Mercatus Site Feed en How a GOP Senate Can Help the Poor <h5> Expert Commentary </h5> <p class="p1">Right now, the Republicans are riding high due. But if they want to stay in power and help Americans in the process, they need to change their priorities.</p> <p class="p2">Emboldened and energized by their triumphant midterm victories, Republicans are eager to repeat their winning formula in the next presidential election. They have one big problem: Republican midterm gains had more to do with a sagging Democrat brand than an attractive GOP platform. Voters are simply tired of the left’s divisive political tactics, like the mythical “War on women,” <a href="">cynical race-baiting</a>, and <a href="">indecent partisanship</a>. Exit polls suggest that Republicans made surprising inroads with rural, young, and Hispanic voters who were hurt or disappointed by the president.</p> <p class="p2">But Republicans can’t sustainably coast on merely being slightly less terrible than the Democrats for too long. To expand their relative appeal, the GOP should embrace compassionate issues that help Americans of <i>all</i> demographics and interest groups who fall through the cracks of Washington’s bad policies.</p> <p class="p2">First, Republicans should become the champions of liberalizing our education system. Education is a major key to income mobility. Unfortunately, our outdated, rigid, and centralized public school system keeps too many American children stuck in poorly-performing schools that hinder their future opportunities. The traditional “solution” of throwing money at the problem simply isn’t cutting it.</p> <p class="p2">And it isn’t for lack of funding. Over the last fifty years, the federal government spent an astounding $2 trillion on education. Total elementary and secondary education spending per pupil <a href="">has tripled in real terms</a>, from an average of $56,903 in 1970 to $164,426 in 2010. At the same time, the <a href="">number of students per teacher</a> in U.S. public schools fell throughout the 1990s until 2012. But these dramatic increases in spending and teachers have not yielded a notable change in <a href=";uid=2&amp;uid=4&amp;uid=3739256&amp;sid=21105255547183">overall student outcomes</a>. Data provided by education analyst Andrew Coulson shows that the National Assessment of Educational Progress scores of 17-year-olds in reading, math, and science <a href="">have stagnated</a> while per pupil spending and employment growth skyrocketed.</p> <p class="p2">Why have educational outcomes so stubbornly flat-lined in the face of this wealth of educational resources? Simple: our educational system provides few incentives for schools to improve. School districts are still based largely on residency; students remain tied to the neighborhood school regardless of how bad its performance may be. U.S. schools will receive funding and “customers” regardless of their merits (or lack thereof).</p> <p class="p2">This structure is particularly destructive for children in low-income families. Privileged children tend to live in higher-performing school districts. If parents are unhappy with their assigned school, they can send their children to private schools or choose move to a better district—which provides another incentive for their district schools to compete to retain students. Less fortunate parents should not be deprived of the ability to remove their children from poor performing schools simply because they lack the resources of their wealthier neighbors.</p> <p class="p2">Republicans should push for reforms to tie educational spending to students rather than schools. The school choice movement formed around these ideas is helping a growing number of low-income children secure access to a high-quality education. Improving our education system by applying successfully-tested school choice reforms is good for everyone, regardless of creed, color, or gender but it is particularly good for low income kids. Republicans should get behind it.</p> <p class="p2">Second, Republicans should use their political capital to end the War on Drugs once and for all. Marijuana legalization initiatives were <a href="">incredibly successful</a> in the midterm election, demonstrating that the pro-legalization trend is well on its way. Republicans should naturally oppose Big Government policies that dictate what individuals can or cannot choose to consume: whether that is sodas, salt, or sativa. What’s more, the decades-long War on Drugs has failed miserably. Despite spending over $1 trillion dollars to stop the stoner scourge, overall drug consumption has barely changed, some drug prices are falling due to technology and increasing supply, and drug addiction has gone up while seeking treatment has become more risky.</p> <p class="p2">In addition, incarceration rates for drug offenses have skyrocketed since the 1980’s due to mandatory sentencing laws, which rigidly determine who goes to prison and for how long. Nonviolent drug offenders no account for about <a href="">one-fourth of all inmates</a> in the United States, up from less than 10 percent in 1980. It destroys families and leaves children to be raised in single-family households. This is particular true for low-income African American families. Despite generally higher usage rates among white Americans, African Americans are three times more likely to be arrested for possession.</p> <p class="p2">Third, Republicans should commit to compassion in action rather than compassion in appearance. While it is tempting to embrace a federal minimum wage increase from a position of compassion, economists have long known that imposing legal price floors tends to create a surplus in markets. The same is true in the labor market.</p> <p class="p2">Research&nbsp;by economists David Neumark of the University of California, Irvine, William Wascher of the Federal Reserve Board, and Mark Schweitzer of the Cleveland Fed shows that minimum wage policies can increase poverty (<a href="">PDF</a>), so poverty reduction certainly shouldn’t be expected as&nbsp;a benefit of raising the minimum wage. That’s because while a minimum wage increase raises the wages of some people, it also reduces employment of young, low-skilled people. The Congressional Budget Office (CBO) for instance, <a href="">calculated</a> that an increase from its current $7.25 level to $10.10 per hour would cost about 500,000 jobs. This is likely a lowball number but it has the merit to illustrate the tradeoff that raising the minimum wage requires.</p> <p class="p2">Additionally, the people whose wages are lifted by the minimum wage aren’t all at the lowest end of the income spectrum. As Nick Gillespie wrote over at <i>Time</i>, “About 50 percent of all people earning the federal minimum wage live in households where total income is <a href="">$40,000 or more</a>. In fact, about 14 percent of minimum wage earners live in households that bring in six figures or more a year.”&nbsp;A better way to help the poor is to just give them cold-hard cash—and stop lecturing them about how to spend their money!