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1. A Return to US Casualty Aversion: The 9/11 Wars as Aberrations

Author:
John Mueller
Publication Date:
04-2024
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Impelled by an overwhelming desire to hunt down those who were responsible for the September 11, 2001, terrorist attacks, the United States launched military invasions of Afghanistan and Iraq, where it toppled regimes that had little or nothing to do with 9/11. There has been a tendency to see these exercises as misguided elements of a coherent plan to establish a liberal world order or to apply liberal hegemony. However, the warring of the post–9/11 period has been a glaring, extended, and highly consequential aberration. During the quarter century before that, the United States pursued a foreign policy that was far more casualty averse. Over the past decade, the country has moved back to—and appears poised to expand on—that tradition after its exhausting 9/11–induced military ventures that ran such high costs for so few benefits. Moreover, public opinion in the United States is not messianic or in constant search of hegemony or of monsters abroad to destroy. As part of its move back to a more limited military approach, the United States developed—or further developed—a strategy called “by, with, and through” that was particularly evident in its successful military campaign from 2014 to 2019 against the Islamic State. In this, the United States worked with local forces by providing advice, supplies, and intelligence, and by carrying out air strikes while the locals were expected to take almost all of the casualties. Although this approach is hardly new, it seems to have a future and is currently being applied in the war in Ukraine. It might also be applied to deal with a Chinese invasion of Taiwan.
Topic:
Foreign Policy, Armed Forces, 9/11, War on Terror, Casualties, and Military
Political Geography:
North America and United States of America

2. Slashing Tax Rates and Cutting Loopholes: Options for Tax Reform in the 119th Congress

Author:
Adam N. Michel
Publication Date:
06-2024
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
The 2017 Tax Cuts and Jobs Act (TCJA) marked a significant overhaul of the US tax system. It reduced taxes for individuals and businesses through the end of 2025 and boosted economic growth. However, beginning in 2026, Americans face an automatic tax increase of about 8 percent (more than $400 billion a year). In the context of the debate over the expiration of the TCJA, the next Congress has an unprecedented opportunity to cut tax rates to their lowest level in almost a century. The Cato Institute is putting forth this tax plan that pairs massively pro-growth tax cuts with the elimination of $1.4 trillion worth of annual tax loopholes, corporate welfare, and other special-interest tax subsidies. The plan would reduce the top income tax rate to 25 percent, the capital gains rate to 15 percent, and the corporate rate to 12 percent; enact full expensing for all investments; and repeal the estate tax, alternative minimum tax, and net investment income tax. The more aggressively Congress eliminates loopholes in the tax code and cuts spending, the deeper it can slash tax rates, eliminate the costliest taxes, and boost the economy.
Topic:
Reform, Economy, Economic Growth, and Tax Systems
Political Geography:
North America and United States of America

3. The Long‐​Run Effects of Immigration: Evidence across a Barrier to Refugee Settlement

Author:
Antonio Ciccone and Jan Nimczik
Publication Date:
02-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Some 280 million people around the world are first‐​generation immigrants; in Organisation for Economic Co‐​operation and Development countries, first‐​generation immigrants make up around 14 percent of the population. The economic effects of immigration have become better understood in recent decades. A new focus of research on the effects of immigration is its long‐​run impact on productivity, wages, and income. We contribute to this research by examining the long‐​run economic effects of the arrival of refugees in what would become West Germany after the end of World War II (WWII) in 1945. This period was characterized by one of the largest population movements in modern times. Between 1945 and 1949, millions of people from Czechoslovakia, Hungary, Poland, Romania, and eastern parts of prewar Germany were displaced westward. When the Federal Republic of Germany (West Germany) was founded in 1949, these refugees made up around 15 percent of the country’s population.
Topic:
History, Immigration, Refugees, Resettlement, and World War II
Political Geography:
Europe, France, Germany, and United States of America

4. Uncle Sucker: Why U.S. Efforts at Defense Burdensharing Fail

Author:
Justin Logan
Publication Date:
03-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
In 2022, the United States counted 50 of the world’s 195 countries as formal treaty allies, not including dozens more informal security relationships. U.S. allies do not carry a proportionate share of the burden of their defense; Washington’s allies account for roughly 36 percent of world economic output but only 24 percent of world military spending. In every alliance, the United States is the most important member and gives more than it gets in return. American politicians and the American public regularly express frustration with allies’ behavior. In 1959, for example, President Dwight D. Eisenhower lamented that the insufficient defense efforts of U.S. allies in Europe meant that the Europeans were close to “making a sucker out of Uncle Sam.” Things have gotten worse since 1959. Today, America’s alliances act as transfer payments from U.S. taxpayers to taxpayers in allied countries. History and theory both suggest that hectoring allies is unlikely to produce much change. Allies know that they can pocket the gains from U.S. commitments, then spend their own money in the ways they believe benefit them most. Policymakers should evaluate alliance commitments in the context of the net contributions of U.S. allies to U.S. defense, weighed against the costs and benefits of a non‐​alliance. The only way to produce more equitable burdensharing is to make allies doubt the strength of the U.S. commitment: the stronger the belief in the U.S. commitment, the harder it is to get allies to defend themselves. Unless policymakers fundamentally change their approach to alliances, there is little hope that defense burdens can be spread more equitably.
Topic:
History, Alliance, Defense Spending, Military, and Burden-sharing
Political Geography:
North America and United States of America

5. The Fiscal Impact of Immigration in the United States

Author:
Alex Nowrasteh, Sarah Eckhardt, and Michael Howard
Publication Date:
03-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
The National Research Council and the National Academy of Sciences (NAS) published groundbreaking investigations into the economics of immigration in 1997 and 2017. Both publications contained thorough literature surveys compiled by experts, academics, and think tank scholars on how immigration affects many aspects of the U.S. economy. The 2017 NAS report included an original fiscal impact model as a unique contribution to immigration scholarship. Its findings have been used by policymakers, economists, journalists, and others to debate immigration reform. Here, we acquired the exact methods used by the NAS from its authors to replicate, update, and expand upon the 2017 fiscal impact model published in the NAS’s The Economic and Fiscal Consequences of Immigration. This paper presents two analyses: a measure of the historical fiscal impacts of immigrants from 1994 to 2018 and the projected long‐​term fiscal impact of an additional immigrant and that immigrant’s descendants. An individual’s fiscal impact refers to the difference between the taxes that person paid and the benefits that person received over a given period. We use and compare two models for these analyses: the first follows the NAS’s methodology as closely as possible and updates the data for more recent years (hereafter referred to as the Updated Model), and the second makes several methodological changes that we believe improve the accuracy of the final results (hereafter referred to as the Cato Model). The most substantial changes made in the Cato Model include correcting for a downward bias in the estimation of immigrants’ future fiscal contributions identified by Michael Clemens in 2021, allocating the fiscal impact of U.S.-born dependents of immigrants to the second generation group, and using a predictive regression to assign future education levels to individuals who are too young to have completed their education. Other minor changes are discussed in later sections. Immigrants have a more positive net fiscal impact than that of native‐​born Americans in most scenarios in the Updated Model and in every scenario in the Cato Model, depending on how the costs of public goods are allocated. The Cato Model finds that immigrant individuals who arrive at age 25 and who are high school dropouts have a net fiscal impact of +$216,000 in net present value terms, which does not include their descendants. Including the fiscal impact of those immigrants’ descendants reduces those immigrants’ net fiscal impact to +$57,000. By comparison, native‐​born American high school dropouts of the same age have a net fiscal impact of −$32,000 that drops to −$177,000 when their descendants are included (see Table 31). Results also differ by level of government. State and local governments often incur a less positive or even negative net fiscal impact from immigration, whereas the federal government almost always sees revenues rise above expenditures in response to immigration. With some variation and exceptions, the net fiscal impact of immigrants is more positive than it is for native‐​born Americans and positive overall for the federal and state/​local governments.
Topic:
Immigration, History, and Fiscal Policy
Political Geography:
North America and United States of America

