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Mercatus scholars apply economic analysis to the issues of the day

The Tip of the Regulatory Iceberg

by Veronique de Rugy on May 21, 2015

In 2014, the government issued 2,400 new regulations, including 27 major rules that may cost $80 billion or more annually. They range from forcing restaurants to list the number of calories in food — even though past experiments have revealed that such measures fail to change consumers' behavior — to reducing consumer choices and increasing energy prices by imposing tighter energy efficiency mandates on the plugs that we use to charge cellphones, laptops and even electric toothbrushes.

These figures can be found in a new paper by Heritage Foundation scholars Diane Katz and James L. Gattuso, in which they tally the number and cost of government regulations over the past six years of President Barack Obama's administration — and show that Washington's control over the economy and Americans' lives is intensifying. According to their count, during the first six years of the Obama administration, the number of new major rules reached 184, but another 126 are...

Five Years Later, Dodd-Frank Is Looking Pretty Haggard

by Hester Peirce on May 20, 2015

Dodd-Frank is rounding the bend to its five-year mark. Its vocal cheering section does not seem to notice that it's looking a bit haggard. One area in which its weakness is evident is over-the-counter derivatives reform, which accounts for approximately 20 percent of Dodd-Frank's pages and much of its rhetoric. Dodd-Frank relies on central counterparty clearinghouses to bring order to over-the-counter derivatives-financial contracts that help companies manage their risks. Although Title VIII of the Act gives a nod to clearinghouses as a potential source of new risk, that concern gets lost in all the cheering for clearing.

Before the crisis, large financial firms entered into many derivatives transactions directly with one another and with their customers. These contracts bound firms into long-term relationships, which meant that a failure by one large firm would directly affect all the firms with which it had relationships.

By...

Opportunity and Mobility in the Sharing Economy

by Christopher Koopman on May 19, 2015

Much of the news surrounding the rapid growth of the sharing economy seems to focus exclusively on the headline-grabbing, billion-dollar valuations that companies like Uber and Airbnb received. More recently, the ride-sharing app and Uber-competitor Lyft was valued at $2.5 billion. These stories fuel a rather popular narrative that the sharing economy is a thinly veiled attempt to profit by cheating the system, circumventing taxes, evading safety regulations, and flouting labor laws.

Yes, these new firms are challenging the traditional approaches taken by both...

In Memoriam: Dr. John Templeton

by Bob Ewing on May 19, 2015

The Mercatus Center at George Mason University notes with great sadness the passing of John M. (“Jack”) Templeton, Jr., M.D., the president and chairman of the John Templeton Foundation. 

“Dr. Templeton’s philanthropy has had world-changing effects on our understanding of the role that formal and informal institutions play in society,” said Mercatus Center Senior Vice President and Chief Operating Officer Daniel Rothschild. “His generosity will continue to pay dividends at Mercatus and elsewhere for generations to come.”

Dr. Templeton’s interest in this area led him to approve two multi-year, multi-million dollar investments in the Mercatus Center from the John Templeton Foundation. The Templeton research grant for Mercatus Center’s F. A. Hayek Program is fueling interdisciplinary scholarship on the causes of economic progress and the...

Lessons About Government from the NFL

by Patrick McLaughlin on May 18, 2015

In many ways, the National Football League is like the federal government. First, the NFL only exists because a group of individual entities — the teams — collectively agreed to form and subject themselves to governance by a centralized body, similar to how the states handed over power to Washington centuries ago. Second, the NFL creates and enforces rules about how the game is played, similar to regulations coming out of the federal government. Third, the NFL very seldom admits that any of its policies were wrongheaded and changes them — and when was the last time you heard a politician admit that a policy was a mistake?

Unfortunately, for a governing body like the NFL to admit a policy's failure seems to require undeniable, unforgettable, alarming visual evidence. It's not just the NFL that apparently has to be shocked into change. Federal, state and local governments have a longstanding tradition of ignoring problematic policies right up until the...