</p> <p class="p2">Republicans have a rare opportunity to implement policies that are truly compassionate and transcend toxic identity politics. Whether they will seize the moment, or play the same old politics as usual, remains to be seen.</p> Mon, 24 Nov 2014 11:16:30 -0500 Adam Smith Discusses Ridesharing on Fox 5 <h5> Video </h5> <iframe width="560" height="315" src="//" frameborder="0" allowfullscreen></iframe> <p>Adam Smith Discusses Ridesharing on Fox 5</p><div class="field field-type-text field-field-embed-code"> <div class="field-label">Embed Code:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> &lt;iframe width=&quot;560&quot; height=&quot;315&quot; src=&quot;//; frameborder=&quot;0&quot; allowfullscreen&gt;&lt;/iframe&gt; </div> </div> </div> Mon, 24 Nov 2014 10:53:21 -0500 New York City Supporter and Friend Lunch <h5> Events </h5> <p>Please join us for lunch on Tuesday, February 3 with George Mason University economics professor and Mercatus Center senior fellow Don Boudreaux.</p><p style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;"><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">This is not a fundraising event, and there is no charge to join us. We are pleased to have you as our guest to show our thanks and appreciation to our donors. Dress is business casual. Please invite friends or associates who might be interested.</span></p><p style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">For more information about this event, please contact Caitlyn Van Orden at&nbsp;<a href="" style="font-size: 12px; color: #666699;"></a>&nbsp;or (703) 993-4925.</p> Wed, 19 Nov 2014 16:41:31 -0500 The Future of Economic Development: A Conversation Between Global Thought Leaders Jeffrey Sachs and Tyler Cowen ( <h5> Events </h5> <p><b>PARTICIPANTS:</b><br /><a href=""> Jeffrey Sachs</a>, Professor of Health Policy and Management, Columbia University<br /><span style="font-size: 12px;"><a href="">Tyler Cowen</a>, Holbert L. Harris Chair of Economics, George Mason University</span></p> <p style="text-align: left;"><b><span style="text-decoration: underline;">**Select VIP Seating Available for Media**</span></b><br /> Contact Bob Ewing, director of media relations, Mercatus Center<br /><span style="font-size: 12px;">&nbsp;703.993.4960 (office), 202.494.2567 (mobile), </span><a style="font-size: 12px;" href=""></a></p> <p>Jeffrey Sachs and Tyler Cowen, both <i>New York Times</i> best-selling authors, are among today’s top global leaders and most influential economists. Join these leading thinkers in a serious dialogue on the ideas and policies that will likely shape economic development in the coming years and decades.&nbsp; This is the inaugural event for the Mercatus Center’s newly established&nbsp;<i>Conversations with Tyler</i> event series.</p> <p>Throughout history, some countries’ economies have thrived while others have failed. Currently, one in six people in the world lives on less than $1 per day.</p> <p>What is the connection between a country’s economic policies and environment and its economic growth? What role does a global marketplace play in a country’s economic growth? What are potential solutions being discussed to bring greater prosperity to these countries? By exploring why some countries have grown out of poverty while others haven’t, we can better understand how to fight global poverty for future generations.</p> <p>Prof. Sachs is a leader and one of the preeminent scholars in this field. He has dedicated years of work to answering these types of questions. Please join us for what promises to be one of the most important discussions on development economics in recent years. After the program, we invite you to stay for a reception.</p><p>If you have any questions about this event, please contact Jason Wilbanks at <a href=""></a> or (703) 993-8297.</p> <p><b>About Jeffrey Sachs</b></p> <p>Sachs<b> </b>is a world-renowned professor of economics, leader in sustainable development, senior UN advisor, bestselling author, and syndicated columnist whose monthly newspaper columns appear in more than 100 countries. He was called by the <i>New York Times</i>, “probably the most important economist in the world,” and by <i>Time Magazine</i> “the world’s best known economist.” A recent survey by <i>The Economist</i> Magazine ranked Professor Sachs as among the world’s three most influential living economists of the past decade. Professor Sachs is widely considered to be one of the world’s leading experts on economic development and the fight against poverty.</p> <p><b>About Tyler Cowen</b></p> <p>Cowen is world-renowned professor of economics, co-author of the popular economics blog Marginal Revolution,&nbsp;cofounder of the award-winning online educational platform&nbsp;<a href="">Marginal Revolution University</a>, and chairman of the Board at the Mercatus Center at George Mason University. <i>Bloomberg Businessweek&nbsp;</i>profiled Cowen as “America’s Hottest Economist”, <i>Foreign Policy&nbsp;</i>named Cowen as one of the “Top 100 Global Thinkers,” and an&nbsp;<i>Economist</i>&nbsp;survey counted Cowen as one of the most influential economists of the last decade.</p><p><b><i>Conversations with Tyler</i> Event Series</b><br /> <i>The Future of Economic Development</i> with Jeffrey Sachs will serve as the inaugural event for the Mercatus Center’s newly established&nbsp;<i>Conversations with Tyler</i> economics series. The series will bring world-class thought leaders to the Arlington campus of George Mason University to discuss how ideas, cutting-edge research, and applied economics can bring solutions to society’s most pressing problems.</p> Wed, 19 Nov 2014 16:19:10 -0500 Scottsdale Supporter and Friend Lunch <h5> Events </h5> <p>Please join us for lunch on Thursday, January 15 with Mercatus Center senior research fellow Jason Fichtner.</p><p><span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">This is not a fundraising event, and there is no charge to join us. We are pleased to have you as our guest to show our thanks and appreciation to our donors. Dress is business casual. Please invite friends or associates who might be interested.</span></p><p>For more information about this event, please contact Caitlyn Van Orden at <a href=""></a> or (703) 993-4925.</p> Wed, 19 Nov 2014 14:57:32 -0500 Sidestep the FCC and the FDA <h5> Expert Commentary </h5> <p class="p1">It is difficult to imagine rapid economic growth taking place in the United States without technological innovation. Other countries can grow by catching up to existing technology, but for us it is necessary to push the frontier.</p><p class="p1"><span style="font-size: 11.8181819915771px;">Two potential areas for rapid innovation are telecommunication and medicine. I am very concerned that these areas are regulated by the FCC and the FDA, respectively, two agencies that were established in different eras. My fear is that these agencies are culturally incapable of adapting to the environment that scientific advances have created. I have proposals for sidestepping each agency.