6. Balance of Trade, Balance of Power: How the Trade Deficit Reflects U.S. Influence in the World

Author:
Daniel Griswold and Andreas Freytag
Publication Date:
04-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
The U.S. trade deficit is a misunderstood symbol of U.S. economic strength and influence in the world. The deficit is not driven by unfair trade abroad or industrial weakness at home and, as the Trump years show, cannot be “fixed” through higher tariffs. Instead, the trade deficit is driven by a persistent net inflow of foreign capital, which reduces interest rates and fuels economic output. Contrary to myth, the trade deficit is not a cause of deindustrialization or a loss of manufacturing jobs. In fact, the current balance of trade points to America’s continuing influence in global affairs—as a haven for global investment, as a robust producer and buyer of global goods and services, and as the provider of a strong dollar that remains at the center of the global economy. Policymakers should reject measures that restrict trade and foreign investment and instead seek to expand America’s commercial ties to the rest of the world.
Topic:
Foreign Policy, Economy, Trade, and Trade Deficit
Political Geography:
North America and United States of America

7. Course Correction: Charting a More Effective Approach to U.S.-China Trade

Author:
Clark Packard and Scott Lincicome
Publication Date:
05-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Over the past several years the U.S.-China economic relationship has soured and become subordinated to broader concerns about national security and geopolitics. After a decades‐​long reform agenda in China that lifted hundreds of millions out of grinding poverty, Chinese president Xi Jinping has increasingly turned inward—reembracing Maoist socialism and heavy‐​handed central planning. Washington’s response to these worrisome developments has been reflexively hawkish economically, scattershot, and woefully inadequate for the economic challenge that China presents.
Topic:
National Security, Bilateral Relations, Economy, and Trade
Political Geography:
China, Asia, North America, and United States of America

8. The Regressive Nature of the U.S. Tariff Code: Origins and Implications

Author:
Lydia Cox
Publication Date:
06-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Tariffs are often thought of as taxes that fall uniformly across goods or industries. In reality, however, the U.S. tariff schedule is extremely complex—the modern‐​day tariff code comprises 4,394 pages of tariffs on 19,347 varieties of goods. As a result, there is a lot of variation in tariff rates, even within narrowly defined categories of goods. We study this complexity through the lens of a little‐​known but consequential pattern in the modern U.S. tariff schedule: tariff rates are systematically higher on low‐​value versions of goods relative to their high‐​value counterparts. For example, the tariff on a $400 handbag made of reptile leather is 5.3 percent, while the tariff on an $8 plastic‐​sided handbag is 16 percent. Through a comprehensive analysis of U.S. tariffs over the past 100 years, we show that this regressive pattern is, and has been, a systematic feature of tariffs for decades. Our findings are emblematic of a more fundamental feature of U.S. tariff policy: tariffs set to meet policy objectives of the past have persisted through vast changes in the economic landscape and, despite their historical origins, are still affecting consumers today.
Topic:
Economics, Tariffs, and Trade Policy
Political Geography:
North America and United States of America

9. Rational Eviction: How Landlords Use Evictions in Response to Rent Control

Author:
Eilidh Geddes and Nicole Holz
Publication Date:
07-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
As housing prices rise, cities are turning to rent control policies, hoping to ensure longterm affordable housing. Typically, rent control policies require leases to be renewed at statutorily limited rent increases. Rent control policies reduce the returns from operating in the rental market, creating well‐​studied incentives for landlords to leave the rental market. Many rent control policies—including San Francisco’s—feature vacancy decontrol provisions, which allow landlords to reset rents to market rates when tenants move. These policies limit the reductions in returns to operating in the rental market but create incentives for landlords to induce tenant turnover, possibly through evictions. The more tenants move, the more often a landlord can raise rents to market rates.
Topic:
Markets, Economy, Eviction, Housing, and Rent
Political Geography:
North America and United States of America

10. Central Bank Digital Currency: The Risks and the Myths

Author:
Nicholas Anthony and Norbert Michel
Publication Date:
01-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Central bank digital currencies (CBDCs) have the potential to radically transform the American financial system—ultimately usurping the private sector and endangering Americans’ core freedoms. Although CBDCs have gained the attention of politicians, central bankers, and the tech industry, this experiment should be left on the drawing board. This paper provides a summary of why Congress should explicitly prohibit the Federal Reserve and the Department of the Treasury from issuing a CBDC.
Topic:
Finance, Economy, Fiscal Policy, Banking, and Digital Currency
Political Geography:
North America and United States of America

11. Self‐​Service Bans and Gasoline Prices: The Effect of Allowing Consumers to Pump Their Own Gas

Author:
Vitor Melo
Publication Date:
01-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Billions of people live in countries that ban self‐​service fueling at gasoline stations, including some of the world’s largest countries by population, including China, India, and Brazil, among many others. The impact of these bans is largely understudied despite their prevalence presumably because this policy is often implemented at the national level and because there have been no policy changes in these countries that allow for an assessment of these bans on gasoline prices.
Topic:
Gas, Regulation, Economy, and Consumer Behavior
Political Geography:
North America, Global Focus, and United States of America

12. Formula for a Crisis: Protectionism and Supply Chain Resiliency—the Infant Formula Case Study

Author:
Scott Lincicome, Gabriella Beaumont-Smith, and Alfredo Carrillo Obregon
Publication Date:
01-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
It has become accepted wisdom in Washington that the COVID-19 pandemic revealed how openness to international trade and investment increases U.S. vulnerability to economic shocks and contributes to widespread shortages of food, medicine, and other essential goods. This official narrative, however, ignores ample economic research showing that, while disruptions are inevitable in a modern economy, the alternative to free trade—a protectionism‐​driven onshoring of global supply chains—carries its own risks and can even heighten vulnerability by inhibiting natural market adjustments to economic shocks. The infant formula crisis, which lasted for most of 2022 and was unique to the United States, provided an unfortunate real‐​world lesson in this regard.
Topic:
International Trade and Finance, Free Trade, Resilience, COVID-19, and Supply Chains
Political Geography:
North America and United States of America

