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Begin New Search Content Type Policy Brief Publishing Institution The Cato Institute

31. Biden and Trade at Year One: The Reign of Polite Protectionism

Author:
James Bacchus
Publication Date:
04-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
As a presidential candidate, Joe Biden promised a change from the go‐​it‐​alone, my‐​way‐​or‐​the‐​highway approach to trade policy of Donald Trump. Disappointingly, during the first year of his presidency, Biden has instead largely embraced the failed Trump policy of unilateralism and protectionism in trade. He and his administration have done so politely, without Trump’s bluster and bombast. Yet, the results have been mostly the same: a turn toward more trade protection and managed trade, toward a proposed industrial policy that would add more restrictions on trade, and toward a destructive unilateralism that threatens to continue undermining the multilateral trading system overseen by the World Trade Organization. If Biden continues to pursue this misguided trade policy, American recovery and prosperity are at risk. There is still time—at least three years—for him to end this reign of polite protectionism by framing and pursuing a new trade policy that will benefit all Americans: a policy that will achieve more trade liberalization, stop managed trade, halt trade‐​restrictive industrial policy, renew trade multilateralism, and give restored and unflinching support to the international rule of law in trade.
Topic:
Tariffs, Trade, Donald Trump, Protectionism, and Joe Biden
Political Geography:
China, Asia, North America, and United States of America

32. False Alarm over the Retreat of the Himalayan Glaciers

Author:
Swaminathan S. Anklesaria Aiyar and Vijay K. Raina
Publication Date:
05-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Many activists and journalists warn that rapidly melting Himalayan glaciers due to global warming will have catastrophic consequences. The glaciers have been melting since the end of the last ice age 11,700 years ago, but the melting has not worsened recently. Satellite studies suggest that the vast majority of glaciers in the Himalayas are stable, a minority are shrinking, and a few are advancing. The retreat of the Gangotri Glacier, the source of the Ganges River, has decelerated in recent decades to 10 meters (33 feet) per year, at which rate it will last 3,000 years.
Topic:
Climate Change, Environment, and Glaciers
Political Geography:
Himalayas

33. Unfair Trade or Unfair Protection? The Evolution and Abuse of Section 301

Author:
Scott Lincicome, Inu Manak, and Alfredo Carrillo Obregon
Publication Date:
06-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Section 301 of the Trade Act of 1974 gives the U.S. trade representative (USTR) broad authority to investigate “unfair” foreign trade policies allegedly harming American companies and to impose tariffs or other trade restrictions to achieve the removal of those policies. The statute was a common tool of U.S. trade policy from the 1980s to the 1990s, authorizing the USTR to conduct almost 100 different investigations during that period. Since the World Trade Organization (WTO) was established in 1995, however, the USTR has used Section 301 infrequently and almost exclusively to initiate or implement WTO dispute settlement actions—actions that, per WTO rules, were supposed to supplant the kinds of unilateral trade actions once applied under the law. The Trump administration departed from this long‐​standing U.S. practice and took advantage of Section 301’s flaws to circumvent the WTO and enact unilateral tariffs against multiple U.S. trading partners, imposing significant economic and geopolitical costs along the way. This paper examines the Trump administration’s actions in historical context, evaluates how the law was stretched beyond its intended purpose in direct contravention of the United States’ WTO obligations, and offers practical reforms to prevent future abuse.
Topic:
Economics, Legislation, Trade, Protectionism, and WTO
Political Geography:
North America and United States of America

34. Monetary Policy and Racial Inequality

Author:
Alina Bartscher, Moritz Kuhn, Moritz Schularick, and Paul Wachtel
Publication Date:
01-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
The racial tensions that spread across the United States in 2020 have caught the attention of monetary policymakers and focused concern on the size and persistence of the gap between both the income and wealth of black and white households. There is widespread recognition that despite some decline in overt labor market discrimination, gains in educational opportunities, and income growth of black households since the onset of the civil rights movement, the gaps persist and have even grown larger by some measures. According to the 2019 Survey of Consumer Finances (SCF), the median wealth of a white household was $184,390, compared with only $20,730 for the median black household. The typical black household owns only about 11 percent of the wealth of the typical white household. The income gap is smaller but still large; the median income of black households ($38,688) is 58 percent of the median income of white households ($67,196).
Topic:
Race, Monetary Policy, Inequality, and Economic Policy
Political Geography:
North America and United States of America

35. Opening Up Military Innovation: Effects of Bottom‐​Up Reforms to U.S. Defense Research

Author:
Sabrina Howell, Jason Rathje, John Van Reenen, and Jun Wong
Publication Date:
02-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
The U.S. economy’s productivity growth has slowed down in recent decades. This slowdown appears due in part to declining innovation, especially among high‐​growth new firms, making the design of innovation incentives particularly important. One overlooked but crucial decision a government or private‐​sector research funder must consider is whether to take a centralized top‐​down approach, tightly specifying the desired innovation, or a more open bottom‐​up approach, giving more latitude to firms to define their research proposals. The bottom‐​up approach may be useful if the research funder is uncertain about what opportunities exist. We compare these two strategies by studying a major reform to the Small Business Innovation Research (SBIR) program at the U.S. Air Force.
Topic:
Reform, Economy, Research, Innovation, Defense Industry, and Military
Political Geography:
North America and United States of America

