Mercatus Site Feed en How Not to Strangle the Internet of Things <h5> Expert Commentary </h5> <p class="p1"><span class="s1">The Internet of Things is the hot new fixation in the world of technology, and it’s already raising concerns about safety, security, and privacy – many of which are persuasively documented in the <a href=""><span class="s2">special package</span></a> just published here. We all face a host of new vulnerabilities in a world in which we’re always plugged into the Internet, and the objects around us are constantly sharing data about our personal and professional lives.</span></p> <p class="p1"><span class="s1">These fears have led some policymakers and activists to call for preemptive regulations. Specifically, they’re calling for limits on certain types of data collection, or restrictions on where and how these technologies can be used.</span></p> <p class="p1"><span class="s1">This is an appealing approach. It’s also shortsighted.</span></p> <p class="p1"><span class="s1">There’s good reason to be excited about the Internet of Things;&nbsp;<a href=""><span class="s2">experts estimate</span></a>&nbsp;that the total global impact of networked technologies could generate anywhere from $2.7 trillion to $14.4 trillion in value by 2025. And it’s likely to increase all kinds of human goods. But we’re not going to tap its full potential if these technologies are smothered in layers of red tape while they’re still in the cradle.</span></p> <p class="p1"><span class="s1">The problem with imposing precautionary rules is that by trying to prevent hypothetical worst-case scenarios – hackers setting your house on fire; blackmail based on your medical data – it’s likely we would unwittingly discourage many&nbsp;<i>best-case </i>scenarios as a result. We don’t know if any of those frightening things will ever really happen. We do know that the Internet of Things is going to require creativity, agility, and lots of experimentation to reach its full potential. And that won’t happen if its players are constrained a thicket of new precautionary laws, or by fear of crossing lines drawn out of excessive caution.</span></p> <p class="p1"><span class="s1">That doesn’t mean law shouldn’t play a role. But it’s important to realize that there are already many potential legal remedies and other solutions already available. Common law can handle many of the issues that the IOT raises. Existing privacy torts and existing targeted rules (such as “Peeping Tom” laws) can address privacy and security harms as they develop. If safety is the issue, volumes of pertinent federal health and safety rules already exist to enable the class actions lawsuits that are bound to take flight at the first sign of any product defects.</span></p> <p class="p1"><span class="s1">Policymakers also have a role. They can encourage privacy and security “by design” for IOT developers, although those are best implemented as guidelines for an industry still developing, rather than as top-down controls that force it one direction or the other. More privacy-enhancing tools—especially robust encryption technologies—can also help, and government officials would be wise to promote these tools instead of restricting them.</span></p> <p class="p1"><span class="s1">The Federal Trade Commission and state attorneys general will also play an important backstop role by policing “unfair and deceptive” practices. The FTC has already been very active in overseeing the digital economy by encouraging companies to live up to the privacy and security promises they make to their consumers. Governments can also help play the role of educator by explaining the potential dangers of new IOT technologies as well as potentially inappropriate uses.</span></p> <p class="p1"><span class="s1">Beyond that, going further with more heavy-handed rules at this early stage would be a mistake. We don’t actually know which risks are going to turn out to be serious, and which are just bogeymen. For now, we can wait and see how our existing legal systems handle IOT issues and then fill gaps from there.</span></p> <p class="p1"><span class="s1">The model to follow is the nonpartisan vision that Congress and the Clinton administration crafted in the mid-1990s for the Internet itself: they embraced light-touch regulation and relied on existing legal remedies instead of imposing overarching, top-down regulatory frameworks for a new and fast-moving technology.</span></p> <p class="p1"><span class="s1">The result of that approach speaks for itself. The Internet and the Web became models of “permissionless innovation,” and allowed America to take a commanding lead in the global information economy. By protecting and extending that approach now, policymakers can foster the growth of the Internet of Things and get this next technological revolution off to a fast start.</span></p> Tue, 30 Jun 2015 16:39:03 -0400 In an Uber World, Fortune Favors the Freelancer <h5> Expert Commentary </h5> <p class="p1"><span class="s1">With the rise of companies like Uber, entrepreneurs in a variety of fields are extending the concept of connecting customers and workers in what is sometimes called the new sharing economy. There are now online services for private tutors, dog walkers and delivery of packages and groceries, among numerous other options, and it is likely that these ventures will expand.</span></p> <p class="p1"><span class="s1">Many taxi drivers dislike the competition from Uber, but we need to think more systematically about the winners and losers as these new institutions develop. The greater convenience they provide consumers is obvious, but is this generally a good or bad thing for people on the other side of the market, the workers? <a href=""><span class="s2">One recent study</span></a>, by Jonathan V. Hall of Uber and Alan B. Krueger, a professor of economics at Princeton, supported by Uber, suggested that Uber drivers earned more than typical taxi drivers and chauffeurs. <a href=""><span class="s2">A study of Airbnb</span></a> by the economist Gene Sperling, in conjunction with Airbnb, found that the service helped supplement middle-class incomes.</span></p> <p class="p1"><span class="s1">Recently the California Labor Commissioner’s Office ruled that one Uber driver <a href=""><span class="s2">was an employee rather than an independent contractor</span></a>. Uber is appealing the ruling, and it has prevailed in some other states. We don’t yet know how the laws surrounding these services will develop, but the economic efficiencies of institutions like Uber and Airbnb appear to be robust.</span></p> <p class="p1"><span class="s1">Such services are likely to continue to spread. If they do, what else is there to say about their broader implications? In the absence of a lot of systematic data, how might economists think through the effects of these new developments?</span></p> <p class="p1"><span class="s1">On the positive side, the so-called sharing economy allows workers to use their time more flexibly. Drivers can earn money without working full time, and without having to wait around at taxi stands for the next passenger. The workers can use their newly acquired spare time for other purposes, including studying for college, teaching themselves programming or simultaneously offering themselves out for different sharing services: If no one wants a ride, go help someone with repairs around the house.</span></p> <p class="p1"><span class="s1">In short, these developments benefit those workers who are willing and able to turn their spare time to productive uses. These workers tend to be self-starters and people who are good at shifting roles quickly. Think of them as disciplined and ambitious task switchers. That describes a lot of people, but of course, it isn’t everybody.</span></p> <p class="p2"><span style="font-size: 11.9999990463257px;">That’s where some of the problems come in. Uber drivers are much more likely to have a college degree than are taxi drivers or chauffeurs, according to the Hall and Krueger study. It found striking differences between the two groups: 48 percent of Uber drivers have a college degree or higher, whereas that figure is only 18 percent for taxi drivers and chauffeurs.