</span></p><p class="p1"><a href="">Continue reading</a></p> Wed, 19 Nov 2014 12:47:36 -0500 Embracing a Culture of Permissionless Innovation <h5> Expert Commentary </h5> <p class="p1">“Why does economic growth… occur in some societies and not in others?” asked Joel Mokyr in his 1990 book, <i>Lever of Riches: Technological Creativity and Economic Progress</i>.<sup>1</sup> Debate has raged among generations of economists, historians, and business theorists about that question and the specific forces and policies that prompt long-term growth.</p> <p class="p1">As varied as their answers have been, there was at least general agreement that institutional factors mattered most—it was really just a question of what mix of them would fuel the most growth. Those institutional factors include: government stability, the enforceability of contracts and property rights, tax and fiscal policies, trade policies, regulatory policies, labor costs, educational policies, research and development expenditures, infrastructure, demographics, and environmental factors.<sup>2</sup></p><p class="p1"><a href="">Continue reading</a></p> Wed, 19 Nov 2014 12:35:10 -0500 Incentive Pay for Congress <h5> Expert Commentary </h5> <p class="p1">Most large enterprises use incentive pay like performance bonuses and stock options to better align the interests of employees, especially top managers, with those of the shareholders. To be sure, these compensation systems are often gamed, and CEOs sometimes receive a large payout even if their performance disappoints. Yet despite these imperfections, incentive pay is an indispensable tool — even startups and privately held companies, which have the strongest reasons to organize efficiently, use it extensively.</p> <p class="p1">We don’t offer incentive pay to members of Congress, but perhaps we should. Like shareholder capitalism, representative government creates a principal-agent problem: no matter how much politicians wrap themselves in the rhetoric of public service, their interests are never quite our own. Voter irrationality compounds the problem — members of Congress usually do not literally enrich themselves at the expense of voters; rather, they play to voters’ worst biases in order to get re-elected, often at the expense of good policy.<sup>1</sup></p><p class="p1"><a href="">Continue reading</a></p> Wed, 19 Nov 2014 12:36:21 -0500 A New Congress Must Perform Major Surgery On Dodd-Frank <h5> Expert Commentary </h5> <p class="p1">In the four years since the passage of Dodd-Frank, the financial regulators have written a lot of new rules. Throughout the implementation period, at least one of the chambers of Congress has been under the control of the party that passed Dodd-Frank. Agencies therefore have been spared some painful scrutiny of their Dodd-Frank implementation programs. This month's election changed that, and agencies are likely to face a lot more uncomfortable oversight in the upcoming Congress. But the new Congress, not as wedded to Dodd-Frank as its predecessors, could also make life more bearable for regulators by eliminating some of Dodd-Frank's extraneous statutory mandates.</p> <p class="p1">The Securities and Exchange Commission is a prime candidate for mandate trimming. Dodd-Frank assigned the SEC responsibilities that are far from its core mission. For example, Dodd-Frank directed the SEC to require companies to assess and report their use of minerals tied to the violence in and around the Democratic Republic of the Congo. Companies have spent many hours and dollars trying to identify whether they are using minerals that fund the conflict, but the task appears to be futile. The Department of Commerce recently published a <a href=""><b>list</b></a> of facilities that process the minerals at issue, but stated that it could not determine "whether a specific facility processes minerals that are used to finance conflict in the Democratic Republic of the Congo or an adjoining country." In other words, the government cannot do what it is asking companies to do.</p> <p class="p1">Another mandate that imposes tremendous burdens on the SEC and companies without proportionate benefit for investors is the so-called pay ratio rule. Under Dodd-Frank, the SEC is working on the rule, which requires companies to disclose the ratio of their median employee compensation to the CEO's pay. Writing such a rule might be a simple task if all companies had no more than ten full-time employees working in a single location, but it is quite a bit more complicated to write such a rule for multinational companies that employ thousands of employees working a mix of full- and part-time schedules.</p> <p class="p1">The conflict mineral and pay ratio mandates do not further the SEC's tripartite mission-protecting investors; facilitating capital formation; and maintaining fair, orderly, and efficient markets. Rather they distract from the considerable work the SEC has to do in these areas. For example, the economy's precarious health depends on the ability of financial markets to direct investable funds to the parts of the economy that need it most. Would-be entrepreneurs and growing small businesses face many obstacles to getting the money they need-obstacles that the SEC could work on removing if it were not so preoccupied with pointless Dodd-Frank mandates.</p> <p class="p1">The Financial Stability Oversight Council is another agency that could use some congressional refocusing. The FSOC, a creation of Dodd-Frank, had the potential to play the important role of bringing regulators together to share information, ideas, and concerns about the financial system. Congress, however, loaded the agency down with the responsibility of identifying companies that are systemically important. This function has absorbed considerable regulatory time and has caused undue angst in the market; designated companies will face substantial regulatory costs and are likely candidates for future taxpayer bailout. If Congress were to eliminate this responsibility, the FSOC could focus on the more important task of bringing regulators together to think holistically about financial system regulation. Eliminating the designation exercise would have the added benefit of preventing the emergence of a new category of too-big-to-fail entities.</p> <p class="p1">Removing the FSOC's power to designate also would free the Federal Reserve of the responsibility of regulating entities like insurance companies about which it has no expertise. Congress could further refocus the Fed on its role as a lender of last resort by quashing the Fed's Dodd-Frank-fueled ambitions of being the regulator of last resort. The Fed will be able to focus on its core central bank functions if Congress shifts its regulatory responsibilities to other bank regulators.</p> <p class="p1">Regulators are not looking forward to heightened congressional oversight of their activities, but the new Congress offers them something to offset the pain. Unencumbered by having voted for Dodd-Frank, the incoming Congress can jettison unnecessary statutory mandates so that agencies can get back to their core missions.