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  • Author: Patrick J. Michaels, David E. Wojick
  • Publication Date: 04-2015
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: The purpose of this report is to provide a framework for doing research on the problem of bias in science, especially bias induced by Federal funding of research. In recent years the issue of bias in science has come under increasing scrutiny, including within the scientific community. Much of this scrutiny is focused on the potential for bias induced by the commercial funding of research. However, relatively little attention has been given to the potential role of Federal funding in fostering bias. The research question is clear: does biased funding skew research in a preferred direction, one that supports an agency mission, policy or paradigm? Federal agencies spend many billion dollars a year on scientific research. Most of this is directly tied to the funding agency mission and existing policies. The issue is whether these financial ties lead to bias in favor of the existing policies, as well as to promoting new policies. Is the government buying science or support?
  • Topic: Government
  • Author: George Selgin
  • Publication Date: 03-2015
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: Not long ago a colleague of mine, who works regularly with legislators, attended a conference at which the lunch speaker, a famous economist, began by telling everyone why governments regulate financial institutions. The reasons the economist gave consisted of various (supposed) financial-market failures. Said the colleague to me later: “I just wanted to stand up and shout, 'That's got nothing to do with it!'” I relate this because some readers may otherwise fail to appreciate the importance of a work whose chief revelation is that financial legislation — and consequently the general structure of financial systems — are shaped by politics. My colleague didn't need to be told, but others, including many economists, evidently do. In Fragile by Design: The Political Origins of Banking Crises Scarce Credit, Charles Calomiris and Stephen Haber tell them. Banking arrangements, they argue, are “not a passive response to some efficiency criterion but rather the product of political deals that determine which laws are passed” (pp. 13 and 38). What's more, the laws such deals give rise to are, more often than not, detrimental to bank safety and soundness. In few words, banking instability has its roots, not in any fragility inherent to commercial banking, but in deals struck between governments and various interest groups. Fragile by Design is at once an alternative interpretation of the history of banking and a contribution to the debate on the causes of the recent crisis. Though other reviewers have tended to focus their attention on the latter contribution, many of Fragile by Design's most important insights, as well as many of its more serious flaws, are independent of its take on the subprime crisis. It is to those insights and flaws that I wish to draw attention
  • Topic: Government
  • Author: Thomas H. Mayor
  • Publication Date: 02-2015
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: Karl Marx formulated his ideas in the middle of the 19th century when much of Europe, particularly England, was well along in what is often referred to as the Industrial Revolution. The central Marxist idea was that those who had wealth would reap the benefit of this revolution and become ever more wealthy while those who lived from their labor alone would be relegated to a bare subsistence. In his view, capital accumulation and increases in productivity do not benefit those who work for a living. Allegedly, those who own the means of production (wealth) and supposedly perform no work, receive all the benefits.
  • Topic: Government
  • Political Geography: Europe, England
  • Author: Richard E. Wagner
  • Publication Date: 02-2015
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: Since the beginnings of the efforts of economist to give their discipline scientific grounding, economists have thought their theoretical efforts had relevance for addressing significant public issues. While the classical economists generally supported what Adam Smith described as the “system of natural liberty,” those economists also weighed in on numerous issues of public discussion. The tenor and substance of those efforts is set forth wonderfully by Lion Robbins (1952) and Warren Samuels (1966). While the analytical default setting of those economists was to support the system of natural liberty, they also recognized the value of sound public policy in supporting that stem. The classical economists thought that there could be publicly beneficial activities that the system. The classical economists thought that there could be publicly beneficial activities that the system of natural liberty would be unlikely to do well in providing. They also thought that there were activities provided through commercial transactions that could wreak significant effects on bystanders to those transactions. The amount of education acquired within a society was one such candidate (West 1965), with the care of the poor being another (Himmelfarb 1983). IN such matters as these, the classical economists engaged in strenuous debate and discussion that served as a forerunner to the development of welfare economics during the 20th century.
  • Topic: Government
  • Author: Philip K. Howard
  • Publication Date: 02-2015
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: Phillip Howard is a lawyer nationally known for his best-selling books and extensive commentary on the dysfunctions of the American legal and political systems and the adverse effects those dysfunctions have on individual behavior and the overall workings of society.
