" href="http://mercatus.org/publication/amateur-public-choice-and-regime-uncertainty-post-katrina-new-orleans-0">“Amateur Public Choice and Regime Uncertainty in Post-Katrina New Orleans,”</a>&nbsp;<i>Mercatus Working Paper</i><span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">,&nbsp;</span><span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">2008.</span></li><li style="font-size: 12px;" class="li1">Storr, Virgil and Stefanie Haeffele-Balch,&nbsp;<a style="font-size: 12px;" href="http://mercatus.org/publication/can-decentralized-bottom-post-disaster-recovery-be-effective">“Can Decentralized Bottom-Up Post-Disaster Recovery be Effective?,”</a>&nbsp;<i>Mercatus Working Paper</i><span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">,&nbsp;</span><span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">2010.</span></li><li style="font-size: 12px;" class="li2">Sutter, Daniel.&nbsp;<a style="font-size: 12px;" href="http://mercatus.org/publication/market-hurricane-mitigation-regulatory-or-market-failure">“The Market for Hurricane Mitigation: Regulatory or Market Failure?,”</a><i>&nbsp;</i><i>Mercatus Working Paper</i><span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">,&nbsp;</span><span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">2008a.</span></li><li style="font-size: 12px;" class="li2">Sutter, Daniel. <a style="font-size: 12px;" href="http://mercatus.org/publication/insurance-and-societal-vulnerability-hurricanes">“Insurance and Societal Vulnerability to Hurricanes,”</a>&nbsp;<i>Mercatus Working Paper</i><span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">,&nbsp;</span><span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">2008b.</span></li><li style="font-size: 12px;" class="li2">Sutter, Daniel.&nbsp;<a style="font-size: 12px;" href="http://mercatus.org/publication/policy-uncertainty-and-market-wind-insurance">“Policy Uncertainty and the Market for Wind Insurance,”</a>&nbsp;<i>Mercatus Working Paper</i><span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">,&nbsp;</span><span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">2009.</span></li></ul><p class="p1"><b>PhD Dissertations &amp; MA Theses</b></p><ul><li style="font-size: 12px;">Grover (<span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">née Agemy)</span>, Erin,&nbsp;<a style="font-size: 12px;" href="http://magik.gmu.edu/cgi-bin/Pwebrecon.cgi?BBID=2089539">"Improving Academics in the Aftermath : A Case Study of New Orleans’ Experiment with Charter Schools,"&nbsp;</a>MA Thesis, George Mason University, 2009.</li><li>Grube, Laura,&nbsp;<a href="http://chss.gmu.edu/defenses/788">"</a><div id="_mcePaste" style="position: absolute; left: -10000px; top: 3903px; width: 1px; height: 1px; overflow: hidden;"><a href="http://chss.gmu.edu/defenses/788">Disaster Recovery and the Role of Self-Governance</a></div><div id="_mcePaste" style="position: absolute; left: -10000px; top: 3903px; width: 1px; height: 1px; overflow: hidden;"></div><a href="http://chss.gmu.edu/defenses/788">Disaster Recovery and the Role of Self-Governance,"&nbsp;</a>PhD Dissertation, George Mason University, 2015.&nbsp;</li><li>Skarbek, Emily,&nbsp;<a href="http://magik.gmu.edu/cgi-bin/Pwebrecon.cgi?BBID=1599334">"The Political Economy of Urban Reconstruction, Development, and Planning,"&nbsp;</a>PhD Dissertation, George Mason University, 2009.</li></ul><p>&nbsp;</p><ul class="ul1"> </ul> http://mercatus.org/expert_commentary/mercatus-disaster-recovery-research Thu, 27 Aug 2015 14:57:12 -0400 Eileen Norcross Provides Testimony Regarding Pennsylvania's Fiscal Outlook http://mercatus.org/video/eileen-norcross-provides-testimony-regarding-pennsylvanias-fiscal-outlook <h5> Video </h5> <iframe src="https://player.vimeo.com/video/136869402" width="500" height="281" frameborder="0" webkitallowfullscreen mozallowfullscreen allowfullscreen></iframe> <p>Eileen Norcross provides testimony before the Pennsylvania Senate Finance and Senate State Government committees regarding her study Ranking the States by Fiscal Condition.</p><p>&nbsp;</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 src=&quot;https://player.vimeo.com/video/136869402&quot; width=&quot;500&quot; height=&quot;281&quot; frameborder=&quot;0&quot; webkitallowfullscreen mozallowfullscreen allowfullscreen&gt;&lt;/iframe&gt; </div> </div> </div> http://mercatus.org/video/eileen-norcross-provides-testimony-regarding-pennsylvanias-fiscal-outlook Mon, 24 Aug 2015 11:33:28 -0400 Property Taxes for Agriculture: Use-Value Assessment and Urbanization across the United States http://mercatus.org/publication/property-taxes-agriculture-use-value-assessment-and-urbanization-across-united-states <h5> Publication </h5> <p class="p1">From 1960 to 1995, all 50 US states adopted some form of use-value assessment (UVA) for agricultural land. UVA programs treat agricultural land preferentially for property tax purposes, basing valuations only on prospective returns from agricultural activity, even when development opportunities are lucrative or are expected to be so in the future. Although UVA programs receive little attention, the programs are vast, encompassing more than 100 million acres of land in California alone and more than 61 percent of all land in Ohio (Anderson and England 2014). Furthermore, the benefits that the programs confer can be substantial. Anderson and England note that for a number of counties in Ohio, UVA results in assessed values that are more than 80 percent below market values. In a stark example, agricultural land in Bedford, Massachusetts, is assessed at an average of $155 an acre, whereas some nonagricultural land in Bedford is assessed at more than $10,000 per acre.