Spending & Budget

Spending & Budget

Research

Tracy C. Miller, Megan E. Hansen | Aug 23, 2016
The federal role in highway spending is expected to get smaller because fuel tax revenues are decreasing and Congress is holding off on raising the federal gas tax rate. Meanwhile, states are not getting the most out of their highway spending. Traffic congestion plagues urban areas, and simply investing in highways and transit will not be enough to fix the problem. A new study for the Mercatus Center at George Mason University discusses general principles that can help states maximize the value they get from their highway spending. While no two states are identical, policymakers can still learn from one another by observing what works and using the same general principles to create reforms that work for their states.
Andrew G. Biggs | Aug 18, 2016
Defined-benefit pension plans for state and local government employees have imposed rising costs and financial risk on government budgets. In response, some reformers have proposed shifting newly hired public employees into defined-contribution plans similar to 401(k)s. But critics of this proposed reform have argued that closing a pension plan to new entrants would impose “transition costs” on plan sponsors as liabilities under the old defined-benefit plan are paid down. A new study for the Mercatus Center at George Mason University explores how closing a pension plan to new entrants affects existing liabilities and whether there are significant costs imposed when transitioning to a defined-contribution, 401(k)-type plan. In fact, transition costs are very small, and they are more than offset by the reduction of newly accrued liabilities.
Jason J. Fichtner, Jason S. Seligman | Aug 2016
Many Social Security reform proposals have emphasized the role of savings over insurance, focusing on security in retirement.
Veronique de Rugy, Andrea Castillo | Jul 28, 2016
Despite decades of a war on poverty that came with proliferating programs and ballooning budgets, the official poverty rate in the United States has stubbornly refused to break from its narrow historical range. This failure stems largely from the methods used to pursue the alleviation of poverty. Policymakers should turn to block grants to states, a policy that has real-world empirical support and that would alleviate the knowledge problem suffered by the federal government. States, in turn, should administer income support programs tailored to the individual causes of poverty, implementing work requirements for people who are temporarily disadvantaged and providing direct income to people who are truly unable to work.
Brian Blase, Doug Badger, Edmund F. Haislmaier, Seth J. Chandler | Jun 28, 2016
The Affordable Care Act (ACA) significantly altered the rules governing health insurance, especially in the individual market. While the law has increased the number of people with health insurance, lower-than-expected enrollment in the new health insurance exchanges and significant insurer losses have resulted in substantial premium increases and insurer withdrawals from state markets. These negative outcomes cast increasing doubt on the ACA and its long-term sustainability.
Daniel Sutter | Jun 21, 2016
Medicaid was established in 1965 as a joint state and federal program to provide medical insurance to Americans who are poor and have disabilities, and it has grown from 1 percent to 3 percent of GDP. The source of Medicaid’s growth over the past 50 years must inform efforts to reform the program and slow spending. The literature on the political economy of Medicaid provides strong evidence of interest group and political ideological influence, enabled by the open-ended federal match for state spending.