  • Topic: Government
  • Political Geography: America
  • Author: Michael Teitelbaum
  • Publication Date: 02-2015
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: In Washington, doomsday prophets tend to be effective motivational speakers. They successfully persuade the electorate that their cause is worthy and prompt Congress to take action. In his book Falling Behind? Boom, Bust, and the Global Race for Scientific Talent, Michael Teitelbaum takes on a particular brand of doomsday prophet: those who see impending shortages in the science and engineering workforce. Teitelbaum walks his readers through five postwar cycles of boom and bust in the science and engineering workforce, which eh argues have been driven to a large extend by political machinations set in motion by labor shortage claims (claims that have been almost universally rejected by economists studying the issue). The institutions that currently shape the science and engineering workforce are largely the product of policy responses to these booms and busts. As a result, Falling Behind? Is more than just a work of policy history. It is also a cogent analysis of contemporary R funding mechanisms, high-skill immigration policies, and PhD program structures.
  • Topic: Government
  • Political Geography: Washington, Soviet Union
  • Author: James L. Buckley
  • Publication Date: 02-2015
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: “The United States faces two major problems today,” writes James L. Buckley: “runaway spending that threatens to bankrupt us and a Congress that appears unable to deal with long-term problems of any consequence.” Contributing significantly to both, he argues, are the more than 1,100 federal grants-in-aid programs Congress has enacted—federal grants to state and local governments, constituting 17 percent of the federal budget, the third-largest spending category after entitlements and defense, with costs that have risen from $24.1 billion in 1970 to $640.8 billion in fiscal 2015. His “modest proposal”? Do away with them entirely, thereby saving Congress from itself while emancipating the states and empowering their people. If that sounds like a program for revising constitutional federalism, it is.
  • Topic: Government
  • Political Geography: United States
  • Author: Stephen J. K. Walters
  • Publication Date: 02-2015
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: The image of a boom town is commonly used to describe exceptional conditions through which a village suddenly becomes a city. Often such conditions are the discovery of mineral deposits that attracts industry and commerce. While in their booming condition, such towns are oases of societal flourishing relative to their preceding state. In Boom Towns, Stephen J.K. Walters, a professor of economics at Loyola University in Baltimore, explains that cities in general have the capacity perpetually to b forms of boom towns. Cities can serve as magnets to attract people and capital, thus promoting the human flourishing that has always been associated with cities at their best. It is different if cities are at their worst, as Walters explains in brining Jane Jacobs's Death and Life of Great American Cities into explanatory ambit. There are no natural obstacles to cities occupying the foreground of societal flourishing. There are obstacles to be sure, but these are man-made. Being man-made, they can also be overcome through human action, at least in principle even if doing so in practice might be difficult.
  • Topic: Government
  • Political Geography: America
  • Author: Robert Krol
  • Publication Date: 03-2014
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: Forecasts of future economic activity underlie any budget revenue projection. However, the forecasters in a government agency may face incentives or pressures that introduce forecast bias. For example, agency forecasters may be rewarded for a rosy growth forecast that allows politicians to avoid politically costly program cuts or tax increases. Similarly they may be penalized for underforecasting economic growth. Where a reward system is asymmetric, it would make sense to observe biased forecasts.
  • Topic: Government
  • Political Geography: California
  • Author: Thomas L. Hogan, William J. Luther
  • Publication Date: 03-2014
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: The Diamond-Dybvig (DD) model is often cited as a theoretical justification for government deposit insurance. In the model, rational agents find it in their interest to withdraw their bank deposits if they suspect other depositors plan to do likewise. When a sufficient number of agents are expected to liquidate their accounts, a bank run ensues. Guaranteeing deposits through a system of government administered deposit insurance removes the temptation to run on the bank and thereby precludes the need to ever use the deposit insurance.
  • Topic: Government
  • Author: Trevor Burrus
  • Publication Date: 03-2014
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: In Free Market Revolution: How Ayn Rand's Ideas Can End Big Government, Yaron Brook, executive director of the Ayn Rand Institute (ARI), and Don Watkins, a fellow at ARI, give a full-throated and spirited defense of Rand's arguments for freedom, self-actualization, and the just society. The book is a clear explanation of objectivism that weaves in timely and accurate policy discussions, such as the chapter on health care, that buttress the overall point.
