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Mercatus scholars apply economic analysis to the issues of the day

Are Congress and the Fed Repeating the Mistakes of the Depression?

by Scott Sumner on February 04, 2016

See if this sounds familiar. The economy is in a deep slump. The Fed cuts interest rates close to zero and then tries quantitative easing (QE). A banking crisis begins in the United States and then spreads to Europe, where even sovereign debt is no longer safe. Individual countries are locked into a single monetary regime and unable to stimulate their economies.

Am I my describing the Great Recession? Yes, but I’m also describing the Great Depression of the early 1930s. Now let’s push the comparison a bit further.

At the time, the Depression was widely viewed as representing the failure of unbridled capitalism. Monetary policy was assumed to be expansionary but ineffective. So far I'm still describing both the 1930s and recent history.

Today, however, the Great Depression is seen very differently, thanks to the path-breaking research of Milton Friedman and Anna Schwartz. Even former Fed Chair Ben Bernanke admits that...

$19 Trillion and Counting

by Veronique de Rugy on February 04, 2016

The statutory limit on how much debt the federal government can accumulate is back in the news, but this time it's not because Washington is close to breaching it. That's not a present concern thanks to the year-end bipartisan spending spree that included a suspension of the debt limit until March 2017. The news is that a report from the House Financial Services Committee found that the Obama administration's Treasury Department has been repeatedly misleading the American public on the matter.

Treasury has routinely rejected the idea that once the government reaches the debt limit, federal spending could be prioritized to avoid a default. During a previous debate over the debt limit in 2011, my colleague Jason Fichtner and I wrote a paper explaining that even if Treasury is unable to issue more debt, it can still avoid a default and thus give policymakers more time to implement reforms that would put the...

The Proper Role of the FDA in the Medical Ecosystem

by Joseph V. Gulfo on February 04, 2016

When I received my driver’s license my father said to me, “Congratulations, son—now you really learn how to drive.” Driver education courses only ensured that I knew how to operate the vehicle safely and appropriately to get from point A to point B. I had eight fender-benders in my first decade behind the wheel, and I haven’t had one accident for the last decade. My father was right. I learned how to operate a car very well—after I had my license for a while.

If the Department of Motor Vehicles approved driver’s licenses like the Food and Drug Administration approved new drugs and devices, driving tests would go on for months and cost a tremendous amount of money. I would have been tested on driving to points B to Z and countless other scenarios. If the DMV started doing this, Americans would surely say the DMV had lost its way.

Well, the FDA has lost its way and as...

Economist William Beach Joins Mercatus Center, Returns to George Mason University

by Bob Ewing on February 03, 2016

Arlington, Va.—The Mercatus Center at George Mason University is excited to announce the addition of William Beach as Vice President for Policy Research. Dr. Beach brings decades of economic and leadership experience with his prior roles as Chief Economist for the Senate Budget Committee, a senior economist in the corporate headquarters of Sprint United, and Director of the Heritage Foundation’s Center for Data Analysis.  He also served previously as President of the Institute for Humane Studies at George Mason University.  

Regarding his new position, Dr. Beach said the following:

I’m delighted to return to George Mason University, and look forward to helping Mercatus grow its research portfolio’s depth and impact.  Mercatus has an established reputation for publishing cutting-edge research that academics as well as policy makers and the media turn to for answers to many of today’s most pressing problems. ...

ACA Will Drive Health Care Costs Up

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by Charles Blahous on February 02, 2016

Today the Mercatus Center unveiled a study by Bradley Herring (Johns Hopkins University) and Erin Trish (University of Southern California) finding that the much-discussed health spending slowdown that continued in 2010-13 “can likely be explained by longstanding patterns” over more than two decades, rather than suggesting a recent policy correction. Projecting these factors forward and incorporating the effects of the Affordable Care Act’s health insurance coverage expansion provisions, Herring-Trish predict the expansion will produce a “likely increase in health care spending.”

Though not surprising in light of...

ACA: 2016 and 2017

by Robert Graboyes, Brian Blase on February 02, 2016

There is no debating that the ACA contains benefits and costs and that the law continues to sharply divide the country. Its supporters say that it is working, while its opponents argue otherwise and continue pressing to undo the law. In January, Congress sent a bill to the president's desk that would have repealed large swaths of the law, including most of its taxes and much of its spending; as expected, the president vetoed the bill. Let's take a closer look at how ACA is working so far.

ACAs Impact on Coverage

The numbers have increased: ACA supporters primarily and repeatedly cite the decrease in the number of people without health insurance. The Obama administration estimates that 12.6 million people gained insurance coverage from 2010 to 2014. However, several million people became uninsured during the financial crash of 2008-2009. Part of the post-2010...

Neighborly Solutions to a Blizzard of Problems

by Stefanie Haeffele-Balch, Virgil Storr on February 01, 2016

 When a major winter storm pummeled the East Coast, it left 12 to 36 inches of snow across the region as well as coastal flooding and, tragically a number of weather-related fatalities in its wake. School districts, governments and businesses were closed as people across the region dug out after the storm. While we may expect government to lead the recovery effort, our neighbors play a key role in helping our communities return to normalcy.

Consider the following examples:

On the Saturday evening of the blizzard, a couple went for a walk around their neighborhood just as the snow stopped falling. As they tromped through the snow, sometimes as high as their knees and hips, they encountered another couple walking their dog and a few people assessing the state of their buried cars. Then, farther down the barely plowed street, they noticed a car...

The Food and Drug Administration Needs to Change After 110 Years

by Richard Williams on February 01, 2016

A supercentenarian is a person who has lived passed their 110th birthday. We celebrate that for people, but it's not clear that we should celebrate it for a federal agency like the Food and Drug Administration , which turns 110 this year. 

It's certainly time to re-evaluate precisely what such an agency ought to be doing, not to mention what it should not be doing. Two things that federal agencies like the FDA should avoid in particular are scandals and poor outcomes.

Typically the scandals are what dominate the news, but what may...

Is Your State Prepared for a Recession?

by Erick M. Elder on January 28, 2016

With 2016 upon us, many states now begin the difficult work of ironing out their next budget. And with the markets off to one of the worst starts in history, the painful choices made necessary by the Great Recession are no doubt still fresh in the minds of veteran policymakers. But does that mean states are truly prepared for another downturn?

It depends on which state you live in, according to my new Mercatus Center at George Mason University research comparing each state’s “rainy day fund.”

State government revenue is generally very sensitive to the health of its economy. The federal government...

Is Innovation Over?

by Tyler Cowen on January 28, 2016

Almost seven years after the Great Recession officially ended, the U.S. economy continues to grow at a sluggish rate. Real wages are stagnant. The real median wage earned by men in the United States is lower today than it was in 1969. Median household income, adjusted for inflation, is lower now than it was in 1999 and has barely risen in the past several years despite the formal end of the recession in 2009. Meanwhile, the U.S. Federal Reserve Board and the Congressional Budget Office have taken more seriously the idea that U.S. productivity, one of the most important sources of economic growth, may stay low. And such problems are hardly unique to the United States. Indeed, productivity growth has been slow in most of the developed world for...

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