13. Corking Russian Gas: Global Economic and Political Ramifications

Author:
Scott Semet
Publication Date:
08-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Awarm winter in 2022–2023, a purposive decline in consumption that caused the economy to cool, and frantic efforts to attract supplies of liquefied natural gas (LNG) obscured Europe’s enduring reliance on cheap Russian gas for economic growth. European winters will not always be warm, and there is not enough LNG to replace Russian gas in the short term. Efforts to wean Europe from Russian gas permanently defy economic logic. Should policymakers choose to do so, it would carry costs not only for Europe but also for the United States and the rest of the world.
Topic:
Gas, Economic Growth, Imports, Energy, and Regional Politics
Political Geography:
Russia, Europe, and United States of America

14. Terrorism and Immigration; A Risk Analysis, 1975–2022

Author:
Alex Nowrasteh
Publication Date:
08-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Terrorism is a hazard to human life and material prosperity that should be addressed in a sensible manner whereby the benefits of actions taken to contain it outweigh the costs. A total of 219 foreign-born terrorists were responsible for 3,046 murders on U.S. soil from 1975 through the end of 2022. The chance of a person perishing in a terrorist attack committed by a foreigner on U.S. soil over the 48-year period studied here is 1 in 4.3 million per year. The hazard posed by foreigners who entered on different visa categories varies considerably. For instance, the annual chance of an American being murdered in a terrorist attack by a refugee is about 1 in 3.3 billion, while the annual chance of being murdered in an attack committed by an illegal immigrant is zero. Looking at this spectrum of risk, any government response to terrorism must consider the wide range of hazards posed by foreign-born terrorists who entered under various visa categories. There were 219 foreign-born terrorists who planned, attempted, or carried out attacks on U.S. soil from 1975 through 2022. Of those, 67 percent were Islamists, 16 percent were foreign nationalists, 6 percent were right-wing extremists, 5 percent were non-Islamic religious terrorists, 4 percent were left-wing extremists, and the rest were separatists, adherents of other or unknown ideologies, or targeted worshippers of specific religions.
Topic:
Security, Terrorism, Immigration, and Cost-Benefit Analysis
Political Geography:
North America and United States of America

15. Pariah or Partner? Reevaluating the U.S.-Saudi Relationship

Author:
Jon Hoffman
Publication Date:
09-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
The U.S.-Saudi relationship is stuck. America’s policy toward the kingdom is rooted in flawed rationales and supported by a system of lobbying and influence designed to sustain the status quo. Those policies are proving ineffective at navigating the changing landscape, both in the Middle East and globally, while reaping virtually no benefits for the United States. The longer these fruitless policies persist, the more they will harm U.S. interests. The long-standing rationales for close U.S.-Saudi relations—centered on oil, counterterrorism, and preserving regional stability—are flawed. What Washington needs from the region on those issues is quite limited and simple to achieve. Despite the high costs and dubious benefits of the current approach to Saudi Arabia, there is a growing chorus in Washington to deepen the relationship with Riyadh. New rationales for expanding the relationship include the return of great power competition to the Middle East and the expansion of the Abraham Accords, which are increasingly being linked together as the new lodestar of Middle East policy. These new rationales also do not withstand scrutiny. It is time for a fundamental reevaluation of the U.S.-Saudi relationship. The United States should approach Saudi Arabia as it would any other state that does not share our interests or our values: from arm’s length.
Topic:
Foreign Policy, Bilateral Relations, Political stability, and Strategic Interests
Political Geography:
Middle East, Saudi Arabia, North America, and United States of America

16. Trade and Investment Are Not a Balancing Act

Author:
Norbert Michel
Publication Date:
11-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
The trade deficit is the amount by which the value of a country’s imports exceeds the value of its exports during a given period, such as one calendar year or quarter. It is a commonly misunderstood concept that inspires harmful economic policies, such as proposals that a country “balance” its imports and exports by taxing international capital flows. Supporters of this policy hope to shrink the trade deficit (i.e., to balance imports and exports) by taxing the capital surplus that goes along with a trade deficit in the balance-of-payments framework. In the United States, senators Tammy Baldwin (D‑WI) and Josh Hawley (R‑MO) authored a 2019 bill to do this and, though it died in the Senate Banking Committee, similar legislation may appear in the future. This kind of policy is highly flawed on theoretical, empirical, and practical grounds. For starters, trade deficits and capital surpluses are merely part of a national accounting system that includes multiple arbitrarily assigned categories. In fact, even the concept of balancing in the national accounting system is not as straightforward as supporters of balancing trade flows suggest. The evidence demonstrates that there is no clear negative relationship between a trade imbalance and a country’s optimal economic performance, especially regarding employment in manufacturing, which is a common concern among politicians. At best, taxing international capital flows would fail to change the incentives that drive US consumers’ high demand for imports. At worst, it would cause a global economic recession that impoverishes millions of people and makes Americans poorer.
Topic:
Economics, Investment, Trade, and Deficit
Political Geography:
Global Focus and United States of America

17. Taiwan’s Urgent Need for Asymmetric Defense

Author:
Eric Gomez
Publication Date:
11-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Amid deteriorating US-China relations, senior US officials have begun suggesting that a Chinese attack against Taiwan could happen soon. The conventional wisdom in Washington is that this urgent threat requires an urgent response, but too much attention has focused on the US-China military balance and too little on Taiwan’s military efforts. Taiwan’s future would likely be determined in the opening days, if not hours, of a conflict. Taiwan must prevail in two critical military operations: surviving China’s conventional bombardment and preventing the first wave of amphibious ground forces from establishing a beachhead. Taiwan would be fighting these two operations alone, but Taiwan’s military does not have the right mix of equipment, manpower, and strategy to mount an effective defense, despite the fact that the results of these operations could prove decisive for the rest of the conflict. US policymakers must press Taipei to focus on improving Taiwan’s ability to execute this narrow set of military missions and to reorient its overall strategy to one of asymmetric defense to counter Chinese advantages. If Taiwan does not or cannot do so, it is unlikely that any amount of potential US assistance or intervention could salvage the island’s position in the event of a conflict. Because these shortfalls are so important, Washington should create a sense of urgency in Taipei through security assistance measures such as conditional arms sales and limited joint training. The United States should also take care not to back Beijing into a corner where it concludes that using force is its only viable option to achieve unification with Taiwan. American assurances to China are a tough sell given Washington’s bipartisan hawkishness on China, but keeping time on Taiwan’s side is essential for the success of Taipei’s self-defense transformation.
Topic:
Foreign Policy, Defense Policy, and Asymmetric Relations
Political Geography:
China, Taiwan, Asia, and United States of America