</span></p> <p class="p1"><span class="s1">Only some workers benefit when each hour, or each 15-minute gap, is up for sale. One way to put the general principle is this: The more efficient market technologies become, the more important are human capabilities and backgrounds in determining who prospers and who does not.</span></p> <p class="p1"><span class="s1">To get a better handle on how some workers might lose, consider a hypothetical situation in which such services — and all freelancing and outsourcing services — do not exist. Let’s say a software company receives periodic contracts to execute projects, but it has to rely entirely on current full-time staff. The company then must train its workers to handle a wide variety of possible projects, and so the amount and cost of corporate in-house education go up. But all things being equal, because this training costs something to the company, worker wages will be lower.</span></p> <p class="p1"><span class="s1">In this case, those workers who benefit will be those who need that push from the in-house education to acquire new knowledge. But some self-starting workers might have learned the material on their own anyway. Those workers receive more in-house education than they need, which, in turn, means they are paid lower wages and might well be worse off than they would have been in an economy that encourages self-training and freelance opportunities. One implication is that if the Uber idea spreads, it could discourage corporate training and may require that workers have stronger educational backgrounds. Ideally, formal education should refocus to prepare people for subsequent self-instruction and retraining.</span><span style="font-size: 11.9999990463257px;">&nbsp;</span></p> <p class="p1"><span class="s1">Workers are likely to be evaluated in different ways, too. The Uber driver, who can be rated by customers on the web after a ride, without face-to-face interaction, has a stronger incentive to be nicer, and to offer a clean vehicle and bottles of water, compared with a traditional cabdriver.</span></p> <p class="p1"><span class="s1">At the moment, one problem with many online ratings is that the information isn’t all publicly useful; for instance, a good Uber rating remains within Uber and cannot easily be exported to market a driver for other jobs or opportunities. Perhaps in the future workers might have the option of being certified by Uber or other services in a more general and publicly verifiable manner. That could make such services useful for upward mobility, and it might make their credentials competitive with those of some lower-tier colleges and universities.</span></p> <p class="p1"><span class="s1">Even if we don’t know how important all of the new services will be, it’s already clear that many consumers like them. It’s also evident that at least some workers can benefit from the new arrangements, although the effect on the less educated workers seems to be an important issue.</span></p> <p class="p1"><span class="s1">Still, we shouldn’t be trying to turn back the clock, but rather figuring out how to make the best of this fascinating but sometimes unsettling new world. We are just getting started.</span></p> Tue, 30 Jun 2015 15:15:46 -0400 Sustaining Surface Transportation: The Highway Trust Fund and Ideas for Reform <h5> Video </h5> <iframe width="560" height="315" src="" frameborder="0" allowfullscreen></iframe> <p>&nbsp;</p><div id="_mcePaste" style="position: absolute; left: -10000px; top: 0px; width: 1px; height: 1px; overflow: hidden;">The current system of funding highways is unsustainable. Expansion of the use of the trust fund, coupled with decreased revenue from gas taxes, has resulted in the fund falling short of demand for funding.&nbsp;</div><div id="_mcePaste" style="position: absolute; left: -10000px; top: 0px; width: 1px; height: 1px; overflow: hidden;"></div><div id="_mcePaste" style="position: absolute; left: -10000px; top: 0px; width: 1px; height: 1px; overflow: hidden;">Dr.Tracy Miller explains the role that vehicle mile charges could play in reforming highway funding and management as well as implications of increasing the federal gas tax.&nbsp;</div><p>The current system of funding highways is unsustainable. Expansion of the use of the trust fund, coupled with decreased revenue from gas taxes, has resulted in the fund falling short of demand for funding.&nbsp;</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 width=&quot;560&quot; height=&quot;315&quot; src=&quot;; frameborder=&quot;0&quot; allowfullscreen&gt;&lt;/iframe&gt; </div> </div> </div> Tue, 30 Jun 2015 14:38:45 -0400 Culture and Economic Action <h5> Publication </h5> <p>Culture has been a relatively understudied subject within economics. Economists who have studied it often conceive culture as a form of capital, treating it as a set of tools or a resource that certain groups possess and other groups do not. Austrian economics, in contrast, is a science of human behavior that is primarily concerned with making sense of meaningful human action. Because of this, Austrian economists are particularly well suited to inject cultural considerations into economic analysis.</p><p>This edited volume, a collection of both theoretical essays and empirical studies, presents an Austrian economics perspective on the role of culture in economic action. The authors illustrate that culture cannot be separated from economic action, but that it is in fact part of all decision-making.</p><p>Culture and Economic Action is an enlightening cross-disciplinary exploration that will appeal to all scholars in the social sciences, from anthropologists to economists.</p><p>Available for Pre-Order at <a href="">Edward Elgar</a> and <a href="">Amazon</a>.&nbsp;</p> Tue, 30 Jun 2015 11:12:14 -0400 Ex-Im Bank Charter to Expire at Midnight <h5> Expert Commentary </h5> <p style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;" class="p1"><b><i>Unprecedented Action Comes in Response&nbsp;</i></b><b><i>to National Backlash Against Cronyism</i></b></p><p class="p2"><b style="font-family: inherit; font-style: inherit;">Arlington, Va.</b><span style="font-size: 12px;">—Why, for the first time in more than eight decades, is the charter for the Export-Import Bank going to expire? &nbsp; The answer, according to </span><a href="" style="font-size: 12px;">Veronique de Rugy</a><span style="font-size: 12px;">, one of the nation’s leading experts on the Ex-Im Bank, is that the American people are now standing up to cronyism. &nbsp;</span><span style="font-size: 12px;">&nbsp;</span></p> <p class="p3">“Today will be remembered as a day Americans stood up to powerful special interests and won,” said de Rugy, an economist and senior research fellow for the <a href="">Mercatus Center</a> at George Mason University. &nbsp; “Americans are sick of cronyism, and the Export-Import Bank is the epitome of cronyism. Activists from the Tea Party to Occupy Wall Street agree that it’s time to put an end to the unhealthy marriage between government and big business.”</p> <p class="p2"><span style="font-size: 12px;">Supporters of the Ex-Im Bank claim it helps small businesses and exports. But 40 percent of the bank’s activities benefit one company, Boeing.&nbsp; More than 60 percent of the bank’s financing is focused on helping ten large corporations, including Caterpillar and General Electric.&nbsp; Overseas, the bank subsidizes businesses like Pemex, the massive state-owned Mexican oil company.&nbsp; By contrast, less than 0.04 percent of American small businesses are helped by the bank. &nbsp;</span></p> <p class="p3">“Importantly, Ex-Im is just the tip of the iceberg,” said de Rugy.&nbsp; “We’re going to see this same pushback throughout the economy.&nbsp; The days of rubber-stamping cronyism are over.”&nbsp; De Rugy, <a href=""><span class="s1">described by <i>The Hill</i></span></a> as “the leading academic opponent of Ex-Im,” has played a vital role in raising awareness about the bank.