</p> Wed, 19 Nov 2014 09:56:27 -0500 Together They Bargain? <h5> Expert Commentary </h5> <p class="p1">Last Friday, America’s four postal employee unions organized a mass protest against Postmaster General Patrick Donahoe’s plan to shut down 80 distribution centers in January 2015. The postal workers, quite understandably, see their livelihoods at stake. Many reformers, however, see the rising share of public sector unionization as a drain on our tax dollars and a likely source of government growth—which, as new research reveals, may not be the case.</p> <p class="p1">Regardless of where one falls on controversies like the postal worker strike or the attempted recall of Wisconsin Governor Scott Walker in 2012, most of us recognize the need for states to keep their promises to government workers, retirees, and citizens who rely on essential state services like education, Medicaid and public safety. In a <a href="">study</a> published today by the <a href="">Mercatus Center</a> at George Mason University, we outline just how challenging this can be for policymakers. Public sector unions are highly effective at securing pay and benefits for their members, but appear to have no effect on overall government spending. This leaves an obvious question: How are we paying for everything?</p> <p class="p1">In our new research, we examine public sector union lobbying and collective bargaining activity. Because unions have several tools at their disposal to influence policy, it is difficult to gauge each tool’s effect on workers and taxpayers. To address this, we measured the impact of unions’ collective bargaining rights and political contributions on state budgets and employee compensation. After controlling for a number of factors, we made two important findings:</p> <p class="p1">First, political activity by public sector unions works. Specifically, more collective bargaining tends to mean more government jobs, and more union political spending tends to mean higher growth in employees’ incomes. Rather than demonize unions, we should recognize that they are responding to strong political incentives. Their job is to take care of their members, and they do this extremely well. In economic terms, public sector unionization functions as a “club good” where members pay dues and, in return, receive higher salaries.</p> <p class="p1">Second, while many public sector union critics believe they are a driving force behind government growth—according to the numbers we examined—union political activity does not appear to lead to higher state government spending. Instead, our findings suggest that it is geared toward securing a larger share of an existing pie, rather than growing the government pie. There appears to be a tradeoff between spending on public services and spending on employees.</p> <p class="p1">We also find similar results for teachers’ unions: They take care of their members, and the data clearly indicate that stronger unions and more activity guarantee higher salaries for teachers. But, again, a larger spillover effect is that the data do not show an obvious correlation between increased teachers’ union spending leading to increases in state spending. So it’s reasonable to wonder if in-classroom funding is suffering.</p> <p class="p1">In our current economic environment—where wages are stagnated and state budgets are already being squeezed by less revenue—these findings are doubly important for policymakers. Budgets are unlikely to rise, so increased public sector union activity seems likely to come at the cost of other services. As a result, we can expect to hear more stories like those coming from Detroit, San Bernardino, and Stockton, California—municipal bankruptcies driven in large part by policymakers’ inability to balance union priorities with financial commitments to the general public.</p> <p class="p1">While our data indicate that the unions may not drive much new spending growth, they carve out such a large share of budgets for their members that municipal governments seem destined to fail. If the nationwide pension crisis—which could very well be related to the dynamic we’ve uncovered—is any indication, the longer politicians wait to address the problem, the more painful the fix will be for public workers and retirees.</p> <p class="p1">The scene from failing cities is not all that different from what we’re seeing this week with postal employees: Their unions are fighting hard to protect their members and are willing to go down swinging to get the job done. But with states either unable or unwilling to increase the overall size of government, the result for American taxpayers is an increasingly squeezed public sector that is being asked again and again to do more with less.</p> <p class="p1">Policymakers have a different job: to balance the priorities of different interest groups and the general public. Let’s hope they’re up to the challenge.</p> Wed, 19 Nov 2014 09:09:36 -0500 Less Food Policy, Not More <h5> Expert Commentary </h5> <p class="p1">The United States has created supermarkets full of the widest variety of food that has ever been available to any country. But for some, this achievement is seen as creating more problems than it solves. One suggestion, the subject of a recent <a href="">Washington Post piece</a>, suggests that we need a national food policy. Those that suggest that we need additional government programs and initiatives focused on healthy eating should consider the programs the government already has in place and the results – or lack of results – they’ve produced.<br /><span style="font-size: 11.8181819915771px;"><br />One program is the Department of Health and Human Service’s 10-year plan, </span><a style="font-size: 11.8181819915771px;" href="">Healthy People 2020</a><span style="font-size: 11.8181819915771px;">. This little-known endeavor has a variety of information available on its website but provides little information about how it plans to actually achieve its goals. Additionally, there is the U.S. Department of Agriculture’s Dietary Guidelines for Americans, which “forms the basis of federal nutrition policy” and is now flirting with issues beyond nutrition, such as promoting vegetarianism and sustainable agriculture.</span></p><p class="p1"><span style="font-size: 11.8181819915771px;"><a href="">Continue reading</a></span></p> Mon, 17 Nov 2014 14:43:40 -0500 Working Around the Budget Process: Will We See More Supplemental Funding With the New Congress? <h5> Publication </h5> <p class="p1">The Obama administration recently sent a request to Congress for an additional $11.7 billion in additional funding for fiscal year 2015 to combat the Ebola virus and Islamic extremists in the Middle East. Funding the federal government’s operations outside of the regular budget process—and thus outside of limits intended to restrain spending—is a practice that has been abused in recent years. In addition to bypassing budget caps, supplemental bills can become a vehicle for excessive and haphazard appropriations because Congress often passes them in a rush.