</p> <p class="p2">Although the degree of the distortion is not known, such incentives certainly distort the use of land toward less efficient uses. Even when the use of the land is not distorted, UVA encourages rent-seeking: property owners lobby to maintain and expand benefits and undertake socially wasteful measures to qualify land for UVA, when the land is only nominally used for agriculture. At the federal level, agricultural interests have a strong track record in obtaining subsidies for their industry; thus, their success at the state level should not be surprising. However, when compared with experiences at the federal level, the experiences of 50 different states provide a better natural experiment for assessing the importance of factors that have contributed to the success of agricultural interests.</p> <p class="p2">In this paper, we model the spread of UVA statutes across the 50 states to understand what factors were most important in determining the rate of UVA adoption. We estimate time-to-event models for UVA policy adoption, relating our findings to the literature on policy diffusion. Although we find evidence supporting some of the traditional mechanisms for policy diffusion (see Shipan and Volden 2008), we also find a pattern consistent with models of interest group behavior built on Mancur Olson’s (1965) <i>Logic of Collective Action</i>. The central theme in that interest group literature is the idea of concentrated benefits and diffused costs. Other things being equal, interests that are smaller and more concentrated (a) place a smaller burden on the rest of society for providing a given level of subsidy to each beneficiary, (b) enjoy lower costs of coordinating political activity, and (c) are less affected by the free-rider problem because the support of large individual players could be critical to the interest group’s success. By contrast, for taxpayers who finance such transfers, costs are diffused. The costs to each taxpayer may be trivial, so the benefits to the taxpayer of becoming aware of such programs and working to prevent them outweigh the costs. This observation is doubly true because the transaction or coordination costs associated with organizing a large and disparate populace are likely immense.</p> <p class="p2">We find, as others have posited, that a driving force behind the spread of UVA has been the secular trend toward urbanization across all 50 states. However, urbanization and divergence between the value of agricultural and nonagricultural land do not tell the full story. Other important factors include changes in average farm size and changes to agriculture’s share of state income. We find that in states where average farm sizes increased more rapidly, legislatures were quicker to adopt UVA. That finding is consistent with an increased concentration of agricultural interests. We also find that states where agriculture’s share of state income declined more rapidly were quicker to adopt UVA. This pattern too is consistent with models of collective action. As groups become smaller, the burden of subsidizing them also lessens. Note that although those findings are consistent with models of interest group behavior, they are at odds with traditional voting models.</p> <p class="p2">A number of researchers have focused on UVA programs; however, little systematic analysis has examined the underlying factors that led those programs to spread to all 50 states. Early research on UVA and its effects includes Carman (1977), which examines the adoption of UVA in California; Conklin and Lesher (1977), which considers whether UVA can reduce development at the urban fringe; and Coughlin, Berry, and Plaut (1978), which analyzes UVA as a means of preserving open space. Ladd (1980) provides an early review of the efficiency and equity aspects of preferential tax treatment of agricultural and rural land, including UVA and other programs that tax such land uses at lower rates. England (2002) and England and Mohr (2003) examine UVA programs specifically analyzing their withdrawal penalties if landowners decide to develop their land. Morris (1998) and Liu and Lynch (2008) analyze whether preferential tax treatment delays land development. Kashian and Skidmore (2002) estimate the willingness to pay for land preservation with UVA or other approaches. Kashian (2004) provides a comparative study of the characteristics of state UVA programs. He concludes that in the absence of other complementary policies (such as income supplements) to preserve agricultural land, UVA is “simply a strategy to time the market” (p. 10). Youngman (2005) gives advice to policymakers on nonuniform property taxation. She argues that taxing farmland at a preferential rate is not sufficient to prevent its ultimate development. However, Youngman notes that UVA policies address a perceived unfairness that results from taxing land on the basis of its most profitable use, a criticism that is leveled at all market-based assessments.