18. Jawboning against Speech: How Government Bullying Shapes the Rules of Social Media

Author:
Will Duffield
Publication Date:
09-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Over the past two decades, social media has drastically reduced the cost of speaking, allowing users the world over to publish with the push of a button. This amazing capability is limited by the fact that speakers do not own the platforms they increasingly rely on. If access to the platforms is withdrawn, speakers lose the reach that social media grants. In America, government censorship is limited by the First Amendment. Nevertheless, seizing upon the relationship between platforms and speakers, government officials increasingly demand that platforms refrain from publishing disfavored speech. They threaten platforms with punitive legislation, antitrust investigations, and prosecution. Government officials can use informal pressure — bullying, threatening, and cajoling — to sway the decisions of private platforms and limit the publication of disfavored speech. The use of this informal pressure, known as jawboning, is growing. Left unchecked, it threatens to become normalized as an extraconstitutional method of speech regulation. While courts have censured jawboning in other contexts, existing judicial remedies struggle to address social media jawboning. Amid the opacity and scale of social media moderation, government influence is difficult to detect or prevent. Ultimately, congressional rulemaking and the people’s selection of liberal, temperate officials remain the only reliable checks on this novel threat to free speech.
Topic:
Government, Regulation, Social Media, Censorship, and Free Speech
Political Geography:
Global Focus and United States of America

19. The Human Perils of Scaling Smart Technologies: Evidence from Field Experiments

Author:
Alec Brandon, Christopher M. Clapp, John A. List, Robert D. Metcalfe, and Michael Price
Publication Date:
12-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Economists have long argued that an essential driver of economic growth is innovation. Past work has shown that differences in production technologies represent an important source of disparities in patterns of long‐​run economic growth across countries. For instance, some estimates suggest that roughly 50 percent of growth in U.S. annual gross domestic product can be attributed to innovation. Not surprisingly, policymakers have thus focused significant attention on policies designed to stimulate innovation and the supply of new technologies. Yet innovation includes not only the creation but also the diffusion of new technologies and products in the marketplace.
Topic:
Science and Technology, Economic Growth, and Innovation
Political Geography:
North America and United States of America

20. Behavioral Responses to Supply‐​Side Drug Policy during the Opioid Epidemic

Author:
Simone Balestra, Heige Liebert, and Nicole Maestas
Publication Date:
12-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
In the last 20 years, the use of prescription opioids has grown dramatically in the United States. Since 1999, the number of opioid prescriptions increased by 300 percent, surpassing 255 million prescriptions in 2012 (81.3 prescriptions per 100 people) before declining to 153 million prescriptions by 2019 (46.7 per 100 people). Opioids may be an effective analgesic for acute pain, but they are also associated with high risks of addiction and overdose. Death rates from opioid poisoning tripled between 2000 and 2014, contributing to a stunning reversal in 1999 of the long‐​running decline in midlife mortality. The increase in overdose deaths was initially driven by prescription opioid poisonings, but the more recent surge in deaths has been attributed to illicit opioids such as heroin and fentanyl.
Topic:
Economy, Drugs, Public Health, and Opioid Crisis
Political Geography:
North America and United States of America

21. Competition and Content Moderation

Author:
Jennifer Huddleston
Publication Date:
01-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Section 230 of the Communications Decency Act has played a pivotal role in fostering the internet ecosystem we have today. Although the law applies to millions of websites of all sizes, critics often misconstrue it as a special exemption for “big tech” companies, shielding them from legal scrutiny; however, platforms large and small are liable for all content they create or develop, even if only in part. Yet many lawmakers see Section 230 as a stumbling block impeding fairness and accountability online. Their arguments fail to consider the expansive impact that Section 230 has had in fostering and preserving a competitive online marketplace over the past 25 years. Its protections for both platforms and users have proven essential to increasing competition.
Topic:
Science and Technology, Social Media, Legislation, Content Moderation, and Competition
Political Geography:
North America and United States of America

22. The National Flood Insurance Program: Solving Congress’s Samaritan’s Dilemma

Author:
Peter Van Doren
Publication Date:
03-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Who should pay for the damages caused by natural disaster? The American ethos has long called on personal responsibility and private charity, rather than broad public aid, to secure people’s welfare. Although public emergency services play a vital role during and immediately after a catastrophe, this ethos looks to private insurance and disaster‐​oriented organizations, such as the Red Cross, to be the main modes of recovery from a flood or storm, as well as prior care in siting and constructing buildings to blunt the effects of wind and rain.
Topic:
Government, Natural Disasters, Public Policy, and Insurance
Political Geography:
North America and United States of America

23. Universal Preschool: Lawmakers Should Approach with Caution

Author:
Colleen Hroncich
Publication Date:
03-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Children are not widgets. What works well for one may not work for another. That is why education is not a one‐​size‐​fits‐​all endeavor. When looking at preschool or K–12 education, having a diversity of options is essential.
Topic:
Education, Children, Legislation, Preschool, and Schools
Political Geography:
North America and United States of America

24. The (Updated) Case for Free Trade

Author:
Scott Lincicome and Alfredo Carrillo Obregon
Publication Date:
04-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
The long‐​standing bipartisan consensus in favor of free trade in the United States has unraveled as the nation’s commitment to the multilateral trading system is increasingly subordinated to inward‐​looking ideological priorities. Like all forms of market competition, trade can be disruptive for some companies and workers, and various trade agreements may require updating to address both an increasingly authoritarian China and the 21st‐​century global economy. Nevertheless, both the seen and unseen economic benefits that free trade has delivered to countless individuals, businesses, and communities in America are undeniable and irreplaceable. Furthermore, the lone alternative to free trade, protectionism, has repeatedly proven to impose high costs for minimal benefits. In short, the case for free trade is an economic no‐​brainer.
Topic:
Geopolitics, Economy, Free Trade, and Protectionism
Political Geography:
North America and United States of America

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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

31. 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

32. The Regulatory Costs of Being Public

Author:
Michael Ewens, Kairong Xiao, and Ting Xu
Publication Date:
05-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
An important explanation for the significant decline in the number of publicly listed companies in the United States is the increased burden of disclosure and governance regulations. Indeed, practitioners often point to heightened regulatory costs as the culprit of the disappearing public firms, while major deregulations such as the 2012 Jumpstart Our Business Startups (JOBS) Act were directly motivated by perceived costs of being public. Thus, understanding the role of regulations in the cost of being public and the decline in the number of public firms can address concerns about possible capital market dysfunction.
Topic:
Markets, Governance, Regulation, and Business
Political Geography:
North America and United States of America

33. Evidence of the Unintended Labor Scheduling Implications of the Minimum Wage

Author:
Qiuping Yu, Shawn Mankad, and Masha Shunko
Publication Date:
06-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
The effect of the minimum wage has been an important topic of debate for decades. For many years, low‐​wage laborers, especially in the food service and retail sectors in the United States, have been advocating an increase in the minimum wage to $15. Intending to increase worker welfare, many states (e.g., California and New York) and municipalities (San Francisco, Seattle, and New York City) have responded by raising their minimum wages.
Topic:
Labor Issues, Economic Policy, and Minimum Wage
Political Geography:
North America and United States of America