&nbsp; &nbsp;</p><p class="p1"><a href=""> <img height="408" width="585" src="" /></a></p><p class="p1"><span style="font-size: 11.8181819915771px;">This week’s chart displays the annual amount of real (2014 $) federal supplemental funding since 1980. As the chart shows, supplemental spending exploded in 2000s during the administration of George W. Bush and a largely Republican-controlled Congress. The increases were driven by the GOP’s preference for skirting budget limits by funding the wars in the Middle East outside of the regular budget process. While this might have been justifiable at the outset of hostilities, the practice of treating war spending as if it were “unforeseen” quickly became dubious.&nbsp;</span></p> <p class="p1">After peaking at $207 billion in fiscal year 2009, supplemental spending has decreased in recent years. Gridlock on Capitol Hill and relatively mild hurricane seasons—with the exception of 2013’s destructive Hurricane Sandy—helped. The winding down of combat operations in Afghanistan and Iraq under the Obama administration is another factor. However, it’s worth noting that the Congressional Budget Office data used to construct this chart omits funding from the 2009 American Recovery and Reinvestment Act (AARA, a.k.a. the economic “stimulus” bill). According to the CBO’s original score of ARRA, an additional $585 billion was added to the federal coffers from FY 2009 to FY 2014 (approximately 85 percent of the funding occurred in the first two years).&nbsp;</p> <p class="p1">With relatively more hawkish Republicans back in control of Congress and problems in the Middle East beginning to boil, a return to the massive supplemental spending of the mid-2000s is a justifiable concern. At the very least, Congress should offset any additional supplemental spending with real budget cuts elsewhere. Taking that approach with the Obama administration’s recent supplemental request would be a good start.&nbsp;</p><p class="p1"><sup>Data notes: Supplemental appropriations are net of recessions. The data does not include the 2009 American Recovery and Reinvestment Act (“stimulus”), which provided for an estimated $585 billion in budget authority from FY 2009 to FY 2014. The 1991 uptrend reflects supplemental spending for Desert Storm, the costs for which were repaid through allied burden sharing. CBO reports no supplemental spending in 2011 and 2012.</sup></p> <p class="p2"><sup>Full sources: Author’s compilations based on Congressional Budget Office, “Supplemental Appropriations in the 1970s” (1981), “Supplemental Appropriations in the 1980s” (1990), “Supplemental Appropriations in the 1990s” (2001), and “Supplemental Appropriations from 2000 to 2006” (2007).&nbsp;</sup></p> Fri, 21 Nov 2014 15:23:49 -0500 Why Treasury Debt Matters More Than the End of QE <h5> Expert Commentary </h5> <p class="p1">Large markets for standardized goods tend to be impersonal. The market's ability to function depends more on the quantity and quality of goods for sale than on who buys the goods. This applies to markets for financial assets too — and it's important to keep in mind when weighing the potential effects of the current volume of U.S. Treasury debt against the impact of the Federal Reserve's decision to <a href="">end quantitative easing</a>.</p> <p class="p1">Under the Fed's historic bond-buying program, the central bank purchased longer-term Treasury debt and Fannie Mae and Freddie Mac mortgage-backed securities from <a href="">primary dealer banks</a> like JPMorgan Chase and Citigroup. The Fed then paid the banks by putting credits into their accounts with the Fed, known as reserves. Increasing banks' reserves was supposed to stimulate the economy by encouraging banks to lend, and possibly even removing some risk from bank balance sheets by purchasing the mortgage-backed securities. Any evidence that it worked seems limited at best.</p> <p class="p1">Some critics worried that quantitative easing could cause severe price inflation, possibly even a hyperinflation, since increasing bank reserves also means boosting traditional measures of the money supply. That doesn't seem to have happened. Banks have earned interest on reserves similar to the interest they would earn on <a href="">short-term U.S. Treasury debt</a>. Professor John Cochrane at the University of Chicago observed in 2010 that <a href="">this helps make dealer banks indifferent</a> between reserves or short-term Treasury debt and may well limit the extent to which banks turn excess reserves into new loans. If banks aren't significantly boosting lending, there's a cap on the potential for big spending increases to drive up prices. So for now, at least, quantitative easing appears to have been a wash.</p> <p class="p1">It's also interesting to note that the effect of quantitative easing may have been mitigated by the fact that the Federal Reserve operates like a private, regulated monopoly banking corporation that pays a very high tax rate. It has a monopoly on issuing U.S. dollars, and earns income in the form of the interest it receives from asset holdings like Treasuries. The Fed then pays its expenses and dividends to member banks and turns the rest back over to the Treasury. As an active participant in the market for Treasuries, the Fed through quantitative easing simply changed who holds the debt.</p> <p class="p1">Going forward, a bigger concern is the quantity of Treasury debt, which as of Oct. 28 was just shy of $18 trillion, and whether the market will want to hold that amount in the future. For now Treasuries are in high global demand: foreign central banks and investors here and abroad want them. (Fed economist Carol Bertaut and co-authors show in a <a href="">series of papers</a> that this global element of demand may in fact be what keeps Treasury debt prices high and yields low.) Basel-type bank capital requirements favor the use of highly-rated sovereign debt like Treasuries; Treasuries also play a key role as collateral in many financial transactions. As long as demand exists, the large quantity of Treasury debt isn't a problem.</p> <p class="p1">Should the Treasury signal that it <a href="">cannot pay back</a> its bond-holders, however, the demand to hold them would vanish. Herein lies the hyperinflationary scenario. For example, if Congress decided not to raise the debt ceiling, that might trigger events leaving the U.S. Treasury no choice but to default on the debt. This would lead people in the U.S. and abroad drop Treasuries at the same time, leaving only taxes and the money-printing presses to finance government spending, which could in turn produce hyperinflation. For this reason, discussions about how to curtail future government spending have become particularly urgent in recent years.</p> <p class="p1">As Alexander Hamilton once <a href="">observed</a>, "A national debt, if it is not excessive, will be to us a national blessing." With quantitative easing out of the way, it's time to focus on curbing the excessive volume of U.S. Treasury debt by addressing spending.