&nbsp; She testified twice before Congress, has authored two papers on the subject, written dozens of op-eds and columns, published more than 40 charts, and penned nearly 80 blog posts. For a one-stop-shop compilation of all de Rugy’s work on the Ex-Im Bank, click <a href="">here</a>. &nbsp;</p> <p class="p3">&nbsp;</p> Tue, 30 Jun 2015 13:29:05 -0400 Is Grad School Right For You? ( <h5> Events </h5> <p>Are you considering pursuing an advanced degree? You’re invited to join <a href="">America’s Future Foundation</a> and the <a href=";utm_medium=GSP&amp;utm_campaign=Newsletter">Mercatus Center at George Mason University</a>&nbsp;on July 16 for a panel discussion to find out if grad school is right for you and to learn about opportunities offered by the Mercatus Center for students pursuing advanced degrees at George Mason University and universities around the world.</p> <p>This panel includes speakers from a variety of backgrounds, including:&nbsp;</p> <ul> <li>Dr. Thomas Hogan,&nbsp;Assistant Professor of Finance, Troy University</li> <li>Dr. Adam Millsap,&nbsp;Research Fellow, Mercatus Center</li> <li>Rachel Reese,&nbsp;Research Assistant, Cato Institute</li> <li>Moderator:&nbsp;Stefanie Haeffele-Balch,&nbsp;Deputy Director of Academic and Student Programs, Mercatus Center</li> </ul> <p>A light reception will follow the discussion.</p> <p>You can <a href="">RSVP here</a>. If you have any questions, please email Leah Hughey at <a href=""></a>.</p> Tue, 30 Jun 2015 11:00:29 -0400 Congress Takes Steps to Keep Consumer Financial Protection Bureau in Line <h5> Expert Commentary </h5> <p><span style="font-size: 12px;">Earlier this year, the Republican-controlled House Financial Services Committee </span><a href="" style="font-size: 12px;">voted out 11 bipartisan reforms</a><span style="font-size: 12px;"> to the Dodd-Frank Act, including two (H.R. 1265 and H.R. 1195) that would write into law certain practices that the Consumer Financial Protection Bureau has voluntarily adopted. And while the committee's ranking member, Rep. Maxine Waters, D-Calif., expressed support for the mandates as harmless, she also criticized them for "unnecessarily" codifying into law policies that the bureau already put into place.</span><br /><span style="font-size: 12px;"></span></p><p><span style="font-size: 12px;">But just because the bureau grudgingly acquiesced to certain needed reforms does not render Congress' actions redundant. Repeated complaints about the bureau's transparency led to it&nbsp;</span><a href="" style="font-size: 12px;">opening up some of its meetings</a><span style="font-size: 12px;"> to additional public scrutiny. Rep. Sean Duffy's, R-Wis., H.R. 1265 would make this transparency permanent by requiring the bureau to comply with the Federal Advisory Committee Act.</span></p><p><span style="font-size: 12px;"><a href="">Continue reading</a></span></p><ul class="ul1"> </ul> Tue, 30 Jun 2015 10:36:52 -0400 Shut Down the Export-Import Bank <h5> Expert Commentary </h5> <p class="p1"><span class="s1">Today at midnight, for the first time in 81 years, the charter of the Export-Import Bank will expire. This government bank claims to promote U.S. exporters by lending cheap, taxpayer-backed loans to foreign and domestic corporations. However, in the process, Ex-Im Bank puts millions of consumers, firms and workers at a disadvantage. As such, closing it down is an important first step in the battle against the unhealthy marriage between the government and corporate America.</span></p> <p class="p1"><span class="s1">Ex-Im Bank's corporate beneficiaries say much to defend their government privileges. They argue that the bank promotes small business, improves exports, is indispensable to countervail foreign export subsidies, and supports jobs. Their claims are either misleading or simply wrong—and are tailored to protect the corporatist status quo. Meanwhile, the many unseen victims of Ex-Im Bank subsidies are ignored.</span></p> <p class="p1"><span class="s1">Contrary to lobbyist talking points, the Ex-Im Bank is firmly in the "big business" business. On the domestic side, 40 percent of its activities benefit one giant company: Boeing. Over 60 percent of the bank's financing aids 10 giant beneficiaries, like Caterpillar, Bechtel, and General Electric. On the foreign side, the cheap loans go to state-owned companies like Pemex, the Mexican government's oil and gas giant, or Air Emirates, the airline of the wealthy United Arab Emirates.</span></p> <p class="p1"><span class="s1">The Ex-Im Bank's effect on small businesses is negligible. Its records suggest that less than 0.3 percent of small business employees and less than 0.04 percent of small business establishments benefit from the Ex-Im Bank annually.</span></p> <p class="p1"><span class="s1">Americans should also be skeptical of fear-mongering about the catastrophes that will befall U.S. exports without the bank. More than 98 percent of all U.S. exports occur with no Ex-Im Bank subsidies at all. And considering who the beneficiaries of Ex-Im on the domestic and foreign sides are, there's no chance that all Ex-Im supported exports will disappear.</span></p> <p class="p1"><span class="s1">The bank claims that if its charter expires jobs will disappear. It takes credit for supporting 164,000 jobs in 2014. But the Government Accounting Office criticized the bank's job calculation methodology for failing to consider how many jobs would have been created without Ex-Im, among other flaws.</span></p> <p class="p1"><span class="s1">Yet even if we accept the bank's questionable job claims, failing to reauthorize Ex-Im won't disturb existing loans and, hence, the jobs they support. It will simply prevent the bank from asking taxpayers to make new loans.</span></p> <p class="p1"><span class="s1">Also, top Ex-Im beneficiaries have billions of dollars in backorders, which will keep their workers and small business suppliers busy for years to come. Boeing, for instance, has a backlog of $441 billion, meaning it will have years to arrange alternative, private, financing (as, of course, small and large borrowers do every day).</span></p> <p class="p1"><span class="s1">Now, I am not saying that Ex-Im beneficiaries don't enjoy the government perks. Yes, Ex-Im loans allowed some smaller domestic recipients do expand their export reach. However, what's beneficial for them isn't good for the economy as a whole.</span></p> <p class="p1"><span class="s1">Economists have shown that while export subsidies boost the profits of the recipients, it tends to have a negative impact on economy as a whole by shifting capital, economic growth, jobs and profits from unsubsidized firms to subsidized ones.</span></p> <p class="p1"><span class="s1">In the end, this is what the fight against Ex-Im is all about. While firms that capture Ex-Im's benefits have every incentive to make sure their voices are heard so they can continue to boost their own exports, jobs, and profits, it is critical that we consider the unseen victims of political privilege who pay for these benefits.</span></p> <p class="p1"><span class="s1">These victims are taxpayers who now bear the risk for $140 billion in liabilities. These victims are consumers who pay higher prices for the purchase of subsidized goods. These victims are unsubsidized firms competing with subsidized ones. They not only pay higher financing costs but also lose out when private capital flows to politically privileged firms regardless of the merits of their projects.</span></p> <p class="p1"><span class="s1">Some are even victimized multiple times: first as taxpayers, then as consumers, then as competitors, and finally as borrowers. Unfortunately, we will never see the businesses that could have been. We will never hear from the workers whose wages weren't raised or whose jobs disappeared because of unfair competition from Ex-Im-backed firms. These victims matter. Also, economists tell us that the cost to them is bigger than the benefits to the winners.</span></p> <p class="p1"><span class="s1">With that in mind, let's look at the claim that since other countries offer export subsidies, the United States should, too. Why on earth would we do something that hurt our overall economy just because other countries are doing it? China and France are free to hurt their economy by offering export subsidies to a few and well-connected companies. The United States shouldn't copy them.