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  • Author: Alan Reynolds
  • Publication Date: 01-2021
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: Estimates of the elasticity of taxable income (ETI) investigate how high‐​income taxpayers faced with changes in marginal tax rates respond in ways that reduce expected revenue from higher tax rates, or raise more than expected from lower tax rates. Diamond and Saez (2011) pioneered the use of a statistical formula, which Saez developed, to convert an ETI estimate into a revenue‐​maximizing (“socially optimal”) top tax rate. For the United States, they found that the optimal top rate was about 73 percent when combining the marginal tax rates on income, payrolls, and sales at the federal, state, and local levels. A related paper by Piketty, Saez, and Stantcheva (2014) concluded that, at the highest income levels, the ETI was so small that comparable top tax rates as high as 83 percent could maximize short‐​term revenues, supposedly without suppressing long‐​term economic growth. Such studies could be viewed as part of a larger effort to minimize any efficiency costs of distortive taxation while maximizing assumed revenue gains and redistributive benefits.
  • Topic: Economics, History, Tax Systems, High-Income People
  • Political Geography: North America, Global Focus, United States of America
  • 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, Adoption
  • Political Geography: North America, United States of America
  • Author: Tanner Corley, Marcus M. Witcher
  • Publication Date: 01-2021
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: In Arkansas, the barber profession has been regulated and licensed for more than 80 years, and until recently, the issue was mostly absent from the political debate. During a regular session of Arkansas’s 92nd General Assembly in 2019, however, state Sen. John Cooper presented a bill to “repeal the [1937] Arkansas Barber Law” and to “abolish the State Board of Barber Examiners” (Briggs 2019). The average Arkansan probably was not aware of the bill, but occupational licensing reformers saw this as a great opportunity for Arkansas to pave the way for other states to reform their own license laws. If Cooper’s bill had passed, Arkansas’s economy would have likely benefited (Timmons and Thornton 2010, 2018). By removing restrictive requirements to becoming a barber, the bill would have allowed more Arkansans to enter the profession. This reform would have ­provided people with more economic opportunities, increased competition, and benefited consumers.
  • Topic: Regulation, Business , Public Health, Licensing
  • Political Geography: North America, United States of America
  • Author: Scott Lincicome
  • Publication Date: 01-2021
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: Labor market and cultural disruptions in the United States are real and important, as is China’s current and unfortunate turn toward illiberalism and empire. But pretending today that there was a better trade policy choice in 2000—when Congress granted China “permanent normal trade relations” (PNTR) status and paved the way for broader engagement—is misguided. It assumes too much, ignores too much, and demands too much. Worse, it could lead to truly bad governance: increasing U.S. protectionism; forgiving the real and important failures of our policymakers, CEOs, and unions over the last two decades; and preventing a political consensus for real policy solutions. Indeed, that is happening now.
  • Topic: International Relations, Economics, Markets, Bilateral Relations, Trade, Protectionism
  • Political Geography: China, Asia, North America, United States of America
  • Author: John A. Allison
  • Publication Date: 06-2021
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: The Covid‐​19 pandemic greatly increased the scope and power of the Federal Reserve. The Fed created a number of new emergency lending facilities, which allowed it to make off‐​balance sheet loans and buy the debt of corporations and municipalities through special purpose vehicles backstopped by the Treasury under the CARES Act. Meanwhile, the Fed’s large‐​scale asset purchase program, known as quantitative easing (QE), was put on steroids after the pandemic struck in March 2020. The Fed has been purchasing longer‐​term Treasuries and mortgage‐​backed securities amounting to $120 billion per month, pushing the size of its balance sheet to an astonishing $7 trillion.
  • Topic: Economics, Monetary Policy, Federal Reserve, Pandemic, COVID-19
  • Political Geography: North America, United States of America
  • 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, Surveillance
  • Political Geography: North America, United States of America
  • Author: Jeb Hensarling, Phil Gramm, John B. Taylor
  • Publication Date: 06-2021
  • Content Type: Journal Article
  • Journal: The Cato Journal
  • Institution: The Cato Institute
  • Abstract: The Fed’s huge balance sheet allows it to engage in credit policy (the composition of the balance sheet is by definition credit policy), which inherently auto‐​resides in fiscal policy — but should auto‐​reside with Congress. This discussion, moderated by John B. Taylor, took place at the Cato Institute’s 38th Annual Monetary Conference on November 19, 2020. The transcript has been edited for publication.