34. Who Pays Sin Taxes? Understanding the Overlapping Burdens of Corrective Taxes

Author:
Christopher Conlon, Nirupama Rao, and Yinan Wang
Publication Date:
07-2022
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
“Sin taxes”—or excise taxes on particular goods that society deems harmful—are popular in the United States. Federal, state, and local governments levy taxes on alcohol and tobacco with the dual and sometimes conflicting goals of curbing consumption and raising revenue. For many of these products, taxes represent a large share of the overall price. In New York City, a 1.75L bottle of vodka might sell for as little as $11.99 of which $7.97 is tax; and a $13.00 pack of cigarettes includes $6.86 in taxes.
Topic:
Tax Systems, Economic Policy, and Consumer Behavior
Political Geography:
North America and United States of America

35. The GameStop Episode: What Happened and What Does It Mean?

Author:
Allan M. Malz
Publication Date:
10-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The GameStop stock trading episode that began in January 2021 has been unprecedented in some ways, especially in the ability of market participants to organize collective action openly yet anonymously. In other ways, it’s been an unsurprising repetition of past experience. Financial markets are imperfect, they display many frictions, and the imperfect alignment of interests is a perpetual dilemma in designing both contracts and public policy.
Topic:
Regulation, Economy, Public Policy, and Stock Markets
Political Geography:
United States of America

36. U.S. Debt Sustainability under Low Interest Rates and after the Covid‐​19 Shock

Author:
William R Cline
Publication Date:
10-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The worst pandemic in 100 years has hit the United States at a time when economic thinking has become more comfortable with high public debt, facilitating an aggressive response in public spending for relief that has reached a remarkable 27 percent of GDP.1 One reason for the receptiveness to large spending has been the perception that the fiscal stimulus in the Great Recession of 2007–2009 erred on the side of excessive caution and left an aftermath of unduly slow growth. More fundamentally, low real interest rates in recent years have shifted the center of gravity in macroeconomic analysis away from concern about chronic deficits and rising debt toward a certain benign neglect of debt as a problem.
Topic:
Debt, Interest Rates, Sustainability, and COVID-19
Political Geography:
North America and United States of America

37. A Brief History of U.S. Immigration Policy from the Colonial Period to the Present Day

Author:
Andrew M. Baxter and Alex Nowrasteh
Publication Date:
08-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
More than 86 million people have legally immigrated to the United States between 1783 and 2019. The legal regime under which they immigrated has changed radically over that time; the politics surrounding those changes have remained contentious, and past immigration policies inform the current political debate. Conflicting visions and piecemeal legislation have left the United States with an archaic and barely coherent immigration system with outdated policy objectives that is primarily controlled by the executive branch of government. We review the history of U.S. immigration policy, including the legal controversies that empowered Congress with its immigration plenary power and the historical policy decisions that still guide the U.S. immigration system, in order to contextualize the current political debate over immigration at the beginning of the Biden administration.
Topic:
Government, History, Immigration, and Immigration Policy
Political Geography:
North America and United States of America

38. Common‐​Sense Policy Reforms for California Housing

Author:
Lee E. Ohanian
Publication Date:
08-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
California housing has become unaffordable. As of February 2021, the median California home price was nearly $700,000 and the median condominium price was $515,000. The median rent for the same month was $1,733. Based on industry mortgage financing and renting standards, this means that both homebuyers and renters require household incomes of nearly $100,000 to qualify for housing.
Topic:
History, Reform, Regulation, and Housing
Political Geography:
North America and United States of America

39. How Wealth Fuels Growth

Author:
Chris Edwards
Publication Date:
09-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
The role of wealth in the economy is the focus of much policy debate. This study examines wealthy individuals as “angel” investors, who fund startup businesses. Angel investors provide a unique source of support for America’s entrepreneurs, particularly in leading‐​edge industries.
Topic:
Entrepreneurship, Economic Growth, Investment, Wealth, and Angel Investors
Political Geography:
North America and United States of America

40. Discrimination, Managers, and Firm Performance: Evidence from “Aryanizations” in Nazi Germany

Author:
Killian Huber, Volker Lindenthal, and Fabian Waldinger
Publication Date:
10-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Large‐​scale increases in discrimination can lead to dismissals of highly qualified business leaders and managers. Discriminatory expulsions of individuals holding important positions in the economy have occurred repeatedly, both historically and in modern times. Recent political developments have renewed interest in the economic effects of this type of discrimination. For instance, the U.S. travel ban on citizens of seven Muslim‐​majority countries has raised fears among large corporations that increasing discrimination will leave them unable to retain talent.
Topic:
History, Economy, Business, Discrimination, and Nazi Germany
Political Geography:
Germany and United States of America

41. Why U.S. Immigration Barriers Matter for the Global Advancement of Science

Author:
Ruchi Agarwal and Patrick Gaule
Publication Date:
10-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
While talent can be born anywhere, few places specialize in nurturing it. Accordingly, talented individuals have pursued opportunities abroad for centuries. For instance, Aristotle moved from Northern Greece to Athens to attend Plato’s Academy and then to Macedonia to tutor a young Alexander the Great. More recently, the United States has emerged as a hub for foreign talent, playing an outsized role in the global knowledge network of scientific activity in recent decades. However, the recent introduction of restrictive immigration policies in the United States may adversely impact scientific activity. While studies have examined the potential negative impact of restrictive U.S. immigration policies on U.S. competitiveness in science and innovation, there has been less focus on understanding how U.S. immigration barriers may in turn impact scientific activity globally. In this context, our work studies the impact of U.S. immigration barriers on global knowledge production and examines which policy actions are more likely to help advance the global knowledge frontier.
Topic:
Science and Technology, Immigration, Border Control, and Research and Development
Political Geography:
Global Focus and United States of America

42. The Smoot‐​Hawley Trade War

Author:
Kris James Mitchener, Kirsten Wandschneider, and Kevin H. O'Rourke
Publication Date:
11-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
In the words of Robert J. Samuelson, “The ghost of Smoot‐​Hawley seems to haunt President Trump.” As fears of a trade war between the United States and China grew after the U.S. presidential election of 2016, many commentators drew this link between the signing of the Smoot‐​Hawley Tariff Act of 1930 and recent trade disputes. And the consensus was that the trade wars of the 1930s were an ominous portent of what might await the world if Donald Trump’s protectionist impulses were not checked.
Topic:
Tariffs, Trade Wars, Economic Policy, and Imports
Political Geography:
China and United States of America

43. Getting Schooled: The Role of Universities in Attracting Immigrant Entrepreneurs

Author:
Natee Amornsiripanitch, Paul A. Gompers, George Hu, and Kaushik Vasudevan
Publication Date:
12-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Immigrants play a vital role in innovation activities and entrepreneurship. Given the substantial contribution of immigrants in these areas, a set of natural questions arise: What are the pathways that high‐​skilled immigrants take to arrive in the United States, and how has the importance of these pathways changed over time? What are important institutions that serve as gatekeepers for high‐​skilled immigrants, and do they affect the types of immigrant founders that come to the United States? Do certain parts of the United States benefit disproportionately from high‐​skilled immigration, and if so, what are some factors that contribute to these benefits? The answers to these questions have important implications for designing immigration policy and regulation, which have become increasingly acrimonious topics in public discourse. They also have important implications for firms and universities that recruit talent from abroad and for the communities that hope to promote vibrant entrepreneurial ecosystems.
Topic:
Entrepreneurship, Immigrants, Innovation, Higher Education, and Startup
Political Geography:
North America and United States of America

