Kevin Dowd, Martin Hutchinson, Jimi Hinchliffe, and Simon Ashby
Publication Date:
07-2011
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
The Basel regime is an international system of capital adequacy regulation designed to strengthen banks' financial health and the safety and soundness of the financial system as a whole. It originated with the 1988 Basel Accord, now known as Basel I, and was then overhauled. Basel II had still not been implemented in the United States when the financial crisis struck, and in the wake of the banking system collapse, regulators rushed out Basel III.
Topic:
Economics, International Trade and Finance, Markets, Monetary Policy, and Governance
The debate over President Obama's fantastically expensive high-speed rail program has obscured the resurgence of a directly competing mode of transportation: intercity buses. Entrepreneurial immigrants from China and recently privatized British transportation companies have developed a new model for intercity bus operations that provides travelers with faster service at dramatically reduced fares.
Topic:
Economics, Markets, Infrastructure, and Governance
Undergraduate education is a highly profitable business for nonprofit colleges and universities. They do not show profits on their books, but instead take their profits in the form of spending on some combination of research, graduate education, low-demand majors, low faculty teaching loads, excess compensation, and featherbedding. The industry's high profits come at the expense of students and taxpayer.
Topic:
Economics, Education, Markets, Privatization, and Governance
The central problem confronting education systems around the world is not that we lack models of excellence; it is our inability to routinely replicate those models. In other fields, we take for granted an endless cycle of innovation and productivity growth that continually makes products and services better, more affordable, or both. That cycle has not manifested itself in education. Brilliant teachers and high-performing schools can be found in every state and nation, but, like floating candles, they flicker in isolation, failing to touch off a larger blaze.
Tax-increment financing (TIF) is an increasingly popular way for cities to promote economic development. TIF works by allowing cities to use the property, sales, and other taxes collected from new developments—taxes that would otherwise go to schools, libraries, fire departments, and other urban services—to subsidize those same developments.
Topic:
Economics, Markets, Monetary Policy, and Governance
The federal government recently placed Fannie Mae and Freddie Mac, the government-chartered, privately owned mortgage finance companies, in conservatorship. These two massive companies are profit driven, but as government-sponsored enterprises (GSEs) they also have a government-mandated mission to provide liquidity and stability to the U.S. mortgage market and to achieve certain affordable housing goals. How the two companies should exit their conservatorship has implications that reach throughout the global financial markets and are of key importance to the future of American housing finance policy.
Topic:
Economics, Markets, Privatization, Financial Crisis, and Governance
Politicians and pundits portray Herbert Hoover as a defender of laissez faire governance whose dogmatic commitment to small government led him to stand by and do nothing while the economy collapsed in the wake of the stock market crash in 1929. In fact, Hoover had long been a critic of laissez faire. As president, he doubled federal spending in real terms in four years. He also used government to prop up wages, restricted immigration, signed the Smoot-Hawley tariff, raised taxes, and created the Reconstruction Finance Corporation-all interventionist measures and not laissez faire. Unlike many Democrats today, President Franklin D. Roosevelt's advisers knew that Hoover had started the New Deal. One of them wrote, "When we all burst into Washington ... we found every essential idea [of the New Deal] enacted in the 100-day Congress in the Hoover administration itself."
Topic:
Economics, Markets, Political Economy, Financial Crisis, and Governance
Markets, tort law, and regulation are alternative methods of achieving safety. Of these, the market is the most powerful, but it is often ignored in policy discussions. I show that both for the United States over time and for the world as a whole, higher incomes are associated with lower accidental death rates, and I discuss some examples of markets creating safety. Markets may fail if there are third-party effects or if there are information problems. Classic tort law is a reasonable (although expensive) way to handle third-party effects for strangers, as in the case of auto accidents. In theory, regulation could solve information problems, but in practice many regulations overreach because of different information problems—consumers are unaware of unapproved alternatives. A particularly difficult information problem arises in the case of what I call “ambiguous goods”— goods that reduce some risks but increase others (for example, medical care and malpractice.) Product liability focuses on these goods; over half of the litigation groups of the American Association for Justice are for ambiguous goods.
The recent financial crisis was characterized by losses in nearly every type of investment vehicle. Yet no product has attracted as much attention as the subprime mortgage.
Topic:
Economics, Government, Markets, and Financial Crisis
Unless repeal attempts succeed, the Patient Protection and Affordable Care Act of 2010 (ObamaCare) promises to increase state government obligations on account of Medicaid by expanding Medicaid eligibility and introducing an individual health insurance mandate for all US citizens and legal permanent residents. Once ObamaCare becomes fully effective in 2014, the cost of newly eligible Medicaid enrollees will be almost fully covered by the federal government through 2019, with federal financial support expected to be extended thereafter. But ObamaCare provides states with zero additional federal financial support for new enrollees among those eligible for Medicaid under the old laws. That makes increased state Medicaid costs from higher enrollments by "old-eligibles" virtually certain as they enroll into Medicaid to comply with the mandate to purchase health insurance. This study estimates and compares potential increases in Medicaid costs from ObamaCare for the five most populous states: California, Florida, Illinois, New York, and Texas.
Topic:
Government, Health, Markets, and Health Care Policy