</p> Mon, 17 Nov 2014 13:10:56 -0500 The Internet of Things and Wearable Technology: Addressing Privacy and Security Concerns without Derailing Innovation <h5> Publication </h5> <p class="p1">The “Internet of Things”—smart devices that are connected to both the Internet and other devices—and wearable technology promise to usher in the next great wave of Internet-enabled services and data-driven innovation. The Internet will be “baked in” to almost everything that consumers own. Some critics are worried about the privacy and security implications of the Internet of Things and wearable technology, so they are proposing regulation.</p> <p class="p1">In a new study for the Mercatus Center at George Mason University, scholar <a href="http://mercatus">Adam Thierer</a> shows that preemptive, top-down regulation would derail the many life-enriching innovations that could come from these new technologies. The study argues that permissionless innovation, which allows new technology to flourish and develop in a relatively unabated fashion, is the superior approach to the Internet of Things. Combining public education, oversight, industry best practices, and transparency in a balanced, layered approach will be the proper way to address concerns about the Internet of Things—not prospective regulation based on hypothetical scenarios.</p> <p class="p1">While some argue that the worst-case scenarios that could result from emerging technology demand intervention before any harm might occur, even if the possibility is remote, Thierer concludes that other solutions—such as tort law in the legal system or the development of industry best practices—are the better approach to regulating new technology, unless there is clear evidence of direct, immediate risk to health or property. Living in fear of the worst-case scenarios and basing public policy on them can lead to the best-case scenarios never arising. Forbearance and humility by regulators is crucial to developing new products and services that could enrich the lives of all consumers.</p> <p class="p2">To read the full study, see “<a href="">The Internet of Things and Wearable Technology: Addressing Privacy and Security Concerns without Derailing Innovation</a>.”</p> <p class="p4">GROWTH OF THE INTERNET OF THINGS AND WEARABLE TECHNOLOGY</p> <p class="p1">The Internet of Things and wearable technology simply means widespread device connectivity. Appliances and machines that consumers use on a daily basis—such as cars, refrigerators, lights, watches, jewelry, eyeglasses, and even clothing—will be networked, sensing, automated, and able to communicate with one another. These new technologies will give consumers more control over their own lives and save time by automating routine tasks and chores. Many of these changes to daily life are just a few years away, and some can already be seen today.</p> <ul class="ul1"> <li class="li5">Within a few years, tens—if not hundreds—of billions of connected devices will be in use globally.</li> <li class="li5">The biggest impact of connected devices will be seen in health care, energy, transportation, and retail services.</li> <li class="li5">Today, wearable technology is already popular for health and fitness monitoring, allowing users to share data with others and log their daily activity and well-being.</li> <li class="li5">Devices will also have profound implications for health care, as technology assists with surgery and emergency care, treatment, and diagnosis of disease. For example, colon cancer screening may soon become less invasive and abrasive, with patients able to swallow a pill that wirelessly transmits video images of the inside of the body back to doctors.</li></ul> <p class="p4">CHALLENGES TO PRIVACY NORMS AND LEGAL STANDARDS</p> <p class="p1">As technological innovation progresses, thorny ethical and legal questions will arise, including what people should be able to do with their own bodies. Emerging technology will also challenge existing health and safety regulations imposed by government agencies. Additionally, concerns about the collection and dissemination of data, which devices routinely do as part of their design, will become particularly sensitive. Questions about how to deal with data and privacy concerns are unanswered at this time, and so are the capabilities of regulators to deal with such questions without knowing the positive implications of new technology. There are several approaches to regulating connected devices:</p> <ul class="ul1"> <li class="li5"><i>Industry best practices.</i> In response to emerging questions relating to wearable technology and privacy, regulators have pushed device manufacturers to adopt industry-wide best practices, but these actions often run into definitional problems because the technology is so new.</li> <li class="li5"><i>Notice and choice.</i> Regulators have also suggested that manufacturers notify consumers of the collection and use of data and make it easier for them to opt out of having their data used for various purposes.</li> <li class="li5"><i>Use-based restrictions.</i> Restricting when and where devices can be used may be an appropriate method of regulation. For example, prohibiting use of Google Glass in restrooms or while operating a vehicle may be a potential avenue for regulation. Others want use-based restrictions limiting how data is used to make other determinations, especially when sensitive personal information is being collected.</li> </ul> <p class="p1">Regulators should be cautious about implementing use-based restrictions, however. The preferences of regulators should not be substituted for the judgment and choice of consumers. Such “privacy paternalism” can make choice meaningless for consumers or remove it altogether, which limits freedom and innovation. Moreover, regulators should be mindful of First Amendment concerns when restricting use by consumers: some activities, such as photography or reporting based on data collection, may be protected by the Constitution’s guarantee of free speech.</p> <p class="p4">RESISTANCE, ADAPTATION, AND ASSIMILATION:<br /> THE CYCLE OF CONSUMER ATTITUDE TOWARD TECHNOLOGY</p> <p class="p1">Attitudes toward new and emerging technology often go through a familiar cycle of resistance, gradual adaptation, and finally assimilation. In other words, citizens gradually come to accept new technology as it emerges and become more resilient in the process. As with the ultimate adaptation of photography—considered in the late 1800s to be a radical and invasive new technology with profound privacy concerns—citizens will eventually understand and seek out the benefits of technology that can improve lives. Regulators should understand that there is no one-size-fits-all approach to regulating new technology. The goal should be to encourage, rather than limit, freedom and choice for consumers.