44. The Economic Impact of Tax Changes, 1920–1939

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, and High-Income People
Political Geography:
North America, Global Focus, and United States of America

45. 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

46. Barber Licensing in Arkansas: Public Health or Private Gain?

Author:
Tanner Corley and 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, and Licensing
Political Geography:
North America and United States of America

47. U.S. Trade Policy toward China: Learning the Right Lessons

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, and Protectionism
Political Geography:
China, Asia, North America, and United States of America

48. Lessons for the Fed from the Pandemic

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, and COVID-19
Political Geography:
North America and United States of America

49. 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

50. Ten Stablecoin Predictions and Their Monetary Policy Implications

Author:
Caitlin Long
Publication Date:
06-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Stablecoins are financial obligations issued on a blockchain. They are generally fully collateralized with either fiat currency deposits at a bank, or with short‐​term government bonds held at a custodian. They’re issued only by nonbanks, although FINMA in Switzerland does allow Swiss banks to issue Swiss franc–denominated stablecoins. Usually stablecoins do not pay interest, and they are designed to trade at par with the fiat currency. Because they are issued on a blockchain, they usually settle in minutes, with irreversibility, and — critically — they are “programmable,” which means users can build their own software applications to interact with them.
Topic:
Monetary Policy, Banks, and Digital Currency
Political Geography:
Global Focus and United States of America

51. Reflections on Monetary Policy and Its Future

Author:
Jeb Hensarling, Phil Gramm, and 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, and Credit
Political Geography:
North America and United States of America

52. The New Faces of Internationalism: How Generational Change Is Reshaping American Foreign Policy Attitudes

Author:
A. Trevor Thrall and Erik Goepner
Publication Date:
03-2021
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
Observers of American foreign policy have been worried for years about eroding public support for international engagement, especially in light of increasing public discontent after nearly two decades of military conflict since 9/11. Low support for international engagement and military intervention among younger Americans, in particular, has led some to worry that the age of American internationalism has passed. There is little agreement, however, about how serious the erosion of public support is and what its causes are. Relying on an analysis of seven decades of polling data, we argue that generational effects have slowly reshaped patterns of American foreign policy preferences. Since World War II, Americans have come of age during periods increasingly less conducive to support of military intervention, leading them to adopt worldviews increasingly at odds with those carried by older Americans. As a result, the United States is undergoing a slow motion changing of the guard, as older and more hawkish Americans die and are replaced by younger, less hawkish ones. These findings have important implications for the debate about the state of public support for American leadership of the liberal international order and the evolution of American foreign policy.
Topic:
Foreign Policy, Engagement, International Order, and Generation
Political Geography:
North America and United States of America

53. Questioning Industrial Policy: Why Government Manufacturing Plans Are Ineffective and Unnecessary

Author:
Scott Lincicome and Huan Zhu
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
In the wake of the COVID-19 pandemic and rising U.S.-China tensions, American policymakers have again embraced “industrial policy.” Both President Biden and his predecessor, as well as legislators from both parties, have advocated a range of federal support for American manufacturers to fix perceived weaknesses in the U.S. economy and to counter China’s growing economic clout. These and other industrial policy advocates, however, routinely leave unanswered important questions about U.S. industrial policy’s efficacy and necessity: What is “Industrial Policy”? Advocates of “industrial policy” often fail to define the term, thus permitting them to ignore past failures and embrace false successes while preventing a legitimate assessment of industrial policies’ costs and benefits. Yet U.S. industrial policy’s history of debate and implementation establishes several requisite elements – elements that reveal most “industrial policy successes” not to be “industrial policy” at all. What are the common obstacles to effective U.S. industrial policy? Several obstacles have prevented U.S. industrial policies from generating better outcomes than the market. This includes legislators’ and bureaucrats’ inability to “pick winners” and efficiently allocate public resources (Hayek’s “Knowledge Problem”); factors inherent in the U.S. political system (Public Choice Theory); lack of discipline regarding scope, duration, and budgetary costs; interaction with other government policies that distort the market at issue; and substantial unseen costs. What “problem” will industrial policy solve? The most common problems purportedly solved by industrial policy proposals are less serious than advocates claim or unfixable via industrial policy. This includes allegations of widespread U.S. “deindustrialization” and a broader decline in American innovation; the disappearance of “good jobs”; the erosion of middle‐​class living standards; and the destruction of American communities. Do other countries’ industrial policies demand U.S. industrial policy? The experiences of other countries generally cannot justify U.S. industrial policy because countries have different economic and political systems. Regardless, industrial policy successes abroad – for example, in Japan, Korea and Taiwan – are exaggerated. Also, China’s economic growth and industrial policies do not justify similar U.S. policies, considering the market‐​based reasons for China’s rise, the Chinese policies’ immense costs, and the systemic challenges that could derail China’s future growth and geopolitical influence. These answers argue strongly against a new U.S. embrace of industrial policy. The United States undoubtedly faces economic and geopolitical challenges, including ones related to China, but the solution lies not in copying China’s top‐​down economic planning. Reality, in fact, argues much the opposite.
Topic:
Government, Industrial Policy, Manufacturing, and COVID-19
Political Geography:
China, Asia, North America, and United States of America

54. Manufactured Crisis: “Deindustrialization,” Free Markets, and National Security

Author:
Scott Lincicome
Publication Date:
01-2021
Content Type:
Commentary and Analysis
Institution:
The Cato Institute
Abstract:
Both the American left and right often use “national security” to justify sweeping proposals for new U.S. protectionism and industrial policy. “Free markets” and a lack of government support for the manufacturing sector are alleged to have crippled the U.S. defense industrial base’s ability to supply “essential” goods during war or other emergencies, thus imperiling national security and demanding a fundamental rethink of U.S. trade and manufacturing policy. The COVID-19 crisis and U.S.-China tensions have amplified these claims. This resurgent “security nationalism,” however, extends far beyond the limited theoretical scenarios in which national security might justify government action, and it suffers from several flaws. First, reports of the demise of the U.S. manufacturing sector are exaggerated. Although U.S. manufacturing sector employment and share of national economic output (gross domestic product) have declined, these data are mostly irrelevant to national security and reflect macroeconomic trends affecting many other countries. By contrast, the most relevant data—on the U.S. manufacturing sector’s output, exports, financial performance, and investment—show that the nation’s total productive capacity and most of the industries typically associated with “national security” are still expanding. Second, “security nationalism” assumes a need for broad and novel U.S. government interventions while ignoring the targeted federal policies intended to support the defense industrial base. In fact, many U.S. laws already authorize the federal government to support or protect discrete U.S. industries on national security grounds. Third, several of these laws and policies provide a cautionary tale regarding the inefficacy of certain core “security nationalist” priorities. Case studies of past government support for steel, shipbuilding, semiconductors, and machine tools show that security‐​related protectionism and industrial policy in the United States often undermines national security. Fourth, although the United States is not nearly as open (and thus allegedly “vulnerable”) to external shocks as claimed, global integration and trade openness often bolster U.S. national security by encouraging peace among trading nations or mitigating the impact of domestic shocks. Together, these points rebut the most common claims in support of “security nationalism” and show why skepticism of such initiatives is necessary when national security is involved. They also reveal market‐​oriented trade, immigration, tax, and regulatory policies that would generally benefit the U.S. economy while also supporting the defense industrial base and national security.
Topic:
Defense Policy, National Security, COVID-19, Free Market, and Deindustrialization
Political Geography:
China, North America, and United States of America