  • Topic: Government
  • Political Geography: New York
  • Author: George Selgin
  • Publication Date: 07-2014
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: For a private-sector firm, success can mean only one thing: that the firm has turned a profit. No such firm can hope to succeed, or even to survive, merely by declaring that it has been profitable. A government agency, on the other hand, can succeed in either of two ways. It can actually accomplish its mission. Or it can simply declare that it has done so, and get the public to believe it.
  • Topic: Government
  • Political Geography: United States
  • Author: Lawrence H. White
  • Publication Date: 07-2014
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: Proposals abound for reforming monetary policy by instituting a less-discretionary or nondiscretionary system ("rules") for a fiat-money- issuing central bank to follow. The Federal Reserve's Open Market Committee could be given a single mandate or more generally an explicit loss function to minimize (e.g., the Taylor Rule). The FOMC could be replaced by a computer that prescribes the monetary base as a function of observed macroeconomic variables (e.g., the McCallum Rule). The role of determining the fiat monetary base could be stripped from the FOMC and moved to a prediction market (as proposed by Scott Sumner or Kevin Dowd). Alternative proposals call for commodity money regimes. The dollar could be redefined in terms of gold or a broader commodity bundle, with redeemability for Federal Reserve liabilities being reinstated. Or all Federal Reserve liabilities could actually be redeemed and retired, en route to a fully privatized gold or commodity-bundle standard (White 2012). All of these approaches assume that there will continue to be a single monetary regime in the economy, so that the way to institute an alternative is to transform the dominant regime.
  • Topic: Government
  • Political Geography: United States
  • Author: Kevin Warsh
  • Publication Date: 10-2013
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: The Federal Reserve's independence is essential to the conduct of monetary policy. But while the Fed is independent within government, it is not independent of government. The grant of authority to the Fed comes from Congress, to which the Fed is ultimately accountable. In my view, the Fed was granted significant powers by Congress, but those powers were not unlimited. The grant of authority was constrained. So by my measure, the Fed is a powerful institution, but a bounded one.
  • Topic: Government
  • Author: Allan H. Meltzer
  • Publication Date: 10-2013
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: On September 1, 1948, Allan Sproul, president of the Federal Reserve Bank of New York, commented on Fed independence: I don't suppose that anyone would still argue that the central banking system should be independent of the Government of the country. The control which such a system exercises, over the volume and value of money is a right of Government and is exercised on behalf of Government, with powers delegated by the Government. But there is a distinction between independence from Government and independence from political influence in a narrower sense. The powers of the central banking system should not be a pawn of any group or faction or party, or even any particular administration, subject to political pressures and its own passing fiscal necessities [Letter to Robert R. Bowie, in Meltzer 2003: 738].
  • Topic: Government
  • Political Geography: New York
  • Author: Gerald P. O'Driscoll Jr., Thomas F. Cargill
  • Publication Date: 10-2013
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: The Federal Reserve was founded in 1913 during the Wilson administration to end banking panics and depressions, and was part of the Progressive agenda for a more activist role of government (see Kolko 1963). By the 50th anniversary, the conventional wisdom was that the Fed's performance was overall satisfactory, especially after the Treasury-Federal Reserve Accord of 1951 that permitted independent monetary policy. While the decision to double reserve requirements in 1937 was judged a policy error, the Federal Reserve was not held responsible for the Great Depression.
  • Topic: Government
  • Author: Jurgen Stark
  • Publication Date: 10-2013
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: It was one of the author's predictions in 1998 that the euro zone would end up teaching us more about economics compared to what economics could teach us about the euro zone. While many of the author's predictions of that year did not hold, including the forecast that the euro would challenge the dollar as the world's foremost reserve currency, this particular prediction ultimately turned out to be correct. A monetary union is a hybrid between a fixed exchange rate system and a unitary state, one that is fully captured neither with closed-economy macro models nor classical international macro models of fixed exchange rates.