Testimony & Comments

Jason J. Fichtner | Jul 13, 2016
My testimony focuses on three key issues: first, the extent of the Social Security financial shortfall; second, whether we’re actually facing a so-called “retirement crisis;” and third, how the current structure of the nation’s largest retirement program, Social Security, provides disincentives to work and save and is in need of modernization if the program is to fit the needs of the twenty-first century and achieve fiscal sustainability.
Maurice P. McTigue | Jul 06, 2016
My view on a successful reform strategy is to first create a concept of what this activity would look like in a perfect world. Once you are satisfied that you have identified what the very best new systems and procedures would look like, it is necessary to identify what it is possible to get done. You will then know what has been traded off to produce a solution that is doable. It is also possible to design today’s reform in such a way that it does not eliminate future desirable reforms that would cumulatively improve the process.
Maurice P. McTigue | Apr 12, 2016
Today I will comment on “wasteful and duplicative spending,” and discuss how better, more transparent budget processes are the first step, but not the solution, to controlling such spending. I would like to make three main points. First, changing the focus to the desired outcomes in the budget process is essential to controlling duplicative spending. Second, comparing the results of all activities that impact the same outcome is critical in allocating resources to the most effective activities and maximizing outcome achievement. And third, budget procedures matter when it comes to controlling spending, based on evidence from state governments and overseas.
Jason J. Fichtner | Mar 22, 2016
My testimony focuses on two key issues. First, I will explain how the current-law Windfall Elimination Provision (WEP) is overly complex and unfair. Second, I will discuss how reforming the Social Security benefit formula would improve the simplicity and fairness of the WEP, while still maintaining the original public policy purpose. Additionally, though most of my testimony focuses on the WEP, a related provision, the Government Pension Offset (GPO), has similar complexity and fairness problems that should be addressed.
Jason J. Fichtner, Adam Michel | Mar 22, 2016
The OECD hopes that the new reporting standards will provide tax administrators with useful information to more effectively direct auditors while making it easier to identify artificial profit shifting to tax-advantaged environments. This public comment will argue that the accounting costs of country-by-country reporting will be larger than the Department of the Treasury’s revenue gains and that there will be even higher unanticipated costs from inadvertent disclosures of sensitive information. Because the costs of information centralization will be greater than the benefits, we recommend that the IRS should not implement the proposed regulation on country-by-country reporting. This recommendation is informed by a recent paper from the Mercatus Center at George Mason University that explains key features of the international corporate tax system, the changes the OECD wants to make, and the potentially far-reaching consequences of those changes. The study also provides recommendations to improve corporate taxation without compromising state sovereignty or taxpayer rights.
Veronique de Rugy | Feb 02, 2016
The heated rhetoric coming in March 2017 about whether Congress should raise the debt ceiling will obscure the federal government’s real problem: an unprecedented increase in government spending and the future explosion of entitlement spending has created a fiscal imbalance today and for the years to come. No matter what Congress decides to do about the debt ceiling, the United States must implement institutional reforms that constrain government spending and return the country to a sustainable fiscal position.

Research Summaries & Toolkits

Jason J. Fichtner, Veronique de Rugy, Matthew Mitchell, Angela Kuck, Adam Michel | May 25, 2016
The nation’s persistently sluggish economic growth and dire long-term fiscal outlook have increased the urgency of the need to reform the federal revenue system. But what does successful, sustainable tax reform look like? What are its key elements? And what would it achieve?
J. W. Verret, Marc Joffe | Apr 28, 2016
J. W. Verret and Marc Joffe debate whether Puerto Rico should be allowed to restructure its debt. After 10 years of recession and poor fiscal management, Puerto Rico is facing a major fiscal crisis. With $72 billion in debt (the equivalent of the commonwealth’s entire economy), deeply distressed pensions, high unemployment, and outmigration, Puerto Rico is insolvent. Congress is deliberating on legislation to provide a framework for Puerto Rico to restructure its finances under the guidance of a federal control board. The most contested point in the current proposal is whether to allow the board broad authority to restructure debt.
Jason J. Fichtner, Veronique de Rugy | Dec 03, 2013
Some in Washington claim the federal spending and deficit problem is solved. While the deficit has been cut in half (from a record-high of $1.4 trillion in FY09 to $680 billion in FY13), this reduction can be attributed to several singular events, such as the end of the payroll tax “holiday” and higher receipts from Fannie Mae and Freddie Mac. Over the longer term, deficits and debt are projected to continue increasing.
Veronique de Rugy, Jason J. Fichtner | Oct 10, 2013
As federal government borrowing is set to exceed yet another debt limit, most are quick to recall—and wish to avoid a repeat of—the 2011 debt-limit showdown. If current rhetoric is any indication, it appears many of the last debate’s lessons have been forgotten. Regrettably, it seems many of the debate’s facts have been forgotten as well.
| Sep 24, 2013
The Mercatus State Policy Guide is intended to summarize and condense the best research available on the most relevant topics. It’s a starting point for discussion, not a comprehensive overview of economic policy. Each statement is supported by academic research, with links provided in the endnotes. Mercatus scholars are available to further explain the results of their studies. We hope the guide will prove to be a valuable tool in your economic policy research.
| Jul 23, 2013
The Mercatus Policy Guide is intended to summarize and condense the best research available on the most pressing topics. It serves as a starting point for discussion, not a comprehensive overview of economic policy. Anyone who wants to go deeper into these studies should consult the references listed at the back. Mercatus scholars are available to further explain the results of their studies. We hope the guide will prove to be a valuable tool in your evaluation of economic policy.