How the Affordable Care Act Is Like Prohibition

by Adam C. Smith on May 18, 2015

The Affordable Care Act is now in its fifth year. Many things have changed since March 23, 2010 when it was passed into law. Website rollouts, cost curves and enrollment figures have dominated the new stories. What we speak so little of, however, is how health care has actually been reformed and how this in turn defined what health care reform means to us today.

To do this, we would need to examine the groups responsible for what ultimately became the bill passed into law, which can help us make sense of what we consider health care reform today. Health care reform is the product of "bootlegger" and "baptist" interests coming together to restructure the industry in their favor, all brought together by a "televangelist" administration.

So what in the world does all that mean?

Continue reading

Stay Focused: West Virginia’s Fiscal Challenges

by Eileen Norcross on May 15, 2015

In an upcoming study for the Mercatus Center at George Mason University, I rank West Virginia’s fiscal condition 43rd among states. This sounds alarming, but the ranking doesn’t tell the whole story.

The state has shown admirable fiscal restraint and weathered the post-recession period better than many. But to prepare for the future and improve their long-run outlook, policymakers must double down on discipline and tackle long-term risks.

First, the good news: A robust Revenue Shortfall Reserve Fund — or rainy day fund — along with an alertness to the economic and revenue impact of the state’s shift from coal to natural gas production and discipline in funding employee benefits are all reasons for the state’s AAA+ credit rating. A closer look at the state’s audited financials for FY 2013 confirms this picture.

The Mountain State has enough cash on hand to pay its short-term bills 1.5 times and a little bit of slack to balance the yearly budget, realizing a small...

Don't Be so Sure the Economy Will Return to Normal

by Tyler Cowen on May 15, 2015

It is hard to avoid the feeling that our current economic problems are more than just a cyclical downturn. We know that the economy has gone through some bad times. But what exactly are we experiencing?

One relatively optimistic view is that observed deficiencies — like slow growth in real wages and the overall economy, persistently low interest rates and low levels of labor participation — are merely temporary. In this view, these problems will dwindle after manageable problems like high levels of public or household debt have been reduced.

Another commonly heard view is that we made the mistake of letting the last recession linger too long, allowing some of its features to became entrenched. That analysis suggests that if we correct past policy errors, whatever they may have been, an underlying normality will re-emerge.

There are some nuggets of truth in both of these arguments, but there is a much more disturbing...

Universal Savings Accounts Help People Help Themselves

by Veronique de Rugy on May 13, 2015

Republican presidential contenders have staked out different positions on tax reform. Sens. Rand Paul of Kentucky and Ted Cruz of Texas and neurosurgeon Ben Carson favor a flat tax. Wisconsin Gov. Scott Walker supports lower marginal tax rates. Former Arkansas Gov. Mike Huckabee would like a 30 percent tax on consumption. Sen. Marco Rubio of Florida favors a huge child tax credit and business tax cuts.

In spite of their differences, all of them agree that our tax code should be reformed to lift the financial pressure on the middle class and stop discouraging savings. The good news is that there is one reform idea that would do just that and should appeal to these leaders and the public: universal savings accounts, or USAs.

The idea was first proposed in 2002 by the Cato Institute's Chris Edwards and Washington lawyer Ernest Christian. As Edwards, who is a fervent advocate of the reform, explains in a recent piece for The Federalist,...

Falaschetti to Join House Financial Services Committee

by Bob Ewing on May 12, 2015

The Mercatus Center at George Mason University is pleased to announce that Senior Research Fellow Dino Falaschetti has been named the new Chief Economist for the House Financial Services Committee.  Falaschetti will join the committee in June of 2015.

“Mercatus is an exciting place for understanding how financial institutions and markets can reliably expand economic opportunity,” said Falaschetti.  “I look forward to serving the Committee and continuing to share sound research with leaders who can make a difference.” 

Congressman Jeb Hensarling of Texas chairs the House Financial Services Committee, with jurisdiction over matters involving banking and insurance, money and credit, and securities and exchanges....

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