  • Topic: Government
  • Political Geography: Europe
  • Author: Michael B. Rappaport
  • Publication Date: 01-2012
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: The constitutional amendment procedure of Article V is defective because the national convention amendment method does not work. Because no amendment can be enacted without Congress's approval, limitations on the federal government that Congress opposes are virtually impossible to pass. This defect may have prevented the enactment of several constitutional amendments that would have constrained Congress, such as amendments establishing a balanced budget limitation, a line-item veto, or congressional term limits. The increasingly nationalist character of our constitutional charter may not be the result of modern values or circumstances, but an artifact of a distorted amendment procedure. Article V should be reformed to allow two-thirds of the state legislatures to propose a constitutional amendment which would then be ratified or rejected by the states, acting through state conventions or state ballot measures. Such a return of power to the states would militate against our overly centralized government by helping to restore the federalist character of our Constitution. Moreover, a strategy exists that would allow this reform to be enacted.
  • Topic: Civil Society, Government, Law Enforcement, Law
  • Political Geography: United States
  • Author: Michael F. Cannon, Diane Cohen
  • Publication Date: 06-2012
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: When a member of Congress introduces legislation, the Constitution requires that legislative proposal to secure the approval of the House of Representatives, the Senate, and the president (unless Congress overrides a presidential veto) before it can become law. In all cases, either chamber of Congress may block it.
  • Topic: Government, Politics, Governance, Law
  • Political Geography: United States
  • Author: Randal O'Toole
  • Publication Date: 06-2012
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: Streetcars are the latest urban planning fad, stimulated partly by the Obama administration's preference for funding transportation projects that promote "livability" (meaning living without automobiles) rather than mobility or cost-effective transportation. Toward that end, the administration wants to eliminate cost-effectiveness requirements for federal transportation grants, instead allowing non-cost-effective grants for projects promoting so-called livability. In anticipation of this change, numerous cities are preparing to apply for federal funds to build streetcar lines.
  • Topic: Economics, Environment, Government, Political Economy, Infrastructure
  • Political Geography: United States
  • Author: Thomas L. Hogan
  • Publication Date: 06-2012
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: Privately issued money can benefit consumers in many ways, particularly in the areas of value stability and product variety. Decentralized currency production can benefit consumers by reducing inflation and increasing economic stability. Unlike a central bank, competing private banks must attract customers by providing innovative products, restricting the quantity of notes issued, and limiting the riskiness of their investing activities. Although the Federal Reserve currently has a de facto monopoly on the provision of currency in the United States, this was not always the case. Throughout most of U.S. history, private banks issued their own banknotes as currency. This practice continues today in a few countries and could be reinstituted in the United States with minimal changes to the banking system.
  • Topic: Economics, Government, Markets, Monetary Policy
  • Political Geography: United States
  • Author: Trevor Burrus
  • Publication Date: 05-2012
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: Public broadcasting has been in critics' crosshairs since its creation in 1967. Assailed from all sides with allegations of bias, charges of political influence, and threats to defund their operations, public broadcasters have responded with everything from outright denial to personnel changes, but never have they squarely faced the fundamental problem: government-funded media companies are inherently problematic and impossible to reconcile with either the First Amendment or a government of constitutionally limited powers.
  • Topic: Government, Communications, Mass Media, Law
  • Political Geography: United States
  • Author: Morris A. Davis
  • Publication Date: 05-2012
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: For decades U.S. housing policy has focused on promoting homeownership. In this study, I show that the set of policies designed to further homeownership has been ineffective and expensive and that homeownership as a public policy goal is not well supported.
  • Topic: Economics, Government, Markets, Urbanization
  • Political Geography: United States
  • Author: Randal O'Toole
  • Publication Date: 05-2012
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: Although gasoline taxes have long been the main source of funding for building, maintaining, and operating America's network of highways, roads, and streets, the tax is at best an imperfect user fee. As such, Congress and the states should take action to transition from gas taxes to more efficient vehicle-mile fees.