</span></p> <p class="p1"><span class="s1">The Export-Import Bank is the epitome of corporatism. Shutting it down is the right thing to do. This is why June 30th will be remembered as the day America stood up for average Americans and the victims of corporate welfare.</span></p> Tue, 30 Jun 2015 13:03:53 -0400 America’s Crumbling Infrastructure? <h5> Expert Commentary </h5> <p class="p1">Most politicians and transportation interest groups claim that America’s infrastructure is in bad shape. At a recent House Ways and Means Committee hearing, Chairman Paul Ryan, R-Wis., said our roads and bridges are in “a sorry state.” At the same hearing Bill Graves, president and CEO of the American Trucking Associations, reported, “Two-thirds of highways are in poor or mediocre condition.”</p> <p class="p1">These statements are reinforced every time we drive over a pothole on the way to work. So it’s no surprise that many people think most roads in the United States are of poor quality. However, government statistics tell a different story. U.S. roads and bridges are not falling apart.</p> <p class="p1">Each year state transportation agencies provide the federal government with comprehensive data on highway and bridge conditions. Highway quality is measured by a surface roughness index. The lower the index score, the better the quality of the road. Roads with index scores below 95 are considered to be in good condition, while higher index scores below 170 are acceptable.</p> <p class="p1">The most recent data on highway quality is for the year 2012. The percentage of urban highways classified as either good or acceptable was about 80 percent in 2012, down about 5 percentage points from 10 years earlier. Some of the decline may reflect a postponement of maintenance during the great recession.</p> <p class="p1">Almost 97 percent of rural highways were classified as either good or acceptable in 2012. This is about the same as 10 years earlier. Even with the recent quality drop for urban highways, a high percentage of our highways are in good or acceptable condition.</p> <p class="p1">These figures mask the variation in road quality across states. For example, in 2012, almost 80 percent of Georgia’s urban highways were in good condition—the highest in the country—while about 15 percent of California’s urban highways were in good condition—the lowest in the country. Obviously, highway usage, weather conditions, and the quality of transportation agencies influence these figures. Using state-level quality figures, there is no statistical change in average urban and rural road quality over the 10-year period.</p> <p class="p1">Taking a longer-term perspective, economists at the Federal Reserve Bank of Chicago examined the quality of the interstate highway system for the period from 1980 to 2006. Using surface roughness index data provided by the government, they find the system’s road surface has become smoother and less deteriorated since the mid-1990s.</p> <p class="p1">Transportation agencies report bridges as either structurally deficient or functionally obsolete. A structurally deficient bridge is not considered unsafe, but it does imply a potential reduction in its load-carrying capacity and requires maintenance. A functionally obsolete bridge does not mean it fails to meet current design standards. It may simply mean that traffic flows over the bridge are more than expected.</p> <p class="p1">The quality of bridges in the United States has improved. Using the most recent data, in 2014, 4.2 percent of bridges were classified as structurally deficient, down from 5.7 percent 10 years earlier. There has been little change in the percentage of functionally obsolete bridges over this time span.</p> <p class="p1">Once again, there is variation across states. In 2014, for example, less than 1 percent of bridges in Texas were structurally deficient—the lowest in the country—while in Rhode Island, almost 24 percent were labelled structurally deficient. Conditions and management vary across states, but our bridges do not appear to be crumbling.</p> <p class="p1">If you Google “crumbling highways and bridges” you get quite a few hits. Yet government statistics suggest that our transportation infrastructure is not in bad shape. People’s personal experience partly explains the divergence between hype and reality. Another reason is that our elected officials in Washington can capture votes by sending gasoline tax dollars home. They have much to gain by pushing the idea that our highways and bridges are falling apart.</p> Mon, 29 Jun 2015 14:49:29 -0400 Expecting the Export-Import Bank to Expire <h5> Expert Commentary </h5> <p class="p1">On June 30, the Export-Import Bank of the United States — an agency that mostly extends loans and loan guarantees to large foreign companies to buy U.S. products — will most likely see its charter expire for the first time in 81 years. This state of affairs is nothing short of remarkable, considering that for years, Ex-Im's charter has been reauthorized by Congress without any debates or even formal votes. The change is the result of an intense fight between the people who oppose corporate welfare and those who will support it at any cost.</p> <p class="p1">However, it would be a mistake to see this battle against Ex-Im as an end in and of itself. It is not. The battle is better-understood in the context of a broader rejection of government-funded privileges for a handful of connected actors. Indeed, everywhere we look, big business is teaming up with big government, and that's causing big problems. People know this, and they're sick of it.</p> <p class="p1">Ex-Im is the epitome of that cronyism and has a charter that is set to expire, which is why it became such a great target. For instance, in recent years, some 60 percent of the bank's activities have benefited 10 giant U.S. corporations, with 40 percent benefiting one company alone: Boeing. On the foreign side, the cheap loans are extended to giant state-owned companies such as Mexico's petroleum company, Pemex, and the United Arab Emirates' airline, Emirates. When the Ex-Im financing isn't benefiting a state-owned firm, it is often flowing to very successful private firms with plenty of access to capital, such as the loan extended to the richest woman in Australia to finance her iron ore project at the expense of its U.S competitors.</p> <p class="p1">These Ex-Im companies may enjoy the perks of cheap financing and artificially inflated profits, but it's not fair for the 98 percent of U.S.&nbsp;exports generated without special treatment from the federal government. That's especially outrageous when the program has taxpayers on the hook for $140 billion.</p> <p class="p1">The Department of Energy's 1705 loan program falls squarely in that category. A few years ago, it received a lot of media and political attention when one of its recipients, a solar company named Solyndra, defaulted on its $538 million loan guarantee, leaving taxpayers with the tab.</p> <p class="p1">The overlooked scandal of the 1705, however, is that — as with the Ex-Im Bank — most of its beneficiaries are green energy projects backed by gigantic companies with plenty of access to capital, such as Goldman Sachs and NRG Energy.</p> <p class="p1">But cronyism goes beyond loan guarantees. A 2012 paper by budget analyst Tad DeHaven calculated that subsidies to businesses alone cost taxpayers almost $100 billion each year. The subsidies flow to air carriers, community developers, fisheries and wineries. There are also billions in subsidies to rich farmers, on top of such things as the bailout of the automobile industry, which ended up costing $9.26 billion.</p> <p class="p1">Whatever form it takes, this cronyism is harmful. As my colleague Matt Mitchell explains, "whatever its guise, government-granted privilege is an extraordinarily destructive force. It misdirects resources, impedes genuine economic progress, breeds corruption, and undermines the legitimacy of both the government and the private sector."