</p> <p class="p4">CONCLUSION</p> <p class="p1">Concerns about wearable technology can be dealt with using a combination of educational efforts, technological empowerment, social norms, public and watchdog pressure, industry best practices and self-regulation, transparency, and targeted enforcement of existing legal standards (especially tort law) as needed and appropriate. Regulators should also not underestimate the ability of individuals to adapt to these new technologies, just as they have with so many other technologies in the past. Policymakers should allow new technology to flourish and grow rather than impeding or stalling it by an overabundance of caution and concern leading to preemptive regulation.</p> Wed, 19 Nov 2014 10:12:20 -0500 Casey Mulligan Discusses the Economic Impact of the Affordable Care Act <h5> Video </h5> <iframe frameborder='0' width='512' height='390' scrollable='no' src=''></iframe> <p>Casey Mulligan Discusses the Economic Impact of the Affordable Care Act&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 frameborder=&#039;0&#039; width=&#039;512&#039; height=&#039;390&#039; scrollable=&#039;no&#039; src=&#039;;&gt;&lt;/iframe&gt; </div> </div> </div> Sun, 23 Nov 2014 18:36:38 -0500 No Surprise Ex-Im Served Big Business <h5> Expert Commentary </h5> <p><i>Mercatus Center economist Veronique de Rugy on the Export-Import Bank's admission that it counted companies owned by billionaires including Warren Buffet and Carlos Slim among the "small businesses" it serves:</i></p><p>For months, I have been beating the drum about the fact that Ex-Im has been concealing handouts to large corporations under the guise of “small business lending.” Contrary to Ex-Im’s claims, the bulk of its activities aren't about helping small businesses at all. Rather, the Bank prioritizes redistributing wealth to large domestic and foreign corporations.</p><p>Today, the Ex-Im Bank made our case for us. A Bank spokesman has confirmed that the outfit misled Americans about how much money was going to small businesses. <a href="">Reuters broke the story</a>.</p><p>There are three important points to keep in mind.</p><p><b>First</b>, the Ex-Im Bank was recently reauthorized for nine months until its fate is again revisited this summer.</p><p><b>Second</b>, Democrats have become some the biggest advocates of the Ex-Im Bank in the name of its benefits to small businesses. Whether it is because they do not look at the data or because they are eager to help big businesses, this story should give them pause.</p><p><b>Third</b>, this is not the first time the Bank has been implicated by accusations of shady behavior. In the past year alone, it has been dogged by corruption probes, suspicious foreign deals, and plenty of praise by their good friends (and number one customers) at Boeing.</p><p>This is yet another reason to end this toxic, corrupt, corporatist institution once and for all when its charter expires in June. Good riddance.</p><p><i><a href="">Click here</a> to read Dr. de Rugy's full commentary, or <a href="">here</a> for a collection of her work on Ex-Im.</i></p> Thu, 13 Nov 2014 18:10:22 -0500 Public-Sector Unions and Government Policy: Reexamining the Effects of Political Contributions and Collective Bargaining Rights <h5> Publication </h5> <p class="p1">The role public-sector unions may play in the growth of government is a heated topic, as evidenced by the failed recall effort against Wisconsin Governor Scott Walker in 2011 and the Chicago teachers’ strike in 2012. Government growth has many causes, but to date there have been few empirical studies demonstrating that the interaction of public-sector unions and politics leads to government growth. What is the effect of union political activity on government spending, and how does union political activity influence its own members’ salaries and employment opportunities?</p> <p class="p1">In a new study for the Mercatus Center at George Mason University, scholars <a href="">George R. Crowley</a> and <a href="">Scott A. Beaulier</a> answer these questions. While they find little to no evidence that public-sector union activity affects total spending by the government, the data show that union political activity may have an impact on the salaries and jobs of union members. Specifically, growth in public-sector union political activity—measured as the amount of political contributions by the union, the level of collective bargaining, and support for the political party of the governor—is associated with an increase in public-sector union employee income and employment. Ultimately, the study raises an important question for further research, which is whether union political activity can lead to cuts in services for the public in order to compensate for increases in union wages and employment.</p> <p class="p2">For the full study, see “<a href="">Public-Sector Unions and Government Policy: Reexamining the Effects of Political Contributions and Collective Bargaining Rights</a>.”</p> <p class="p4">KEY FINDINGS</p> <p class="p1">Several variables may play a role in the interaction between unions and politics. The following findings used publicly available data on income, employment, government expenditures, union membership, and campaign contributions.</p> <p class="p5">Amount of Political Contributions Correlates with Higher Incomes for Public-Sector Union Employees</p> <ul class="ul1"> <li class="li6">There is a statistically significant relationship between per capita total contributions made by public-sector unions and growth in income per state and local employee.</li></ul> <p class="p5">Level of Collective Bargaining Correlates with Increased Employment for Public-Sector Union Employees</p> <ul class="ul1"> <li class="li6">There is a statistically significant relationship between the level of collective bargaining and the growth of state and local employment.</li> <li class="li6">When taken together, the amount of political contributions and level of collective bargaining have a stronger effect on incomes and employment than they do when observed by themselves.</li> <li class="li6">Moreover, the effect union political activity has on income and employment is associated with support for the governor’s political party: the more the unions have supported the governor’s party in the past, the more of an effect political activity has on income and employment.</li></ul> <p class="p5">Evidence of a Relationship between Total Growth in Government Spending and Public-Sector Union Activity Is Inconclusive</p> <ul class="ul1"> <li class="li6">Evidence is inconclusive for a relationship between either collective bargaining levels or per capita total political contributions and the total growth in government spending.</li> <li class="li6">This lack of a statistically significant finding, along with increases in income and employment for public-sector employees, may indicate the presence of cuts to government services in order to compensate for union income and employment increases. This hypothesis is speculative and further research is necessary to test it.<span style="font-size: 11.8181819915771px;">&nbsp;</span></li></ul> <p class="p5">Political Activity by Teachers Unions May Not Affect Overall Education Spending but Does Affect Teacher Salaries and Employment</p> <ul class="ul1"> <li class="li6">There is little evidence of a relationship between the level of collective bargaining or political contribution by teachers unions and overall education spending in state and local governments.