  • Topic: Economics, Government, Communications, Infrastructure
  • Political Geography: United States
  • Author: Michael Tanner
  • Publication Date: 04-2012
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: News that the poverty rate has risen to 15.1 percent of Americans, the highest level in nearly a decade, has set off a predictable round of calls for increased government spending on social welfare programs. Yet this year the federal government will spend more than $668 billion on at least 126 different programs to fight poverty. And that does not even begin to count welfare spending by state and local governments, which adds $284 billion to that figure. In total, the United States spends nearly $1 trillion every year to fight poverty. That amounts to $20,610 for every poor person in America, or $61,830 per poor family of three.
  • Topic: Economics, Government, Poverty
  • Political Geography: United States, America
  • Author: Patric H. Hendershott, Kevin Villani
  • Publication Date: 03-2012
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: The current narrative regarding the 2008 systemic financial system collapse is that numerous seemingly unrelated events occurred in unregulated or underregulated markets, requiring widespread bailouts of actors across the financial spectrum, from mortgage borrowers to investors in money market funds. The Financial Crisis Inquiry Commission, created by the U.S. Congress to investigate the causes of the crisis, promotes this politically convenient narrative, and the 2010 Dodd-Frank Act operationalizes it by completing the progressive extension of federal protection and regulation of banking and finance that began in the 1930s so that it now covers virtually all financial activities, including hedge funds and proprietary trading. The Dodd-Frank Act further charges the newly created Financial Stability Oversight Council, made up of politicians, bureaucrats, and university professors, with preventing a subsequent systemic crisis.
  • Topic: Economics, Government, Markets, Global Recession, Financial Crisis
  • Political Geography: United States
  • Author: Jagadeesh Gokhale
  • Publication Date: 11-2012
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: Official federal budget accounts are constructed exclusively in terms of current cash flows – receipts from taxes and fees and outlays on purchases and transfers. But cash-flows do not reveal economically relevant information about who benefits and who loses from government policies. Cash flows also do not reveal how changes in government's policies redistribute resources within and across generations, including reducing the tax burden on today's generations and increasing it on future ones. Because most government transact ions are targeted by age and gender, the federal government can bring about large resource transfers across generations. Intergenerational resource transfers will grow larger as the composition of budget receipts and expenditures changes with relatively faster growth of age-and-gender-related social insurance program. Intergenerational redistributions across generations through federal government operations could substantially affect different generations' economic expectations and choices and exert powerful long-term effects on economic outcomes.
  • Topic: Economics, Government, Health, Human Welfare, Markets, Monetary Policy
  • Political Geography: United States
  • Author: Alan Reynolds
  • Publication Date: 10-2012
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: This paper confirms recent studies which find little or no sustained increase in the inequality of disposable income for the U.S. population as a whole over the past 20 years, even though estimates of the top 1 percent's share of pretax, pretransfer (market) income spiked upward in 1986-88, 1997-2000 and 2003-2007.
  • Topic: Economics, Government, Markets, Social Stratification
  • Political Geography: United States
  • Author: David Cronin
  • Publication Date: 10-2012
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: This article revisits the key conceptual aspects of the New Monetary Economics (NME) by examining the idea of “monetary separation” and objections raised against it. So long as a dominant role for base money in exchange exists, using it to provide the unit of account remains advantageous and is likely to outweigh any mooted benefits of separation. Recent quantitative analysis, however, shows the transaction demand for government base money to be falling, a development that can be expected to continue in the years ahead. The passage of time thus seems to be weakening the principal basis on which monetary separation has been criticized—namely, the superiority of base money in payments. That development fits into the history of money told by Austrian economists, which emphasises payment practices evolving over time in response to technological improvements and market forces.
  • Topic: Government
  • Political Geography: Europe, Germany, Cyprus, Luxembourg
  • Author: Masoud Moghaddam
  • Publication Date: 10-2012
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: The determinants of government budget deficits have been studied extensively, especially during the years in which the discrepancy between federal income taxes and expenditures has widened. In that respect, it is of interest to explore the causal relationship between government revenues and expenditures. If the direction of causation is from taxes to spending, then enjoying tax cuts without cutting expenditures necessitates starving the beast, as suggested by Milton Friedman (1978) and confirmed by a number of studies including Garcia and Henin (1999), and Chang, Liu, and Caudill (2002). On the other hand, if a tax cut is perceived by rational agents to be a cut in the cost of public goods, then spending would increase. In that case, taxes and spending are inversely related. Support for that relationship—the so-called fiscal illusion hypothesis—is provided by Wagner (1976), Niskanen (1978, 2002, 2006), and more recently by New (2009) and Young (2009). There are also a few studies in which no significant causal relation between tax and spend variables has been reported (e.g., Baghestani and McNown (1994).