</p> <p class="p1">The American people are awakening to this reality, and many are demanding change. And they now have champions in Washington to make their voices heard. It's in that broader context that we should understand the battle against the Export-Import Bank. Indeed, I predict that lawmakers and lobbyists defending the many crony programs that exist today will soon find out that the opposition to the Ex-Im Bank is just the beginning.</p> Mon, 29 Jun 2015 14:37:21 -0400 Community Revival in the Wake of Disaster <h5> Publication </h5> <p><span style="font-size: 12px;">Rebounding after disasters like tsunamis, hurricanes, earthquakes, and floods can be daunting. Communities must have residents who can not only gain access to the resources that they need to rebuild but can overcome the collective action problem that characterizes post-disaster relief efforts.&nbsp;</span></p><p><i>Community Revival in the Wake of Disaster</i> argues that entrepreneurs, conceived broadly as individuals who recognize and act on opportunities to promote social change, fill this critical role. Using examples of recovery efforts following Hurricane Katrina in New Orleans, Louisiana, and Hurricane Sandy in Rockaway, New York, the authors demonstrate how entrepreneurs promote community recovery by providing necessary goods and services, restoring and replacing disrupted social networks, and signaling that community rebound is likely and, in fact, underway. They argue that creating space for entrepreneurs to act after disasters is essential for promoting recovery and fostering resilient communities.</p><p>Pre-order at <a href=";st1=9781137559715">Palgrave Macmillan</a> or <a href=";sr=&amp;qid="></a></p> Mon, 29 Jun 2015 13:54:06 -0400 Los Angeles Supporter and Friend Dinner <h5> Events </h5> <p style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">Please join us for an intimate dinner and discussion with Dr. Don Boudreaux,&nbsp;Mercatus Center Board Member and&nbsp;Senior Fellow with the F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics.</p><p 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.</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;">To RSVP for this event, please contact Caitlyn Van Orden at&nbsp;</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;"><a href="" style="font-size: 12px; color: #666699;"></a>&nbsp;or (703) 993-4925.</span></p> Fri, 26 Jun 2015 13:22:27 -0400 Costa Mesa Supporter and Friend Dinner <h5> Events </h5> <p style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">Please join us for an intimate dinner and discussion with Dr. Don Boudreaux,&nbsp;Mercatus Center Board Member and&nbsp;Senior Fellow with the F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics.</p><p 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.</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;">To RSVP for this event, please contact Caitlyn Van Orden at&nbsp;</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;"><a style="font-size: 12px; color: #666699;" href=""></a>&nbsp;or (703) 993-4925.</span></p> Fri, 26 Jun 2015 13:20:14 -0400 San Diego Supporter and Friend Lunch <h5> Events </h5> <p style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;">Please join us for an intimate lunch and discussion with Dr. Don Boudreaux,&nbsp;Mercatus Center Board Member and&nbsp;Senior Fellow with the F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics.</p><p 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.</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;">To RSVP for this event, please contact Caitlyn Van Orden at&nbsp;</span><span style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif;"><a href=""></a> or (703) 993-4925.</span></p> Fri, 26 Jun 2015 13:16:52 -0400 Trans Fat Ban Just a Swing in the Dark <h5> Expert Commentary </h5> <p class="p1"><span class="s1">When in doubt, throw it out. That philosophy seems to be what’s driving the FDA’s policy on trans fatty acids, and, in all likelihood, it’s just wrong. Let’s untangle what has transpired and see why.</span></p> <p class="p1"><span class="s1">First, the FDA probably should have left a big win alone. When the FDA required trans fatty acids to appear on the Nutrition Facts Panel, the food industry reacted immediately – those who could find substitute fats did so, which caused consumption to drop by 80 percent. At the previous levels, there was pretty good evidence that consumption of trans fatty acids at high levels (4 grams) was associated with heart disease.</span></p> <p class="p1"><span class="s1">But what about current consumption at lower levels? The evidence is missing. One might wonder: If it’s bad for you in larger amounts, why isn’t it bad for you in smaller amounts? Well, water is obviously good for you in small amounts, but if you drink too much too quickly, you die.</span></p> <p class="p1"><span class="s1">It turns out that most of the things we eat are like that. Small amounts either pass harmlessly through your body or are good for you. Eat too much, too quickly, and it’s bad or lethal. Drugs are the same way: They may cure you in small amounts but kill you if you take too many of them. Radiation is also the same way; a lot will give you cancer or kill you, but a little bit (it turns out) is good for you. Even some very nasty things like dioxin and arsenic can be good for you at extremely low levels. Salt is necessary for life, but consuming too much is unhealthy.</span></p> <p class="p1"><span class="s1">Even though trans fatty acids likely follow the same pattern – being benign or helpful at low levels – we don’t know that, and we don’t know at what level that may be.</span></p> <p class="p1"><span class="s1">So, shouldn’t we just get rid of it? Probably not, for a couple of reasons.</span></p> <p class="p1"><span class="s1">First, it sets a bad precedent. It takes a nutrition issue and turns it into a safety issue. That’s what the Generally Recognized as Safe or GRAS law is about: safety. If we start doing that for other ingredients – particularly when we don’t have the science to back it up – we are opening up a huge can of worms. Apparently, there are lawyers out there who see this kind of thing as a golden opportunity.</span></p> <p class="p1"><span class="s1">The other reason goes back to missing science. What’s going to take the place of trans fatty acids when you ban it? The FDA doesn’t know, but it moved ahead anyway.</span></p> <p class="p1"><span class="s1">Ironically, this is how we got into this particular mess in the first place.</span></p> <p class="p1"><span class="s1">When food activists became concerned about saturated fat in animal fats in the 1970s, the industry went to vegetable oil but, to make it work, they had to use the hydrogenated variety. No one knew that’s what they were going to do, and no one tried to find out. The same people pushed the FDA to enact the current policy, and they don’t know what the replacement will be either. The good news is that after the labeling came out, the industry generally found better fats to replace trans. It’s not clear what the remaining firms are going to do since, if they could have easily replaced trans, they already would have. Will the replacement be better or worse? No one knows.</span></p> <p class="p1"><span class="s1">This is regulating in the dark. We don’t know if there are levels of trans fatty acids that are benign or perhaps even good for you – but the odds are that they exist. We don’t know what’s going to replace trans fatty acids. We don’t know how many wasteful lawsuits may drive food companies in other, potentially worse, directions. We don’t know how morphing what should be a nutrition policy into a safety policy will entice activists to agitate for more policies that move way ahead of science.</span></p> <p class="p1"><span class="s1">What we do know is that the moment we leave the necessary science and sound policy behind, it’s a crapshoot. If that’s what we are going to do, why we do we need “expert” science agencies?