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Mercatus scholars apply economic analysis to the issues of the day

Can You Have Your Subsidized Peanut Butter Cake and Eat It, Too?

by Veronique de Rugy on July 28, 2016

The federal government is packed full of crony programs, such as the Export-Import Bank and the ethanol mandate. When it comes to the unhealthy marriage between government and the private sector, however, the U.S. Department of Agriculture may take the cake.

With the exception of food stamps, which should have nothing to do with the farm bill, every program in the agency is meant to subsidize or boost the profits of farmers. We have such programs as the Dairy Margin Protection Program and the Dairy Market Stabilization Program. The former effectively guarantees profits for dairy farmers, and the latter is a complicated program meant to drive up milk prices to benefit small-scale dairy farmers. Then there are sugar tariffs, which are meant to artificially boost the profits of a few companies by keeping the price of sugar high in the United States at the expense of consumers and taxpayers.


Worry about Lack of New Banks, Not 'Record Profits'

by Stephen Matteo Miller on July 26, 2016

The House Committee on Oversight and Government Reform just had a hearing about the Federal Deposit Insurance Corporation's (FDIC) application process for de novo (new) banks. The purpose of the hearing was to uncover why we have so few new banks of late: Is it the slow economy and low interest rates, the regulations or something else driving away new applicants? Maybe the answer is: all of the above.

As a recent Federal Reserve Bank of Richmond study showed, the number of new banks has...

How the FAA Killed Supersonic Flight—and How It Can Revive It

by Andrea Castillo on July 26, 2016

Flying is the worst. With each commercial flight, Americans get groped, jostled, cramped, and corralled like cattle. But the Transportation Security Administration (TSA) isn't the only government agency that needlessly adds to our jet-setting woes. If not for Federal Aviation Administration (FAA) meddling in supersonic flight innovation, we could zip around the world in a fraction of the time.

Five decades ago, the future of aerospace engineering was incredibly bright. As international rivals raced to put humans into space, scientists applied new technologies to improve the speed, comfort, and safety of terrestrial air travel. The U.S.-based McDonnell Douglas and Boeing spearheaded the era of commercial jet transportation with the introduction of the Douglas DC-8 and Boeing 707 in the late 1950s. Our European friends got into the aviation game in the 1970s with the Airbus A300, while Lockheed Martin followed up...

Get Bureaucrats out of Medical Decisions

by Richard Williams on July 26, 2016

The stories are heartbreaking and horrifying. People who are dying and just want to live go before the Food and Drug Administration in hopes that the FDA will listen to them and approve a drug that may give them a chance to live.

But as a former FDA medical officer recently revealed, when the FDA holds a public speaking session where these desperate people come to make their case at advisory committee meetings, “It is all for show. I can recall my FDA supervisors and colleagues checking their emails, doodling, texting, and the like to avoid listening to individuals who would often travel great distances to pour out their hearts to the advisory committee and FDA reviewers, literally begging them to approve a new drug.”

Yet Right to Try legislation, which allows...

Seeing China through Its Economic History

by Tyler Cowen on July 25, 2016

Is it possible to better understand China today by looking back to the country's economic history? I don't mean the years of communism under Chairman Mao, but rather earlier times, those which seem to many Western observers like a blurred sequence of one dynasty after another.

Enter Richard von Glahn's “The Economic History of China: From Antiquity to the Nineteenth Century,” a book likely to go down as one of the year's best. Over the last 15 years, the economics profession has gone from a poor understanding of China's economic history to knowing quite a bit. Von Glahn's exhaustive but readable book is the best guide to this rapidly growing body of knowledge.

I took away several overall lessons,...

What Not to Do as Robots Take More Jobs

on July 25, 2016

Minimum wage hikes will likely be touted at the Democratic National Convention this week, but such policies can potentially divide society more than unify it. Raising the minimum wage is not the best way to fight income inequality because it will increase the rate of job automation that already disproportionately affects people with less education and lower incomes.

Leading computer scientists at the Future of Life Institute last year wrote an open letter warning policymakers of the risks posed by artificial intelligence. A primary concern is that many jobs will become automated, filled machines. It's a problem if people do not adapt, but one piece of good news is that high-paying jobs in the tech sector are motivating millions of people to learn how to use computers.

Until more people leave low-wage jobs for high-wage jobs, we will have income inequality. Because of...

Stop Bleeding Red Ink, Make America Sustainable Again

by Veronique de Rugy on July 21, 2016

The Congressional Budget Office recently released its long-term budget outlook. There isn't much new there; we are still in the red, and it will only continue to get worse. Considering the extent of the problem, you would think someone on the campaign trail would pay attention. Yet no presidential candidate really is.

First, CBO projects that the federal public debt-to-GDP ratio will go from its current 75 percent (up from 39 percent in 2008) to 86 percent in 2026 and 141 percent in 2046. On the deficit side, CBO projects that by 2020, our deficit level will reach $1 trillion, up from its current level of $534 billion. Today's deficit-to-GDP ratio is 2.9 percent, and it may be close to 5 percent in 10 years and 8.8 percent in 2046.

There are a lot of assumptions going into these projections. As we know, a small change in these assumptions can have a significant impact....

Against Regulatory Complexity

by Patrick McLaughlin, Chad Reese on July 20, 2016

With the July 21 anniversary of the Dodd-Frank Wall Street Reform and Consumer Protection Act now upon us, it’s a good time to reflect on how this type of Byzantine legislation spawns a convoluted network of tangled regulations. 

When recently unveiling his Financial CHOICE Act, House Financial Services Committee Chairman Jeb Hensarling highlighted a key principle behind his efforts to combat this overgrowth: “Simplicity must replace complexity.” The chairman’s focus on regulatory complexity is appropriate.

In many ways, regulations are like a computer’s operating system, establishing processes and parameters within which programs must operate. But anyone who has undergone the experience of “upgrading” an operating system only to find...

Government Report Finds That ACA Medicaid Enrollees Much More Expensive Than Expected

by Brian Blase on July 20, 2016

The Department of Health and Human Services’ (HHS) annual report on Medicaid’s finances contains a stunning update: the average cost of the Affordable Care Act’s Medicaid expansion enrollees was nearly 50% higher in fiscal year (FY) 2015 than HHS had projected just one year prior. Specifically, HHS found that the ACA’s Medicaid expansion enrollees cost an average of $6,366 in FY 2015—49% higher than the $4,281 amount that the agency projected in last year’s report.

The government’s chief financial experts appear not to have anticipated how states would respond to the federal government’s 100% financing of the cost of people made eligible for Medicaid by the ACA. It appears that the enhanced federal funding for the ACA expansion...

'Pokemon Go' Represents the Best of Capitalism

by Michael Farren on July 20, 2016

A recent article uploaded to by Timothy Lee, “Pokémon Go is everything that is wrong with late capitalism,” has caused quite a stir, since it was fairly critical of the “Pokémon Go economy.” Given the popularity of the game and our concern that some players would be alarmed that their lighthearted entertainment was somehow destroying the economy, we wanted to offer a different perspective on some of the points made in the article.

In fact, we think “Pokémon Go” actually represents the best of capitalism. In less than a week, the game topped 15 million downloads and the ...

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