</li> <li class="li6">However, there is a statistically significant relationship between teacher salaries and employment and the three variables (political contributions, level of collective bargaining, and support for the governor’s party).&nbsp;</li> <li class="li6">While pairs of these three variables have a positive relationship with salaries, when combined the results indicate a negative relationship with salaries, suggesting diminishing returns at high levels for all the variables if they are used at the same time.<span style="font-size: 11.8181819915771px;">&nbsp;</span></li></ul> <p class="p4">CONCLUSION</p> <p class="p1">Public-sector unions have real effects on policy outcomes. These unions reward their members’ support through higher incomes and greater employment opportunities. This effect is magnified in states where the governor has enjoyed union support in the past. While there is little evidence that union activity actually affects total state and local expenditure growth, union activity aimed at protecting the interests of the unions’ own members may ultimately have an impact on the services state and local governments offer to the public.</p> Tue, 18 Nov 2014 14:44:29 -0500 The Rise in Per Capita Federal Spending <h5> Publication </h5> <p class="p1">Government debt is projected to reach 77 percent of the US gross domestic product by 2024, if not sooner. Economists have identified that level of debt as counterproductive, yet this sad state of affairs is the result of a growing bipartisan propensity to spend, as a worrying trend has emerged: high levels of spending under Republican administrations have become institutionalized in Democratic ones.</p><p class="p1"><img height="425" width="585" src="" /></p> <p class="p1">This week’s chart shows the amount of real (2014) federal dollars spent per capita since the end of the Second World War. After adjusting for population and inflation, federal outlays have, with a few exceptions, grown at a staggering pace since 1945. The first Truman budget spent $5,039 per capita. Government spending per capita decreased for the next two years and in 1948 hit a historic low of $2,214—a low that has not been matched in six decades. Today’s spending per capita is more than five times this amount, at $10,970.</p> <p class="p1">By the end of the Truman administration, per capita spending had risen back almost to the levels of Truman’s first budget, and it continued to increase under the next few presidents. Kennedy began his term by raising per capita spending to $4,304. Presidents Carter, Reagan, George H. W. Bush, and Clinton all began their terms with higher per capita spending than their predecessors ended with.</p> <p class="p1">George H. W. Bush is the only president since Kennedy whose last budget spent less than his first, falling from $8,728 to $8,507 over four years. That trend was reversed under Clinton and George W. Bush, whose last budgets spent $8,665 and $12,422 per capita, respectively. However, as the chart shows, the increase in spending during Clinton’s two terms was very slight.</p> <p class="p1">While some of the spending in fiscal year 2009 was a result of President Obama’s so-called stimulus bill, and the massive omnibus spending bill for that fiscal year was signed by Obama, President Bush bears responsibility for helping lay the foundation for the increase. This chart, however, does not illustrate that the current president is fiscally responsible, that he is not a big spender, or even that the government doesn’t have a spending problem. The chart shows that spending has not increased as quickly under Obama as it did under the previous administration. In fact, it has even fallen slightly, at least for the moment. But the federal government is still spending an enormous amount of money—more than in 2008 and in every single year before that. The fact that the government isn’t quite as expensive as it was at its peak—or not expanding as fast as it was before—doesn’t mean it is lean. Indeed, Obama’s fiscal year 2015 budget proposes to increase spending from an estimated $10,970 to $11,922 per capita.</p> <p class="p1">This country needs to start making real and credible commitments to cutting government spending. With the president looking to put spending back on an upward trajectory, the new Republican-controlled Congress will need to champion the cause of controlling spending.&nbsp;</p> Fri, 14 Nov 2014 13:57:11 -0500 Matthew Mitchell Discusses the History of Lame Duck Congresses on Washington Journal <h5> Video </h5> <iframe frameborder='0' width='512' height='390' scrollable='no' src=''></iframe> <p>Matthew Mitchell talked about the history of lame-duck congresses and legislation that might pass before the 113th Congress adjourns.</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 frameborder=&#039;0&#039; width=&#039;512&#039; height=&#039;390&#039; scrollable=&#039;no&#039; src=&#039;;&gt;&lt;/iframe&gt; </div> </div> </div> Tue, 11 Nov 2014 17:54:04 -0500 Defining ‘Natural’ Is a Waste of F.D.A. Resources <h5> Expert Commentary </h5> <p class="p1"><b><i>The New York Times Room for Debate</i>&nbsp;posted this question:&nbsp;</b></p><p class="p1">Should the F.D.A. restrict use of the word "natural" on food labels?</p><p class="p1"><b>Richard Williams provided the following response:</b></p><p class="p1">The Food and Drug Administration would have to spend a few years and thousands of human hours defining “natural” when it comes to food. And since most of what people want to avoid by eating "natural" food has no basis in science, the F.D.A. should not get involved.</p> <p class="p1">Some people want to avoid anything that’s been genetically modified, despite the fact that it is safe and farmers have been modifying foods for thousands of years, all the way back to the Babylonians who used yeast to make beer, and the <a href="">documented benefits</a> of this technology. Others are worried about preservatives, though it’s not clear that modern supermarkets could exist without them. Still others want the F.D.A. to label sugar as "natural" and high fructose corn syrup as "artificial" but that only benefits sugar manufacturers, not consumers.</p> <p class="p1">If people want to eat “natural” foods, let the market sort it out. There is a myriad of information available on the Internet that helps consumers make choices depending on their preferences. Additionally, high-end supermarkets act as natural sheriffs and can police these products much more efficiently than federal inspectors ever could.</p> <p class="p1">Rather than trying to standardize a definition of “natural” by sorting through conflicting public opinion, the F.D.A. should remain focused on scientific claims. For example, creating user-friendly <a href="">nutrition labels</a> is an area where the F.D.A. can play a vital role. Defining “natural” simply doesn’t require the time and money of a federal agency.</p> Tue, 11 Nov 2014 09:54:22 -0500