</span></p> Fri, 26 Jun 2015 11:16:56 -0400 State's Exports Won't Collapse If Ex-Im Bank Goes Away <h5> Expert Commentary </h5> <p>With its June 30 expiration date quickly approaching, there are very few working days left should Congress want to address the termination of the Export-Import Bank - a federal outfit that mainly extends loans and loan guarantees to successful, well-connected foreign companies. At the center of the debate has been House Financial Services Committee Chairman Jeb Hensarling, R-Dallas, who noted last month: "The American people do not want privilege and subsidy. What they want is freedom and opportunity." Chairman Hensarling was referring to Ex-Im's problematic, and often corrupt, history.</p><p><a href="">Continue reading</a></p> Thu, 25 Jun 2015 16:03:37 -0400 Mercatus' Graboyes on King v. Burwell <h5> Expert Commentary </h5> <p>Robert Graboyes, a health care economist at the Mercatus Center at George Mason University, had this to say about today's King v. Burwell ruling:</p> <p style="padding-left: 30px;">King v. Burwell is over. The Court has ruled for the defendants (Burwell), and from a rule of law perspective, that's an unfortunate outcome. But as for the fundamental dynamics of U.S. health care, the case was never going to change much. Since World War II, Left and Right have fought bitterly—and almost exclusively—over how to divide up existing health care resources through health insurance coverage. Both sides have obstructed the development of newer, better, and less expensive modes of care—technologies that can bring better health to more people at lower costs, year after year. (For a fuller explanation, see my work, "<a href="">Fortress and Frontier in American Health Care</a>")</p><p style="padding-left: 30px;">Nevertheless, King v. Burwell was an important case. As written, the Affordable Care Act (ACA) offers insurance subsidies only in states that establish their own health insurance exchanges—not in those using the federal government's exchange. But when most states declined to establish exchanges, the Administration decided to distribute subsidies through the federal exchange without clear legal authorization. Today's ruling means the federal government can continue paying subsidies as interpreted, not as written.</p><p style="padding-left: 30px;">With this ruling, the ACA’s status quo remains. In all states (and D.C.), ACA subsidies will be available to individuals. The ruling also preserves the employer mandate (which imposes significant financial and administrative costs on employers) and the individual mandate (which orders Americans to either buy insurance or pay a tax for not doing so).</p><p style="padding-left: 30px;">However, the ACA is still a troubled law. While’s consumer interface is operational, much of the site remains dysfunctional. Oregon spent $300 million only to have its exchange completely collapse. That state now uses Hawaii is terminating its failed exchange. Vermont recently abandoned its exchange-centered single-payer system. Exchanges in California, Colorado, Maryland, Massachusetts, Minnesota, and several other states are suffering serious financial and operational stress. Health insurance premiums nationwide are rising rapidly, and 2017 will likely see huge increases as federal subsidies to insurers end.</p><p style="padding-left: 30px;">The ACA is a massive law, written and passed in haste. Such procedural shortcuts yield unintended consequences and pose unanticipated risks to the American people. The real lesson of King v. Burwell is that transformative legislation should never be written or passed in extreme haste, nor imposed by a single party. Ignoring those principles assures that the Affordable Care Act will remain bitterly contentious and subject to additional litigation for years to come.</p><p><i>For more information, please contact Kyle Precourt at (703) 993-8196 or Camille Walsh at (703) 993-4895.</i></p> Thu, 25 Jun 2015 10:48:11 -0400 Tools for Tracking the Economic Impact of Legislation <h5> Events </h5> <p>Laws passed by Congress impact the economy, but Congress has no systematic way to comprehensively track and assess the economic impact of legislative actions. This is especially difficult when laws empower federal agencies to regulate. While the current budget process scores and tracks the economic impact of spending and taxes, it does not account for the economic consequences of regulation.</p> <p>The Mercatus Center at George Mason University invites you to join Dr. Jerry Ellig, Dr. Jason Fichtner, and Dr. Patrick McLaughlin for a Regulation University to discuss how the budget and regulatory process operate in isolation to each other, and reform options that could improve both systems.</p> <p>This program will:</p> <ul><li>Review the economic information that is important to a well-functioning budget and regulatory process;</li><li>Examine how the current legislative, budget and regulatory processes prevent Congress from knowing the economic results of legislation and regulation; and</li><li>Identify the elements that can improve Congress’s ability to define and oversee public policy priorities. </li></ul> <p>Space is limited. Please register online for this event.</p> <p class="p1">This event is free and open to all congressional and federal agency staff. Lunch will be provided. Due to space constraints, this event is not open to interns.&nbsp;<i>Questions? Please contact Samantha Hopta at </i><a href=""><i></i></a><i>.</i></p> Wed, 24 Jun 2015 15:45:06 -0400 The Challenge of Transparency in Taxation <h5> Publication </h5> <p><span style="font-size: 12px;">Fiscal illusion may not be a household term, but it is nothing new. Coined by Amilcare Puviani in 1903, </span><i style="font-family: inherit; font-weight: inherit;">fiscal illusion</i><span style="font-size: 12px;"> theorizes that the ruling class intentionally misleads the public by exaggerating the benefits of public services and obscuring the total tax burden. The theory was developed and popularized by economist James Buchanan in the 1960s as a way to better understand tax policies and outcomes. While fiscal illusion involves a </span><i style="font-family: inherit; font-weight: inherit;">systematic misunderstanding </i><span style="font-size: 12px;">of both expenditure and revenue policy, scholarly analysis has focused primarily on the revenue side through the examination of tax policies. This policy brief focuses on tax policy and its relationship with transparency as a means of possibly counteracting the effects of fiscal illusion.</span></p><p><span style="font-size: 12px;">While the federal government has taken the lead in implementing efforts toward greater transparency—for example, by creating the easy-to-access website to enable visitors to track the spending of stimulus money—state and local governments are following suit by providing more online information about how they spend taxes. Proponents of increased transparency in the public sector, including elected officials and citizens, believe that transparency is an important tool for holding governments accountable and reducing corruption. In a period when trust in government has hit a record low (24 percent in 2014 and a record low of 19 percent in 2013), increased transparency is viewed as a way of promoting trust and cooperation between government and its citizens.</span></p><p><span style="font-size: 12px;">Despite almost universal support for transparency, there is no clear way of efficiently and effectively achieving this goal. Many such efforts involve posting more information and data online, but data dumping by itself does little to increase transparency. For example, does making 10,000 pages of expenditure and revenue information available online further transparency when the pure volume of information makes it next to impossible for researchers to understand, much less find, what they are looking for? In response to concerns about data dumping, academics and nonprofits have attempted to categorize how open and accessible state websites really are. As of 2013, 43 states have created websites dedicated to fiscal transparency. In many of those cases, however, the fiscal data the states present are not easily accessible or digestible by either nonexperts or scholars—thus the websites are not successful at reaching the majority of the public. Exceptions include the states of Kentucky, Arizona, and New York, which not only present fiscal information on their websites but also provide video tutorials of how to navigate their sites.