</p> <p class="p2">The next section provides an overview of UVA programs, including the underlying theory of market value and current agricultural use value, the effect of reduced assessment ratios on the effective rate of property taxation, the potential effects of that preferential taxation, and the literature on UVA programs and their effects. Section 3 reviews the literature on policy diffusion with an eye toward testing whether diffusion theories from the political science literature help explain UVA policy diffusion. Section 4 presents our data and estimation techniques. Section 5 presents our results, and section 6 provides concluding remarks.</p><p class="p3"><a href="http://mercatus.org/sites/default/files/Anderson-Property-Taxation.pdf">Continue reading</a></p> http://mercatus.org/publication/property-taxes-agriculture-use-value-assessment-and-urbanization-across-united-states Mon, 24 Aug 2015 09:36:23 -0400 Government Intervention Is Becoming Obsolete http://mercatus.org/expert_commentary/government-intervention-becoming-obsolete <h5> Expert Commentary </h5> <p class="p1">Much government intervention has no economic rationale and is due instead to pressure from special interests. However, some interventions have a public-welfare justification, backed by conventional economic theory. Textbooks in the field normally present four such rationales: asymmetric information, external effects, public goods, and monopoly.</p> <p class="p1">Advances in technology are fast rendering these arguments obsolete.</p> <p class="p1">"Asymmetric information" means that in an exchange, one party has much more knowledge than the other. When one buys a used car or computer, the seller could take advantage of the buyer's ignorance. Therefore, says standard theory, the market fails.</p> <p class="p1">But ignorance creates a demand for both information and assurance. The economy provides consumers information through such channels as&nbsp;<i>Consumer Reports</i>, Angie's List, and Yelp reviews. Advancing technology provides greater and cheaper information. The websites of consumer publications enable users to computer-search, rather than having to go to libraries and look up printed articles. Markets also provide assurance through warranties, guarantees, and sellers' desire to preserve a good reputation.</p> <p class="p1">"External effects" are uncompensated effects on others; the standard example is pollution.&nbsp;In a pure market, pollution constitutes trespass and invasion of another's property, and is subject to a liability rule that makes the producer pay for the damage, making the cost internal.</p> <p class="p1">But some property rights, such as for fish in the oceans, have not historically been feasible.</p> <p class="p1">Here too, advancing technology, like electronic fencing and tagging, is providing a solution. Even when government is involved in reducing pollution, better technology can replace regulations (such as on gasoline, engines, and smog) with pricing when remote sensors measure actual pollution and photograph the license plates. Private associations and firms can also use such technology to get polluting car owners to compensate for their emissions and help pay for the roads.</p> <p class="p1">"Public goods" are items that are non-rival, meaning that their use by one person does not diminish the use of others. One more person viewing a city fireworks show does not prevent others from viewing it. Standard economic theory posits market failure due to free riders: An entrepreneur cannot privately build a dam to protect a city from floods, because some people will refuse to pay, figuring that the dam will protect them whether they contribute or not.</p> <p class="p1">Already, private contractual communities such as homeowners' associations can and do provide such collective goods. And better technology such as electronic tolling now makes private provision more feasible, as private roads and parking can more easily collect the needed fees, while also eliminating congestion with prices just high enough to enable traffic flow and parking.</p> <p class="p1">Monopoly can indeed result in higher prices, but there can be benefits to large firms, such as providing standard formats for software. Also, even dominant firms need to innovate in order to maintain market share, and excessively high prices induce competition. Here too, better technology helps to address the problem. Examples include cheaper generation of electricity on a small scale, including solar generators, and the recycling of water. Both of these examples reduce the need for regulated "natural monopolies" that have high fixed costs.