  • Topic: Government
  • Author: James A. Dorn
  • Publication Date: 10-2012
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: The purpose of this article is to delineate the legitimate functions of government in a free society. This exercise differs from determining the “optimal” size of government, which economists have estimated at 15 to 30 percent of gross domestic product. James Madison, the chief architect of the U.S. Constitution, was not primarily looking for an engine of economic growth; he was seeking an institutional design to limit the powers of government and protect individual rights. People would then be free to pursue their happiness and, in the process, create wealth.
  • Topic: Government
  • Political Geography: United States
  • Author: Mark A. Calabria
  • Publication Date: 02-2012
  • Content Type: Policy Brief
  • Institution: The Cato Institute
  • Abstract: While Fannie Mae, Freddie Mac, and private subprime lenders have deservedly garnered the bulk of attention and blame for the mortgage crisis, other federal programs also distort our mortgage market and put taxpayers at risk of having to finance massive financial bailouts. The most prominent of these risky agencies is the Federal Housing Administration (FHA).
  • Topic: Debt, Economics, Government, Financial Crisis
  • Political Geography: United States
  • Author: Marcus E. Ethridge
  • Publication Date: 01-2011
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: In the wake of the 2010 elections, President Obama declared that voters did not give a mandate to gridlock. His statement reflects over a century of Progressive hostility to the inefficient and slow system of government created by the American Framers. Convinced that the government created by the Constitution frustrates their goals, Progressives have long sought ways around its checks and balances. Perhaps the most important of their methods is delegating power to administrative agencies, an arrangement that greatly transformed U.S. government during and after the New Deal. For generations, Progressives have supported the false premise that administrative action in the hands of experts will realize the public interest more effectively than the constitutional system and its multiple vetoes over policy changes. The political effect of empowering the administrative state has been quite different: it fosters policies that reflect the interests of those with well organized power. A large and growing body of evidence makes it clear that the public interest is most secure when governmental institutions are inefficient decisionmakers. An arrangement that brings diverse interests into a complex, sluggish decisionmaking process is generally unattractive to special interests. Gridlock also neutralizes some political benefits that producer groups and other well-heeled interests inherently enjoy. By fostering gridlock, the U.S. Constitution increases the likelihood that policies will reflect broad, unorganized interests instead of the interests of narrow, organized groups.
  • Topic: Democratization, Government, Politics, Power Politics, Governance
  • Political Geography: United States, America
  • Author: Jagadeesh Gokhale
  • Publication Date: 01-2011
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: 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, Health Care Policy
  • Political Geography: United States, New York, California, Florida
  • Author: Jagadeesh Gokhale
  • Publication Date: 10-2011
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: Social Security is often described as a "foundational" element of the nation's social safety net. Almost all Americans are directly affected by the program and many millions primarily depend on its benefits for supporting themselves during retirement. But the program's financial condition has worsened considerably since the last recession, which began in 2007. In that year, the Social Security trustees estimated that the program's trust fund would be exhausted by 2042. The trustees' annual report for 2011 brings the trust fund exhaustion date forward to 2038. Indeed, the programs revenues fell short of its benefit expenditures in 2010 and it appears unlikely that significant surpluses will emerge again under the program's current rules. If the program's finances continue to worsen at this rate, it won't be long before the debate on reforming the program assumes an urgency and intensity similar to that during 1982-83, when imminent insolvency forced lawmakers to implement payroll tax increases and scale back its benefits.
  • Topic: Economics, Government, Human Welfare
  • Political Geography: America, Ethiopia
  • Author: Ilya Somin
  • Publication Date: 12-2011
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: As has often been the case in American history, federalism is once again a major focus of political debate. Numerous recent political conflicts focus at least in part on the constitutional balance of power between the states and the central government. The lawsuits challenging the recently passed Obama health care plan, the federal bailout of state governments during the current economic crisis, and the conflicts over social issues such as medical marijuana and assisted suicide are just a few of the more prominent examples.