55. Espionage, Espionage‐​Related Crimes, and Immigration: A Risk Analysis, 1990–2019

Author:
Alex Nowrasteh
Publication Date:
02-2021
Content Type:
Commentary and Analysis
Institution:
The Cato Institute
Abstract:
A cost‐​benefit analysis finds that the hazards posed by foreign‐​born spies are not large enough to warrant broad and costly actions such as a ban on travel and immigration from China, but they do warrant the continued exclusion of potential spies under current laws. Espionage poses a threat to national security and the private property rights of Americans. The government should address the threat of espionage in a manner whereby the benefits of government actions taken to reduce it outweigh the costs of those actions. To aid in that goal, this policy analysis presents the first combined database of all identified spies who targeted both the U.S. government and private organizations on U.S. soil. This analysis identifies 1,485 spies on American soil who, from 1990 through the end of 2019, conducted state or commercial espionage. Of those, 890 were foreign‐​born, 583 were native‐​born Americans, and 12 had unknown origins. The scale and scope of espionage have major implications for immigration policy, as a disproportionate number of the identified spies were foreign‐​born. Native‐​born Americans accounted for 39.3 percent of all spies, foreign‐​born spies accounted for 59.9 percent, and spies of unknown origins accounted for 0.8 percent. Spies who were born in China, Mexico, Iran, Taiwan, and Russia account for 34.7 percent of all spies. The chance that a native‐​born American committed espionage or an espionage‐​related crime and was identified was about 1 in 13.1 million per year from 1990 to 2019. The annual chance that a foreign‐​born person in the United States committed an espionage‐​related crime and was discovered doing so was about 1 in 2.2 million during that time. The government was the victim in 83.3 percent of espionage cases, firms were the victims of commercial espionage in 16.3 percent of the cases, and hospitals and universities were the victims of espionage in 0.1 percent and 0.3 percent of the cases, respectively. The federal government should continue to exclude foreign‐​born individuals from entering the United States if they pose a threat to the national security and private property rights of Americans through espionage. A cost‐​benefit analysis finds that the hazards posed by foreign‐​born spies are not large enough to warrant broad and costly actions such as a ban on travel and immigration from China, but they do warrant the continued exclusion of potential spies under current laws.
Topic:
Crime, Immigration, Risk, and Espionage
Political Geography:
North America and United States of America

56. Protectionism or National Security? The Use and Abuse of Section 232

Author:
Scott Lincicome and Inu Manak
Publication Date:
03-2021
Content Type:
Commentary and Analysis
Institution:
The Cato Institute
Abstract:
With several Section 232 tariffs still in place, and the status of other investigations unclear, the law presents an early test for the Biden administration and a signal about its future trade policy plans. President Biden took office at the height of modern American protectionism. The trade policy legacy he inherited from the Trump administration puts the United States at a crossroads. Will Biden go down the problematic path of executive overreach like his predecessor, or will he forge a new path? We may not need to wait long to find out. In his first trade action, President Biden reinstated tariffs on aluminum from the United Arab Emirates under Section 232 of the Trade Expansion Act of 1962, which authorizes the president to impose tariffs when a certain product is “being imported into the United States in such quantities or under such circumstances as to threaten to impair national security.” Though infrequently used in the past, Section 232 was a favored trade tool of the Trump administration, which was responsible for nearly a quarter of all Section 232 investigations initiated since 1962. While Congress has constitutional authority over trade policy, Section 232 gives the president broad discretion to enact protectionist measures in the name of national security. Why is this law a problem? First, the statute’s lack of an objective definition of “national security” permits essentially anything to be considered a threat, regardless of the merits. Second, the law’s lack of detailed procedural requirements encouraged the Trump administration to cut corners in applying the law, thus breeding cronyism and confusion. Third, President Trump took advantage of the law’s ambiguity to shield key Section 232 findings from Congress and the public, undermining both transparency and accountability. The Trump administration’s abuse of the rarely used Section 232 has allowed the statute to become an excuse for blatant commercial protectionism, harming American companies and consumers and our security interests. It’s unclear whether the Biden administration will continue this troubling trend or seek reform. The best course of action would be the latter: Biden should avoid using Section 232 and support congressional efforts to rein in presidential power, thus ensuring an end to the calamitous episodes that were common during the Trump era.
Topic:
National Security, Trade Policy, and Protectionism
Political Geography:
North America and United States of America

57. Private Schooling after a Year of COVID-19: How the Private Sector Has Fared and How to Keep It Healthy

Author:
Neal McCluskey
Publication Date:
04-2021
Content Type:
Commentary and Analysis
Institution:
The Cato Institute
Abstract:
In one year, COVID-19 contributed to the permanent closure of at least 132 mainly low‐​cost private schools. But that was better than some feared. As COVID-19 struck the United States in March 2020, sending the nation into lockdown, worry about the fate of private schools was high. These schools, which only survive if people can pay for them, seemed to face deep trouble. Many private schools have thin financial margins even in good economic times and rely not only on tuition but also on fundraisers, such as in‐​person auctions, to make ends meet. When the pandemic hit, many such events were canceled, and churches no longer met in person, threatening contributions that help support some private schools. Simultaneously, many private schooling families faced tighter finances, making private schooling less affordable. Finally, families that could still afford private schooling might have concluded that continuing to pay for education that was going to be online‐​only made little sense.
Topic:
Education, COVID-19, and Private Schools
Political Geography:
North America and United States of America