</span></p><p><span style="font-size: 12px;">Other common methods to increase transparency involve expanding citizen knowledge and participation in the budgetary process. This is done through information sharing in the form of budget briefs and participatory budgeting, whereby citizens choose how and where to spend a portion of their budgets (as is currently done in San Francisco, Vallejo [California], St. Louis, Chicago, New York, and Boston). Participatory budgeting allows citizen groups to create proposals and then vote on them directly, thereby taking control of a portion of government expenditures.</span></p><p><span style="font-size: 12px;">To date, most efforts toward greater transparency in the public sector have targeted the expenditure side of public spending while ignoring the revenue side. For example, in 2013, Michigan began to provide comprehensive line-item budget expenditure reports with expenditures characterized as core services, support services, or work projects. Given polling statistics showing that 76 percent of Americans believe government spends too much, this trend may not be surprising. Despite the lack of attention given to the revenue side, 72 percent of Americans report that the federal government needs to either completely overhaul its tax system or make major changes to it. Perhaps one reason for the emphasis on expenditures rather than revenues is that in many states, revenues are already subject to referendum and tax and expenditure limits and are therefore considered so restricted that states and local governments are less inclined to engage citizens in conversations about tax policy. Or it may be that concerns about accountability are primarily about how the money is being used—not how it is collected.</span></p><p><span style="font-size: 12px;">The lack of public discourse about revenue transparency does not mean that public revenues are at all transparent. This brief discusses revenue transparency with particular attention to what makes revenue instruments transparent, what the obstacles to transparency are, and some options for increasing transparency.</span><br /><br /><b style="font-family: inherit; font-style: inherit;">Transparency and the Fiscal Illusion</b><br /><span style="font-size: 12px;">Transparency in government can be understood as government providing data and information on its operations, management, and policies—that is, clear information on what it is doing and how. Advocates for transparency come from across the political spectrum, from normal citizens, and from numerous nonprofits.</span></p><p><span style="font-size: 12px;">Broadly speaking, a government’s revenues are transparent when people can understand their total tax burden, including fees and license costs. Fiscal illusion research is very concerned with the lack of transparency in government financing. Most research on this topic revolves around the tax burden and finds that fiscal illusion causes citizens to perceive their tax burden to be lower than it actually is. This misperception leads citizens to believe that government services cost less than they do, thereby creating demand for government services to be beyond what is socially optimal. This is troubling because there is also evidence that when citizens understand the true cost of government, their policy preferences change. For example, one study finds that the transparency of the local tax burden has a strong impact on citizen demand for redistributive policies: 90 percent of citizens supported a policy when the tax was opaque versus only 10 percent when the same tax burden was transparent.</span><br /><br /><b style="font-family: inherit; font-style: inherit;">Obstacles to Transparent Revenues</b><br /><span style="font-size: 12px;">There are many obstacles to making government revenues transparent. Some have to do with the nature of the revenue instrument while others are the result of policy choices or tax administration. An underlying reason is the high cost to citizens of getting complete information on their total tax burden. These costs, scholars have argued, lead citizens to choose to be “rationally ignorant” regarding their tax burden, which then allows governments to rely on deceptive or illusionary revenue instruments.</span></p><p><span style="font-size: 12px;">The difficulty of acquiring this information is due to several factors. First, many taxes or fees are paid throughout the year, so citizens who want to capture their full tax burden must carefully monitor each tax payment. Sales taxes are collected on the purchase of most commercial items (not all items, though; for example, many states do not collect sales taxes on food, and in some states food is taxed at the local but not the state level). This means that many Americans pay sales taxes multiple times a day, so to know their total tax burden they would have to keep track of every receipt and be mindful of the sales tax rates in their jurisdictions. This temporal spacing is most apparent in the sales tax, but other common examples are excise taxes (such as for gasoline or tobacco), tolls, park fees, and utility fees.</span></p><p><span style="font-size: 12px;">A second obstacle is the revenue complexity in the American system, in large part because there are a lot of taxes and fees that citizens pay. Fiscal illusion literature has shown that the tax system becomes more opaque as the number of revenue instruments grows. This problem is exacerbated by a reliance on taxes that are less visible and are spread out over time. This becomes especially problematic when citizens must pay the same tax in multiple jurisdictions and to various levels of government. Because citizens may pay federal, state, and even municipal income taxes, they need to understand how their burden is spread over multiple governments.</span></p><p><span style="font-size: 12px;">An additional obstacle is that some tax instruments are inherently less transparent than others. For example, the impact of sales taxes is attenuated by virtue of frequent payment, whereas property taxes, when not paid through escrow accounts, are more transparent because they are made known to taxpayers much less often, typically once a year. Many researchers of fiscal illusion theory point to the very transparency of property taxes as the primary reason why they are so unpopular. Similarly, income taxes </span><i style="font-family: inherit; font-weight: inherit;">should</i><span style="font-size: 12px;"> be transparent, but income tax withholding has made them more opaque. Taxpayers are not confronted with their tax bill and may not keep track of how that burden accrues over the course of the year.</span></p><p><span style="font-size: 12px;">Why would government make its revenues less transparent? The fiscal illusion literature would say policymakers make them less transparent to make them more politically palatable. Another explanation is that as policymakers implement changes to ease administration, a loss of transparency is simply a side effect.</span><br /><br /><b style="font-family: inherit; font-style: inherit;">Strategies to Increase Transparency</b><br /><span style="font-size: 12px;">What can be done to increase transparency on the revenue side? There are numerous strategies, but many are not feasible. For example, revenue systems would be more transparent if revenue instruments were used only by one level of government, not by overlapping jurisdictions. The more levels of government that share a tax base, the more difficult it is for taxpayers to track where their tax money is going, which in turn makes it difficult to hold the appropriate level of government accountable. Another strategy would be to limit the number of revenue streams used at each level of government. If states were financed exclusively by income taxes, citizens could calculate their tax burdens more easily. Under the current system, the citizen has to combine income tax burdens with sales taxes, excise taxes, fees, and so on.