  • Topic: Economics, Monetary Policy, Federal Reserve, Credit
  • Political Geography: North America, United States of America
  • Author: Alan Yang
  • Publication Date: 01-2021
  • Content Type: Journal Article
  • Journal: Political Science Quarterly
  • Institution: Academy of Political Science
  • Abstract: Alan Yang examines how ordinary U.S. Latinos of different national origin ancestries have become an increasingly cohesive panethnic political group since the time of the 1990 Latino National Political Survey. He argues that this trend towards increasing convergence across national origin has been both reinforced and disrupted on questions related to politically relevant sentiments and perceptions two years into the Trump presidency.
  • Topic: Politics, History, Ethnicity, Political Science, Donald Trump
  • Political Geography: North America, United States of America
  • Author: Mark Paul
  • Publication Date: 01-2021
  • Content Type: Journal Article
  • Journal: Political Science Quarterly
  • Institution: Academy of Political Science
  • Abstract: America is in the midst of a housing crisis. For millions of Americans, stable housing is simply out of reach. A full-time worker earning minimum wage cannot afford a two-bedroom apartment in any county in the United States. Twenty-one million households, nearly half of all renters, are rent-burdened, with rent claiming more than a quarter of their income. There are a number of contributing factors to the crisis, including pervasive economic inequality and the lack of rising wages over an entire generation for nonmanagerial workers, but many economists, political scientists, and housing experts point the finger at a lack of housing supply. Specifically, much ink has been spilled over the “not in my back yard” (NIMBY) phenomenon, whereby local residents support more housing in theory, just not in their own neighborhoods. But do local residents really have the power necessary to slow new and denser development in ways that curtail housing supply and contribute to rising house prices? In their timely and important book, Katherine Levine Einstein, David M. Glick, and Maxwell Palmer provide an excellent analysis of the political institutions that empower certain local residents to resist change in their neighborhoods. While the NIMBY sentiment is worthy of consideration regarding the housing crisis, without the right institutions, the movement would not have legs. Neighborhood Defenders provides an in-depth study of how institutions initially designed to democratize local zoning and development decisions have resulted in unintended consequences. Specifically, they document how participatory institutions that could, in theory, keep developers accountable to the people have instead backfired, leading to a shortage of housing supply and a precipitous rise in prices.
  • Topic: Book Review, Political Science, Crisis Management, Housing
  • Political Geography: North America, United States of America
  • Author: Natalie Masuoka
  • Publication Date: 01-2021
  • Content Type: Journal Article
  • Journal: Political Science Quarterly
  • Institution: Academy of Political Science
  • Abstract: Explanations for American voting behavior and attitudes have taken on a curious frame since the election of Barack Obama in 2008, such that there have been growing claims that race is no longer central to American politics. Obama’s election was labeled evidence of a new “post-racial” America. Then, when Donald Trump was elected in 2016, public narratives emphasized the role of social class by pointing to the voting bloc of white, working-class, and rural voters who had helped decide the outcome of the election. Zoltan L. Hajnal’s Dangerously Divided joins an important collection of recent academic work that directly challenges the argument about the reduced role of race in American politics. Hajnal does not sugarcoat his position: “A key aspect of this story is not just that race matters but also that it eclipses the other important dividing lines in American society” (p. 13). Race has always been a core feature of American politics, and it is present even in the constitutional Framers’ debates over the structure of government. The interpretation that recent events indicate a reduced role of race discounts the historical centrality that race has always played in American government. Hajnal offers empirical evidence and an unambiguous argument that race continues to direct most patterns in American politics.
  • Topic: Politics, Race, Elections, Book Review, Political Science, Class
  • Political Geography: North America, United States of America