Speeches & Presentations

Expert Commentary

Aug 29, 2016

The cobra anecdote shouldn't be taken as paradigmatic; many regulations work positively as planned, while others are clearly going to be disastrous but are implemented nonetheless. One of the key lessons, however, is that there are returns to thinking carefully before diving into new regulations.
Aug 25, 2016

The bottom line is — whether you value freedom intrinsically or you're a lawmaker who wants to improve your state's economic outlook or slow down out-migration — you're better off knowing where your state stands so you know what to do. "Freedom in the 50 States" will help you achieve this goal.
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Aug 24, 2016

Only if we surmount our labor force participation challenge will we be able to successfully address other economic policy desires such as higher living standards, lower poverty, and sound federal government finances. For these and other reasons, re-orienting federal policies to keep people in the workforce is likely to remain the pre-eminent economic policy challenge of our time.
Aug 18, 2016

You would think that Clinton would be more favorable to helping low-income Americans and union workers in particular. If she were, the way to go would be to reform the corporate income tax, not to arbitrarily prohibit companies from moving to where tax laws are less punitive.
Aug 18, 2016

Outside the legal challenges it previously faced, the Affordable Care Act has never been as threatened as it is right now.
Aug 18, 2016

Now more than ever, we need to depoliticize health care and create transparent marketplaces where insurers heed the wishes of customers rather than government officials.

Charts

Whether today’s policymakers intend or realize it, the evolution of informal and formal fiscal rules continues to shape today’s fiscal policy outcomes. This has led to chronic deficits, mounting debt, a dizzying complexity of tax and budget procedures, and unsustainably large unfunded obligations—all leading toward an overall bad and worsening fiscal outlook. Any serious discussion of reform must start by recognizing the current incentive structure embedded in the budget process. Piling on more formal constraints, without addressing the shifts in the informal rules, will be futile.

Experts

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University and a nationally syndicated columnist. Her primary research interests include the U.S. economy, the federal budget, homeland security, taxation, tax competition, and financial privacy. Her popular weekly charts, published by the Mercatus Center, address economic issues ranging from lessons on creating sustainable economic growth to the implications of government tax and fiscal policies. She has testified numerous times in front of Congress on the effects of fiscal stimulus, debt and deficits, and regulation on the economy.
Charles Blahous is the director of the Spending and Budget Initiative, a senior research fellow at the Mercatus Center at George Mason University.
Brian Blase is a Senior Research Fellow with the Spending and Budget Initiative at the Mercatus Center at George Mason University.
Antony Davies is a Senior Affiliated Scholar at the Mercatus Center at George Mason University, associate professor of economics at Duquesne University, and Strata Research Fellow.
Jason J. Fichtner is a Senior Research Fellow at the Mercatus Center at George Mason University.

Podcasts

Brian Blase | August 18, 2016
Brian Blase discusses the impact of Aetna exiting the ACA exchanges with host Rob Schilling.

Recent Events

Join Mercatus senior health care scholar Brian Blase, senior regulatory fellow Patrick McLaughlin, & senior budget reform fellow, Jason J. Fichtner, for a Capitol Hill Campus that will showcase Mercatus resources & explore how congressional staff can more effectively use our research.

Books

Jason J. Fichtner, Jason S. Seligman | Mar 2016
This book was published by The McCrery-Pomeroy SSDI Solutions Initiative, and includes a chapter by Mercatus scholars Jason Fichtner and Jason Seligman.

Media Clippings

Mark J. Warshawsky | Jun 22, 2016
This excerpt originally appeared at The Washington Post on June 22, 2016.
Jason J. Fichtner | Jul 28, 2014
This excerpt originally appeared in The Daily Caller.
Jason J. Fichtner | Jul 24, 2014
This excerpt originally appeared in FOX Business.
Jason J. Fichtner | Jul 17, 2014
This excerpt originally appeared in FOX Business.
Charles Blahous | Jun 04, 2014
This excerpt originally appeared in CQ and also appeared Roll Call.
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