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1. How Misaligned Incentives Hinder Foster Care Adoption

Author:
Isabella M. Pesavento
Publication Date:
01-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Adoption, particularly adoption out of foster care, has not been well studied within the field of economics. Researchers may avoid this topic because the adoption market greatly deviates from a typical market, and the system and data collection are highly fragmented, with relatively little federal coordination. Rubin et al. (2007) and Thornberry et al. (1999) show that instability in foster care placements produces negative welfare outcomes, and Hansen (2006), Barth et al. (2006), and Zill (2011) demonstrate that adoption out of foster care is socially and financially beneficial. Yet, children waiting to be adopted out of foster care are in excess supply, which has been exacerbated in recent years. I hypothesize that this is, in part, due to misaligned incentives of government officials and the contracted foster care agencies. I show that earnings are prioritized over ensuring permanent child placement, which hinders the potential for adoption, and government oversight fails to correct such iniquities because of career interests.
Topic:
Economics, Government, Markets, Children, Incentives, Foster Care, and Adoption
Political Geography:
North America and United States of America

2. A Reckoning Looms for America’s 50‐​Year Financial Surveillance System

Author:
Michael J. Casey
Publication Date:
06-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
For all the upheaval of 2020, it’s perhaps not surprising that the 50‐​year anniversary of a major piece of financial legislation came and went with little fanfare. But the 1970 U.S. Bank Secrecy Act (BSA) deserves much scrutiny.1 In mandating that financial institutions maintain customer identity records and report illicit activity to government agencies, the BSA was a landmark statute by any measure. It paved the way to an ever‐​expanding system of international surveillance that’s a cornerstone of U.S. economic power.
Topic:
Economics, Government, Finance, and Surveillance
Political Geography:
North America and United States of America

3. Subnational Economic Freedom and Performance in the United States and Canada

Author:
Daniel L. Bennett
Publication Date:
01-2016
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
During his illustrious career spanning more than half a century, Richard Vedder has tirelessly advocated for limited government and free enterprise. Much of his scholarship has focused on examining how fiscal and labor market policies consistent with the principles of economic freedom are associated with economic and social benefits such as stronger economic performance (Vedder 1981, 1990), lower unemployment (Vedder and Gallaway 1996, 1997), and poverty alleviation (Vedder and Gallaway 2002). Vedder has also examined the impact of government policy on income inequality (Vedder 2006; Vedder and Gallaway 1986, 1999; Vedder, Gallaway, and Sollars 1988), an area that he and I have collaborated to study (Bennett and Vedder 2013, 2015). Thus, Vedder’s scholarship has contributed to our understanding of the impact that economic freedom exerts on economic outcomes.
Topic:
Government, Income Inequality, Economy, and Free Trade
Political Geography:
Canada, North America, and United States of America

4. Why the U.S. External Imbalance Matters

Author:
William R Cline
Publication Date:
01-2007
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Last year the U.S. current account deficit (mainly on trade but including capital income and transfers) reached almost 7 percent of GDP, or about twice as large a share as in 1987, the peak of the previous episode of large external imbalances and dollar overvaluation. A major reason is that from 1995 to 2002 the dollar rose by 28 percent against other currencies, after taking account of inflation and weighting by trade. A strong dollar made U.S. exports expensive and imports cheap, driving up the trade deficit after about a two-year reaction time. With large and persistent external deficits, the United States has swung from being the world’s largest creditor nation to its largest debtor, with net foreign liabilities now at about one-fourth of GDP. The dollar has corrected somewhat and is now about 13 percent lower on a trade-weighted basis than its average in 2002, based on the Federal Reserve’s broad real exchange rate index. Without that partial correction the trade deficit would now be even larger. It will likely require a decline of an additional 15 to 20 percent in the dollar to cut the current account deficit back to about 3 percent of GDP. That rate would be consistent with limiting net foreign liabilities to 50 percent of GDP in the long term. Exceeding that ceiling would seem imprudent for both the U.S. and global economies. It will be crucial that China, Japan, and much of the rest of Asia participate in realignment of their currencies against the dollar, because the decline of the dollar so far has been heavily concentrated against the euro and other industrial country currencies except for the Japanese yen. Dollar correction will also need to be accompanied by fiscal adjustment. Otherwise much of the competitive effect of the dollar adjustment would be offset by higher inflation and a dollar rebound from higher interest rates. Fundamentally the external deficit is the excess of resources used over resources produced, and with U.S. household saving near zero, the government cannot be a large net borrower without keeping the nation in large external deficit.
Topic:
Government, Finance, Economy, Currency, and Deficit
Political Geography:
North America and United States of America

5. Limiting Government: The Failure of “Starve the Beast”

Author:
William A. Niskanen
Publication Date:
10-2006
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
For nearly 30 years, many Republicans have argued that the most effective way to control federal government spending is to “starve the beast” by reducing federal tax revenues. Moreover, two Nobel laureate economists, Milton Friedman and Gary Becker, have endorsed this argument. Friedman (2003) summarized this perspective as follows: How can we ever cut government down to size? I believe there is one and only one way: the way parents control spendthrift children, cutting their allowance. For governments, this means cutting taxes. Resulting deficits will be an effective—I would go so far as to say, the only effective—restraint on the spending propensities of the executive branch and the legislature. The public reaction will make that restraint effective. Becker and his colleagues Ed Lazear and Kevin Murphy (2003) described this effect as “the double benefit of tax cuts.” (Lazear is the recently appointed chairman of the Council of Economic Advisers.) This argument has been effective in unifying the Republican Party in favor of reducing federal taxes, but at the cost of undermining the more traditional Republican concern about fiscal responsibility.
Topic:
Government, Economy, Tax Systems, Fiscal Policy, and Public Spending
Political Geography:
North America and United States of America