  • Topic: Government
  • Political Geography: America
  • Author: Bryan Barnett
  • Publication Date: 12-2011
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: It is one of the sad facts of recent human history that the economic prosperity enjoyed by so many remains unknown to most of the rest. The causes of poverty have long been debated and much has been spent in the effort to ameliorate it. Reliable estimates suggest as much as $2.3 trillion has been spent over the last several decades, most of it in the form of sponsored aid programs conceived and pursued by governments and large foundations in developed countries. Despite this investment, however, poverty remains widespread and has worsened in many places, especially in Africa. These basic facts now fuel a vigorous debate over the scale and ultimate value of traditional aid programs and a search for more effective solutions.
  • Topic: Government
  • Political Geography: Africa
  • Author: Mark A. Zupan
  • Publication Date: 06-2011
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: Free markets have many virtues. Arguably, the most recognized is the expansion of individual choice—and thus freedom—through mutually beneficial exchange (see Bauer's definition of economic development in Dorn 2002: 356). This proposition is at the heart of the enduring impact of Adam Smith's Wealth of Nations ([1776] 1937) which aptly spells out the benefits of the Invisible Hand for citizens and societies.
  • Topic: Government
  • Author: Matthew Carr
  • Publication Date: 06-2011
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: Over the course of the last 35 years, traditional public school student achievement in the United States has been stagnant, despite myriad reform efforts and a doubling in total expenditures on K–12 education (Ravitch 2000, Hanushek 1986, Greene 2005). The ramifications of this academic achievement plateau on human capital development and thus the country's global economic standing are of paramount importance (Heckman and Masterov 2007). Thus, one of the most important public policy questions that government and society faces is how to improve the academic performance and quality of the nation's public education system.
  • Topic: Government
  • Political Geography: United States
  • Author: Jerry L. Jordan
  • Publication Date: 09-2011
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: This article addresses some of the recent proposals for the conduct of monetary policies in the post-bubble environment. Advocacy of higher inflation targets is analyzed, and the challenge of maintaining monetary discipline in the face of massive fiscal deficits and mounting government debts is presented. Proposals for reforms of monetary arrangements must be based on consensus regarding the objectives of such reforms. The article concludes with some suggestions for near- and intermediate-term changes to present arrangements, as well as ideas for longer-term reforms.
  • Topic: Government, Reform
  • Political Geography: Canada
  • Author: Richard L. Gordon
  • Publication Date: 09-2011
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: Pennington undertakes a needed effort to provide a systematic, analytic critique of recent efforts to discredit what he terms “classical liberal economics.” His is effectively the standard but hard-to-sell proposition that prescient impartial counselors—Plato's philosopher kings—have failed to emerge from the development of modern knowledge. In particular, Pennington makes good use of Hayek's radical contrast between the competitive testing of concepts in a spontaneous market order and the construction of solutions by government monopolies. As Pennington's conclusions nicely summarize, skepticism of limited government is high and fostered by those who are seeking rents from intervention. Thus, ideas that committed libertarians see as obviously absurd need systematic debunking for a broader audience. Pennington, therefore, pretends that he is treating serious arguments and confronts them respectfully.
  • Topic: Government, Political Economy
  • Political Geography: United States
  • Author: Mark A. Calabria
  • Publication Date: 03-2011
  • Content Type: Policy Brief
  • Institution: The Cato Institute
  • Abstract: 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, Financial Crisis
  • Political Geography: United States
  • Author: Michael F. Cannon, Aaron Yelowitz
  • Publication Date: 01-2010
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: In 2006, Massachusetts enacted a sweeping health insurance law that mirrors the legislation currently before Congress. After signing the measure, Gov. Mitt Romney (R) wrote, "Every uninsured citizen in Massachusetts will soon have affordable health insurance and the costs of health care will be reduced." But did the legislation achieve these goals? And what other effects has it had? This paper is the first to use Current Population Survey data for 2008 to evaluate the Massachusetts law, and the first to examine its effects on the accuracy of the CPS's uninsured estimates, self-reported health, the extent of "crowd-out" of private insurance for both children and adults, and in-migration of new Massachusetts residents.