</span></p><p><span style="font-size: 12px;">There are more feasible ways in which governments could increase transparency. First, they could choose (if legally able) to rely on more transparent taxes. For local governments this could mean relying more heavily on property taxes and less heavily on sales taxes. Increasing property taxes would most likely be met with a good deal of opposition from the public. The literature provides evidence that more visible and transparent tax structures lead to increased rationality of policy outcomes, so facing the political backlash may be worth it. Furthermore, there is evidence that citizens are more willing to pay higher taxes (and trust elected officials) when fiscal institutions are more transparent.</span><br /><span style="font-size: 12px;">Other ways that government can increase revenue transparency are less structural in nature. Through increased citizen education and engagement, citizens can come to understand the ramifications of different revenue policies, including what their respective tax burdens actually are. Governments could provide taxpayers with “receipts” for different tax instruments, which break down how much of a citizen’s taxes goes to each government program. In November 2014, a bipartisan effort in Oklahoma, the Taxpayer Transparency Act, led to the creation of a taxpayer receipt. It is intended to foster understanding of how taxes support state government and to enable citizens to hold their elected officials more accountable—ultimately leading to superior outcomes. However, citizens must first know their tax burdens to input them into the tax receipt form and receive a breakdown of what their taxes are paying for.</span></p><p><span style="font-size: 12px;">One of the few other states to adopt a taxpayer receipt is Utah. The Utah system requires citizens to input their income tax burden on a receipt form, but it also allows citizens to estimate their own sales tax burden or provides an estimate based on a citizen’s income. While this system is imperfect—for example, it does not take into consideration family size or the individual taxpayer’s preferences or behaviors—it does provide a reasonable estimate of the taxpayer’s </span><i style="font-family: inherit; font-weight: inherit;">state</i><span style="font-size: 12px;"> sales tax burden, thereby increasing transparency of sales tax revenue. To make this process even more transparent, Utah could link to the receipt once income taxes are filed to use taxpayers’ personal information to populate the receipt, compare this information to the average burden in the state, and include estimates of all other taxes and fees.</span></p><p><span style="font-size: 12px;">Beyond creating a taxpayer receipt, few states and local governments are making an effort to increase revenue transparency. One exception is momentum toward shining a light on tax expenditures—that is, government spending through the tax code using various forms of tax breaks. While this approach does not directly help citizens understand their true tax burden, tax expenditures are not only a form of public spending; they also affect many aspects of tax policy and equity. For example, Massachusetts now publishes its tax expenditures budget, allowing taxpayers to view all tax expenditures and the magnitude of each. The budget focuses on expenditures from three categories of taxes: personal income tax, corporate income tax, and sales tax. Vermont passed a law in 2013 mandating that the government must evaluate and provide justification for all tax expenditures. While these efforts make substantial progress in making government more transparent, both governments and citizens need to do more to fight fiscal illusion as it applies to tax burdens.</span></p><p><span style="font-size: 12px;">Citizen outreach and education is difficult and costly. Governments have to use scarce resources to find ways to get citizens to engage. However, such efforts would be worthwhile if governments could inform citizens as to&nbsp;the scope of government activities, the reason government provides services and their benefits, and how much those services cost and how they are financed. Such knowledge, were it accessible, would allow citizens to make better-informed decisions about their desired level of taxes and services.</span></p><ul class="ul1"> </ul> Wed, 24 Jun 2015 15:05:59 -0400 America's Coming Transfer of Wealth <h5> Expert Commentary </h5> <p><span style="font-size: 12px;">Does it seem as if some lawmakers have the attention span of a toddler? Several years ago, concerns about the debt and overspending were all the rage. These worries have dissipated almost entirely as deficit levels have gone down from their sky-high summit in 2009. And just like that, lawmakers have gone back to overlooking our long-term fiscal situation and the unsustainable path the nation is on.</span></p><p><span style="font-size: 12px;">Case in point: the latest projections from the Congressional Budget Office. According to the CBO's annual Long-Term Budget Outlook, if current laws were to remain unchanged, government spending as a share of gross domestic product would reach 22.2 percent in fiscal 2025, up from 20.5 percent today. By then, even under a very rosy GDP growth scenario, the debt would amount to 78 percent of the economy. To put this number in perspective, the debt-to-GDP ratio was 35 percent in 2007. In 2040, the debt could reach a whopping 103 percent of GDP. Spending on interest alone would consume 4.3 percent of GDP, a dramatic increase above the current 1.3 percent. Putting that in dollar terms, interest on the debt would jump from $235 billion to over $2.2 trillion. That's a lot of money.</span></p><p><span style="font-size: 12px;">The deterioration comes fully from the explosion of major health care programs, Social Security and escalating interest on debt costs. More precisely, Medicare, Medicaid, Affordable Care Act subsidies and Social Security are the drivers of our future debt. Spending on these programs alone could reach 11.8 percent of GDP in fiscal 2025 and 14.2 percent of GDP in 2040, up from 10.1 percent today.</span></p><p><span style="font-size: 12px;">Because spending on entitlements will continue to outpace all other spending for years to come, they will consume a large and increasing share of the budget. In layman's terms, it means that the future of our government will be mostly to spend money on older Americans for their retirement and health care.</span></p><p><span style="font-size: 12px;">Despite federal revenues slightly increasing during the coming decade, the government could still run cumulative deficits of $7.4 trillion over that 10-year period, according to CBO forecasts.</span></p><p><span style="font-size: 12px;">Of course, all of the policy uncertainty in Washington, not to mention the CBO's required current law projections, will not yield perfectly accurate forecasts. If lawmakers were to make changes to current law — say, repeal the sequester cuts or scheduled tax increases or fail to implement some of the "savings" in the president's health care law — then deficits and debt would be significantly higher than the amounts reported under the current base line.</span></p><p><span style="font-size: 12px;">For example, under the alternative scenario, the CBO projects that debt would reach 86 percent of GDP in fiscal 2025, and spending would be 22.9 percent of GDP. In 2040, debt as a share of GDP would be an unimaginable 156 percent. And of course, the more debt you have the more interest you pay. Interest on the debt would equal 6.3 percent of GDP, or $3.2 trillion.</span></p><p><span style="font-size: 12px;">Now, if you are not freaked out enough, the CBO also looks at the negative impact on the economy of accumulating such levels of debt. In that scenario, higher debt means lower growth, and that increases our debt to 175 percent of GDP.</span></p><p><span style="font-size: 12px;">And who do you think is going to shoulder this lower growth and higher debt? The younger generations will. Without any changes to our enormous entitlement programs, we are about to witness the most massive transfer of wealth from the relatively poor and young to the relatively rich and old in society. It is time for members of Congress to stop acting like toddlers and refocus on changing the path we are on.</span></p><ul class="ul1"> </ul> Wed, 24 Jun 2015 13:08:53 -0400