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Young, Bummed, and in Debt

by Veronique de Rugy on August 27, 2014

This article appears in the October edition of Reason Magazine

Until recently, a bad job market was nearly always bad news for political incumbents. Unemployed and anxious voters have a habit of throwing the bums out. But headed into the 2016 election season, one large demographic group is still likely to vote Democratic: millennials.

Which is weird, because when it comes to the labor market, it sucks to be young. To be sure, it has always been hard to enter the workforce during a recession. But this recession has not only been particularly severe; it has been made longer and deeper than necessary by the Obama administration's policies. Washington's burdensome regulations, "stimulus" spending, and health insurance mandates have given us a slow recovery, high uncertainty, and a pathetic job market.

According to the Bureau of...

The Helicopter Parents At the FSOC Are Running With Scissors

by Hester Peirce on August 27, 2014

The Financial Stability Oversight Council is rumored to be on the verge of designating MetLife as a systemically important financial institution. Through the FSOC's bureaucratic eyes, designating MetLife may appear to be a safer course than leaving it undesignated and facing questions later if the company runs into trouble. But designation brings its own problems-problems that are likely to be ignored in the FSOC's broken designation process.

Thanks to Dodd-Frank, regulators are fully engaged in the business of picking out and propping up individual firms. Dodd-Frank gives the FSOC authority to require the Federal Reserve to supervise "nonbank financial companies that may pose risks to the financial stability of the United States in the event of their material financial distress or failure, or because of their activities." Once...

It's High Time for Effective Regulatory Reform

by Thomas D. Hopkins, James Broughel on August 26, 2014

Four decades ago this month, in one of his first acts as president following the resignation of Richard Nixon, Gerald Ford signed into law the Council on Wage and Price Stability Act of 1974. The bill authorized the creation of an agency tasked with identifying key causes of inflation, a pernicious problem that was posing a serious threat to the American economy. Over the next seven years, the new agency, nicknamed CWPS, would play a key role not just in the fight against inflation, but in reforming the American regulatory system as well.

CWPS officials intervened in the regulatory process by submitting comments to executive agencies on behalf of the White House. These comments focused on the supporting analysis that agencies produced for their regulations. State-of-the-art tools developed by economists heavily informed the CWPS's perspective. Eventually, in...

Bank of America's Opaque Penance

by Hester Peirce on August 25, 2014

A gaggle of state and federal officials just announced a $16.7 billion settlement with Bank of America. The federal government and participating states will take part of that hefty sum, and the rest will go to select underwater homeowners and nonprofits. This record-breaking settlement stems from the crisis-era mortgage activities by Bank of America and the two companies it probably now wishes it had not acquired, Countrywide and Merrill Lynch. The various settlement documents present a smattering of examples of bad mortgage practices and email snippets, speculate that these might have violated federal or state law, and lay out a complicated formula for allocating the settlement loot. But it is difficult to assess whether the settlement is a proper response to the underlying conduct.

The settlement stems largely from Countrywide's and Merrill Lynch's practice of originating and...

Back to School: More Education Money Hasn't Improved Results

by Courtney A. Collins on August 25, 2014

For millions of children across the country, August signals the traditional culmination of summer break and the start of the academic year. As the final days of August bleed into September, students trade swimsuits for school uniforms and flock toward the bus stop, swapping stories of summer vacation along the way. August is a month that has held its post as gatekeeper of summer and school year in America for more than a century. By the early 1900s, summer break was already well established in the cyclical routines of children and teachers. Each year, herds of American students headed back to class, just as their 21st century counterparts will this month.

On some level, those two groups of students are not so different. There is something in that first-day-of-school excitement with its carefully packed lunch boxes and freshly sharpened pencils that persists across time. In other ways, the groups are completely dissimilar; the contents of their...

Classifying Internet As Utility A Perilous Concept

by Brent Skorup on August 22, 2014

On the heels of more than 1.1 million Americans recently submitting comments to the Federal Communications Commission on Internet openness, the FCC has announced that it will hold a series of "open Internet roundtable discussions" with the aim of clarifying to what extent communications law should be reinterpreted. Central to that proceeding is "net neutrality," a catchall term for severe regulation of broadband providers and Internet companies. This notion that the FCC should reinterpret the law and, for the first time ever, "reclassify" broadband as a public utility is perilous.

Providing the Internet is nothing like supplying water or electricity, of course. Broadband carries speech, information, and entertainment, and there should be an impermeable wall of separation between regulators and the Internet.

Leaders of the net neutrality movement, however, are struggling mightily to tear down that wall. Underlying talk of the need for...

Lesson From Old India: When an Economy Just Doesn’t Get Better

by Tyler Cowen on August 22, 2014

Commentators have often compared the recent Great Recession of the United States and Europe to the Great Depression of the 1930s. In both cases, asset prices tumbled, financial systems turned insolvent and demand plummeted. One difference is that in the recent case, we mounted a swifter rescue effort than we did in the 1930s; for instance, Ben S. Bernanke, as chairman of the Federal Reserve in the recent crisis, drew upon his academic research in supporting bailouts and reflating the economy.

This comparison is intriguing, but we may be neglecting other, less obvious and yet more unsettling historical parallels for today’s global economy. For all the talk of the Great Depression, we might look at a different exemplar for modern times, 18th- and 19th-century economic history ...

Subsidies for Big Business and Megabanks

by Veronique de Rugy on August 21, 2014

In the little time she’s been in Congress, Sen. Elizabeth Warren has made a name for herself as a populist who talks tough about Wall Street and other large corporations. But is she going to do more than just talk about it?

Recently, Warren confirmed that she is renewing her support for the Export-Import Bank — an agency that lends money to foreign companies to buy U.S. goods and services. This may sound good on paper; however, Warren’s endorsement of the Ex-Im Bank is inconsistent with her otherwise populist stand.

The biggest Ex-Im Bank beneficiaries are giant corporations like Boeing, General Electric, Caterpillar and their very wealthy foreign buyers. These companies don’t need the bank, but they love it. It increases their profits and transfers onto taxpayers the risk that the companies should be shouldering since they pocket the benefits.

The foreign companies love it, too. While most of them do have access to...

Let Customers — Not Regulators — Decide the Right Size for Banks

by Stephen Matteo Miller on August 21, 2014

To see why it's absurd for Washington to be debating how big the country's banks should be, imagine the following scenario:

You leave your hometown after high school to study and later work abroad for several years. After some time, you decide it's time to come home, at which point you reacquaint yourself with your high school prom date, who never left. You decide to get married. After the honeymoon, it's time to pay the bills, which means you have to choose how to bank. Your spouse has banked for years at a local small bank because of the personalized service it offers. It has only a few branches. But having moved around, you think fondly about all those times you found a bank branch during your travels — and you appreciate that you didn't have to close your account just because you moved to a different part of the state, let alone an entirely different state, or even abroad.

What's the right way to go? That's for you and your spouse...

Regulatory Measurement Can Lead to Actionable Knowledge

by Patrick McLaughlin on August 18, 2014

Scientific progress requires measurement, especially when working with a complex system such as the economy or the human body. For example, our understanding of the relationship between cholesterol and human health continues to evolve, but it has only gotten to the point where we debate the merits of "good" cholesterol and "bad" cholesterol via a century of investigation and the development of measurement techniques. Similarly, although in a very different field, professional sports teams increasingly develop new, quantitative metrics of player performance in order to optimize team performance — as described by the book and movie "Moneyball."

Good governance also can develop over time through careful measurement combined with scientific inquiry. To that end, I developed (along with my...

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