36. The Effect of Tax Avoidance Crackdown on Corporate Innovation

Author:
Qin Li, Mark (Shuai) Ma, and Terry Shevlin
Publication Date:
02-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
The past three decades have witnessed significant increases in corporate tax avoidance at both the state and federal levels. U.S. firms utilize one of the most important tax avoidance strategies, which involves extensively using intangible assets to shift taxable income from high‐​tax areas to low‐​tax areas to reduce income taxes. To combat such income‐​shifting behavior and crack down on tax avoidance, more than 20 U.S. state governments have adopted addback statutes that specifically target tax‐​motivated income‐​shifting transactions that use intangibles. These statutes require firms within the adopting state to add back intangible‐​related expenses paid to related parties in other states to their state taxable income. For example, Connecticut adopted an addback statute in 1999. That means if a firm’s subsidiary in Connecticut pays royalty fees for using patents held by a subsidiary in another state that does not tax intangible income, the firm needs to add the royalty fees to the taxable income reported in Connecticut. Thus, these provisions are expected to effectively limit firms’ ability to avoid paying state income taxes by preventing them from using intangible assets to shift income across states. Different state governments adopted the addback statutes at different times, providing a powerful setting for examining the economic consequence of this tax policy.
Topic:
Economic Policy, Innovation, Corporations, and Tax Evasion
Political Geography:
North America and United States of America

37. When Interventions Fail: Lessons from the U.S. Experience in Latin America

Author:
Leticia Abad and Noel Maurer
Publication Date:
03-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
In the middle of 2021, despite two decades of effort, the Afghan government collapsed in just nine days. The United States failed to create a state with the capacity to control its own armed forces or local officials. As early as 2009, eight years into the intervention, Ambassador Karl Eikenberry had already noted that the Afghan government could not carry out most state functions and that its leadership showed little interest in trying. U.S. civilians and soldiers tried to fill the gap.
Topic:
Foreign Policy, State Building, and Intervention
Political Geography:
Afghanistan, Latin America, and United States of America

38. When Is Tinkering with Safety Net Programs Harmful to Beneficiaries?

Author:
Jeffrey Clemens and Michael J. Wither
Publication Date:
03-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
The U.S. safety net has many moving parts. Redistributive transfers are made in cash and in kind, often come through regulation, and are implemented by multiple levels of government. Arrangements related to health care and health insurance are particularly complicated, as low‐​income households must navigate eligibility for free care, Medicaid, subsidized coverage, and employer‐​provided coverage.
Topic:
Government, Economic Policy, Labor Market, and Safety Net
Political Geography:
North America and United States of America

39. Real Effects of Climate Policy: Financial Constraints and Spillovers

Author:
Söhnke M. Bartram
Publication Date:
04-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Climate change is among the most intensely debated socioeconomic issues of current times. As a response to potential catastrophic risks from climate change, governments around the world are pushing for various regulations to curb greenhouse gas emissions. However, there is far from a consensus on optimal policy approaches, and as a result, climate policies are highly fragmented across the jurisdictions in which they are designed and implemented. More importantly, it is unknown whether such localized yet uncoordinated policies are able to internalize potential externalities that may impede efforts to address climate change as a global phenomenon or simply distort allocations in the economy. For example, at the beginning of 2013, California became the first and only state to put a comprehensive mandatory carbon regulation in place in the form of a cap‐​and‐​trade system that applies universally to all industrial greenhouse gas emissions. Exploiting the introduction of the California cap‐​and‐​trade rule, we investigate the internal resource‐​allocation responses by firms and the real but unintended spillover effects of localized climate policies that arise from the importance of financial constraints. Our study analyzes the interplay between climate policy and firm behavior, and it informs policymakers regarding the effectiveness of climate regulation.
Topic:
Climate Change, Regulation, Economy, Business, and Carbon Emissions
Political Geography:
Global Focus

40. Slippery Fish: Enforcing Regulation under Subversive Adaptation

Author:
Andres Gonzalez-Lira
Publication Date:
04-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Correcting market failures and improving economic efficiency often require curbing undesirable behaviors of market agents who act to maximize their private benefits. Examples include actions that affect ecosystems, such as deforestation, pollution, and overexploitation of natural resources; actions that affect community health, such as drunk driving and open defecation; or actions that undermine government performance, such as corruption and tax evasion. Enacting and enforcing regulations is the most direct strategy to deter such behaviors. Implementing this strategy requires strong institutions to enforce laws, plus sophisticated policing to track agents’ reactions to enforcement so that rules are robust enough to curb the undesirable behavior even when regulated agents try to game the new system.
Topic:
Environment, Government, Markets, Regulation, and Adaptation
Political Geography:
Global Focus