  • Topic: Government, Health, Privatization
  • Political Geography: United States
  • Author: Michael F. Cannon
  • Publication Date: 01-2010
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: House and Senate Democrats have produced health care legislation whose mandates, subsidies, tax penalties, and health insurance regulations would penalize work and reward Americans who refuse to purchase health insurance. As a result, the legislation could trap many Americans in low-wage jobs and cause even higher health-insurance premiums, government spending, and taxes than are envisioned in the legislation.
  • Topic: Government, Health, Privatization
  • Political Geography: United States, America
  • Author: Adam B. Schaeffer
  • Publication Date: 03-2010
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: Although public schools are usually the biggest item in state and local budgets, spending figures provided by public school officials and reported in the media often leave out major costs of education and thus understate what is actually spent.
  • Topic: Economics, Education, Government, Monetary Policy
  • Author: Randal O'Toole
  • Publication Date: 03-2010
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: Over the past four decades, American cities have spent close to $100 billion constructing rail transit systems, and many billions more operating those systems. The agencies that spend taxpayer dollars building these lines almost invariably call them successful even when they go an average of 40 percent over budget and, in many cases, carry an insignificant number of riders. The people who rarely or never ride these lines but still have to pay for them should ask, “How do you define success?"
  • Topic: Government, Markets, Infrastructure
  • Political Geography: America
  • Author: Christopher J. Conover
  • Publication Date: 10-2010
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: A well-established principle of public finance holds that taxes impose costs on society beyond the amount of revenue government collects. Estimates vary depending on the type of tax, but the “marginal excess burden” of federal taxes most likely ranges from 14 to 52 cents per dollar of tax revenue, averaging about 44 cents for all federal taxes.
  • Topic: Economics, Government, Markets
  • Political Geography: United States
  • Author: Chris Edwards
  • Publication Date: 09-2010
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: State governments have had to make tough budget choices in recent years. Tax revenues have stagnated as a result of the poor economy, and that has prompted governors to take a variety of fiscal actions to close large budget gaps. Some governors have cut spending to balance their budgets, while others have pursued large tax increases.
  • Topic: Economics, Government, Markets, Monetary Policy
  • Political Geography: America
  • Author: George A. Selgin, Lawrence H. White, William D. Lastrapes
  • Publication Date: 11-2010
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: As the one-hundredth anniversary of the 1913 Federal Reserve Act approaches, we assess whether the nation's experiment with the Federal Reserve has been a success or a failure. Drawing on a wide range of recent empirical research, we find the following: (1) The Fed's full history (1914 to present) has been characterized by more rather than fewer symptoms of monetary and macroeconomic instability than the decades leading to the Fed's establishment. (2) While the Fed's performance has undoubtedly improved since World War II, even its postwar performance has not clearly surpassed that of its undoubtedly flawed predecessor, the National Banking system, before World War I. (3) Some proposed alternative arrangements might plausibly do better than the Fed as presently constituted. We conclude that the need for a systematic exploration of alternatives to the established monetary system is as pressing today as it was a century ago.
  • Topic: Civil Society, Government, Markets
  • Political Geography: United States
  • Author: Andrew J. Coulson
  • Publication Date: 10-2010
  • Content Type: Working Paper
  • Institution: The Cato Institute
  • Abstract: School voucher and education tax credit programs have proliferated in the United States over the past two decades. Advocates have argued that they will enable families to become active consumers in a free and competitive education marketplace, but some fear that these programs may in fact bring with them a heavy regulatory burden that could stifle market forces. Until now, there has been no systematic, empirical investigation of that concern. The present paper aims to shed light on the issue by quantifying the regulations imposed on private schools both within and outside school choice programs, and then analyzing them with descriptive statistics and regression analyses. The results are tested for robustness to alternative ways of quantifying private school regulation, and to alternative regression models, and the question of causality is addressed. The study concludes that vouchers, but not tax credits, impose a substantial and statistically significant additional regulatory burden on participating private schools.
  • Topic: Education, Government, Markets
  • Political Geography: United States