</p> <p class="p1">The effects of advancing technology on the rationales for governmental programs were presented in the 2003 book "The Half Life of Policy Rationales," edited by Daniel Klein and myself. Eric Hammer and I recently updated this research in 2015 in a working paper published by the Mercatus Center at George Mason University, "How Advancing Technology Keeps Reducing Interventionist Policy Rationales."</p> <p class="p1">The prevailing market-failure theory and the government programs that claim justification from such theory are increasingly obsolete, and both theorists and practitioners need to take note.</p> http://mercatus.org/expert_commentary/government-intervention-becoming-obsolete Mon, 24 Aug 2015 09:20:51 -0400 Fiscal Health Tax Climate and Best Practices for Budgeting http://mercatus.org/publication/fiscal-health-tax-climate-and-best-practices-budgeting <h5> Publication </h5> <p class="p1">Thank you Chairman Folmer and Chairman Eichelberger for inviting me to testify today on the subject of Pennsylvania’s budget and fiscal outlook. The Commonwealth of Pennsylvania has weathered several years of budgetary stress and continues to face near-term difficulty balancing the yearly budget.&nbsp;</p> <p class="p1">Pressures in the form of lower-than-projected revenues, increasing programmatic costs, and demographic changes have been building for many years. Pennsylvania’s financials are weak on a short-term and on a long-term basis, partially owing to policy and fiscal choices over the years, and partially because of the wider economy. Three credit ratings agencies—Moody’s Investors Service, Fitch Ratings, and Standard &amp; Poor’s—downgraded the commonwealth’s bond rating in 2014 in response to these trends.</p> <p class="p1">In my recent research, “<a href="http://mercatus.org/statefiscalrankings/pennsylvania">Ranking the States by Fiscal Condition</a>,” Pennsylvania is ranked 41st out of the 50 states. In my testimony I will highlight several areas of fiscal weakness:</p><ol><li><span style="font-size: 12px;">Poor and deteriorating cash liquidity. Pennsylvania is ranked 45th in the nation for cash solvency.</span></li><li><span style="font-size: 12px;">Ongoing difficulty matching revenues and expenses during the fiscal year. Pennsylvania is ranked 39th for budget solvency.</span></li><li><span style="font-size: 12px;">Long-run obligations are significant. Pennsylvania is ranked 36th for long-run solvency.</span></li><li><span style="font-size: 12px;">Unfunded pension and other postemployment benefits (OPEB) liabilities are a fiscal risk. Pennsylvania is ranked 26th for trust fund solvency.</span></li></ol> <p class="p1">I will also offer some suggestions for improving the fiscal position of the commonwealth.</p> <p class="p1"><b>Background</b></p> <p class="p1">Recently I authored a study that ranks the 50 states according to their fiscal condition. The motivation for this study was to devise a tool for policymakers and the public to assess their state’s fiscal condition, relative to the other states, based on the audited reports of the state government.&nbsp;</p> <p class="p1">Fiscal condition is made up of five “dimensions” of solvency: cash, budget, long-run, service-level, and trust fund. Each of these dimensions consists of two to three indicators that measure the extent to which a state has sufficient resources to meet short-term and long-term commitments. The data to assess solvency is taken from each state’s Comprehensive Annual Financial Report (CAFR) for fiscal year (FY) 2013, the most recent year available when the analysis was performed. This study measures the financial position of the total primary government and includes both governmental activities and business-type activities.</p> <p class="p1">Based on FY 2013 and compared to the other 49 states, Pennsylvania’s overall fiscal ranking is 41 with a score of −1.14, which means Pennsylvania’s fiscal performance is 1.14 standard deviations below the average performance of the states. This score only provides a measure of relative position. For a better understanding of Pennsylvania’s fiscal condition, it is necessary to look at the individual indicators that make up each dimension of solvency.&nbsp;</p> <p class="p1">In the following sections I go through the individual metrics for each dimension of fiscal solvency. In addition to providing the metrics from the FY 2013 study, I updated Pennsylvania’s metrics using recently released FY 2014 data to see how things have changed.</p> <p class="p1"><b>1. Cash Solvency</b></p> <p class="p1">In FY 2013 Pennsylvania ranks 45th for cash solvency. Cash solvency measures the degree to which the state has enough cash on hand to cover short-term bills, which include accounts payable, vouchers, warrants, and short-term debt. The three metrics that make up cash solvency include the cash ratio, quick ratio, and current ratio. The cash ratio only includes the most liquid forms of cash. The quick and current ratios include less liquid forms of cash. A ratio of 2 or greater for any of these metrics is generally considered healthy.</p><p class="p1"><a href="http://mercatus.org/sites/default/files/Norcross_PA-Fiscal--Condition-Testimony.pdf">Continue reading</a></p> http://mercatus.org/publication/fiscal-health-tax-climate-and-best-practices-budgeting Thu, 20 Aug 2015 10:19:20 -0400