58. China: Rise or Demise?

Author:
John Mueller
Publication Date:
05-2021
Content Type:
Commentary and Analysis
Institution:
The Cato Institute
Abstract:
China, even if it rises, does not present much of a security threat to the United States. Policymakers increasingly view China’s rapidly growing wealth as a threat. China currently ranks second, or perhaps even first, in the world in gross domestic product (although 78th in per capita GDP), and the fear is that China will acquire military prowess commensurate with its wealth and feel impelled to carry out undesirable military adventures. However, even if it continues to rise, China does not present much of a security threat to the United States. China does not harbor Hitler‐​style ambitions of extensive conquest, and the Chinese government depends on the world economy for development and the consequent acquiescence of the Chinese people. Armed conflict would be extremely—even overwhelmingly—costly to the country and, in particular, to the regime in charge. Indeed, there is a danger of making China into a threat by treating it as such and by engaging in so‐​called balancing efforts against it. Rather than rising to anything that could be conceived to be “dominance,” China could decline into substantial economic stagnation. It faces many problems, including endemic (and perhaps intractable) corruption, environmental devastation, slowing growth, a rapidly aging population, enormous overproduction, increasing debt, and restive minorities in its west and in Hong Kong. At a time when it should be liberalizing its economy, Xi Jinping’s China increasingly restricts speech and privileges control by the antiquated and kleptocratic Communist Party over economic growth. And entrenched elites are well placed to block reform. That said, China’s standard of living is now the highest in its history, and it’s very easy to envision conditions that are a great deal worse than life under a stable, if increasingly authoritarian, kleptocracy. As a result, the Chinese people may be willing to ride with, and ride out, economic stagnation should that come about—although this might be accompanied by increasing dismay and disgruntlement. In either case—rise or demise—there is little the United States or other countries can or should do to affect China’s economically foolish authoritarian drive except to issue declarations of disapproval and to deal more warily. As former ambassador Chas Freeman puts it, “There is no military answer to a grand strategy built on a non‐​violent expansion of commerce and navigation.” And Chinese leaders have plenty of problems to consume their attention. They scarcely need war or foreign military adventurism to enhance the mix. The problem is not so much that China is a threat but that it is deeply insecure. Policies of threat, balance, sanction, boycott, and critique are more likely to reinforce that condition than change it. The alternative is to wait, and to profit from China’s economic size to the degree possible, until someday China feels secure enough to reform itself.
Topic:
Government, GDP, Geopolitics, and Economic Growth
Political Geography:
China, Asia, and United States of America

59. Money, Stability, and Free Societies

Author:
Steve H. Hanke
Publication Date:
06-2020
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Monetary instability poses a threat to free societies. Indeed, currency instability, banking crises, soaring inflation, sovereign debt defaults, and economic booms and busts all have a common source: monetary instability. Furthermore, all these ills induced by monetary instability bring with them calls for policy changes, many of which threaten free societies. One who understood this simple fact was Karl Schiller, who was the German Finance Minister from 1966 until 1972. Schiller’s mantra was clear and uncompromising: “Stability is not everything, but without stability, everything is nothing” (Marsh 1992: 30). Well, Schiller’s mantra is my mantra. I offer three regime changes that would enhance the stability in what Jacques de Larosière (2014) has asserted is an international monetary “anti-system.” First, the U.S. dollar and the euro should be formally, loosely linked together. Second, most central banks in developing countries should be mothballed and replaced by currency boards. Third, private currency boards should be permitted to enter the international monetary sphere.
Topic:
Debt, Foreign Exchange, Monetary Policy, Developing World, Inflation, and Currency
Political Geography:
Europe, United States of America, and European Union

60. Tariffs and Monetary Policy: A Toxic Mix

Author:
Michael D Bordo and Mickey D. Levy
Publication Date:
01-2020
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The ratcheting up of tariffs and the Fed’s discretionary conduct of monetary policy are a toxic mix for economic performance. Escalating tariffs and President Trump’s erratic and unpredictable trade policy and threats are harming global economic performance, distorting monetary policy, and undermining the Fed’s credibility and independence. President Trump’s objectives to force China to open access to its markets for international trade, reduce capital controls, modify unfair treatment of intellectual property, and address cybersecurity issues and other U.S. national security issues are laudable goals with sizable benefits. However, the costs of escalating tariffs are mounting, and the tactic of relying exclusively on barriers to trade and protectionism is misguided and potentially dangerous. The economic costs to the United States so far have been relatively modest, dampening exports, industrial production, and business investment. However, the tariffs and policy uncertainties have had a significantly larger impact on China, accentuating its structural economic slowdown, and are disrupting and distorting global supply chains. This is harming other nations that have significant exposure to international trade and investment overseas, particularly Japan, South Korea, and Germany. As a result, global trade volumes and industrial production are falling. Weaker global growth is reflected in a combination of a reduction in aggregate demand and constraints on aggregate supply.
Topic:
International Trade and Finance, Monetary Policy, Economic Growth, Tariffs, and Industry
Political Geography:
Japan, China, Europe, Asia, South Korea, Germany, North America, and United States of America

61. The U.S.-China Trade War: Is There an End in Sight?

Author:
Simon Lester and Huan Zhu
Publication Date:
01-2020
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Donald Trump was a trade “hawk” long before he became president. In the late 1980s, he went on the Oprah Winfrey show and complained about Japan “beating the hell out of this country” on trade (Real Clear Politics 2019). As president, he has continued with the same rhetoric, using it against a wide range of U.S. trading partners, and he has followed it up with action (often in the form of tariffs). While many countries have found themselves threatened by Trump’s aggressive trade policy, his main focus has been China. As a result, the United States and China have been engaged in an escalating tariff, trade, and national security conflict since July 2018, when the first set of U.S. tariffs on China went into effect and China retaliated with tariffs of its own. In this article, we explore the U.S.-China economic conflict, from its origins to the trade war as it stands today. We then offer our thoughts on where this conflict is heading and when it might end.
Topic:
Economics, International Trade and Finance, Tariffs, Trade Wars, and Donald Trump
Political Geography:
China, Asia, North America, and United States of America

62. How the Classical Gold Standard Can Inform Monetary Policy

Author:
James A. Dorn
Publication Date:
10-2020
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
atching the frenzy surrounding Judy Shelton’s confirmation hearing before the Senate Banking Committee on February 13, one is led to believe that the gold standard is a “nutty” idea, for which no serious economist or monetary policymaker could possibly have a kind word (see U.S. Senate 2020). This article critiques that wholesale refutation of the gold standard. In recent years (as well as in the past), both serious economists and reputable monetary policymakers have recognized the benefits of a gold standard in reducing regime uncertainty and promoting monetary and social order. Whatever one may think of President Trump’s recent Fed picks, the gold standard itself deserves more respect than it’s been getting.
Topic:
Monetary Policy, Federal Reserve, Finance, and Gold Standard
Political Geography:
Global Focus and United States of America

63. On the Origins of Entrepreneurial Alertness: Did Bauer and Yamey Precede Kirzner?

Author:
J. Robert Subrick
Publication Date:
10-2020
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
After the Second World War, the entrepreneur virtually disappeared from economic analysis (Baumol 1968). This neglect followed from the emerging models of general equilibrium that formed one aspect of the core of economic theory. By assumption, the Walrasian auctioneer knew the appropriate prices necessary to equate quantity supplied with quantity demanded in each market. In addition, the auctioneer knew when and by how much to adjust prices when an exogenous factor changed such as income or production technology. Trade only occurred at equilibrium prices so that markets cleared. No market participant chose or changed prices; it occurred exogenously. Kenneth Arrow recognized the lack of real world mechanisms to determine and adjust prices in competitive markets. He identified a logical gap in the perfectly competitive model. He wrote that “there is no place for a rational decision with respect to prices as there is with respect to quantities” (Arrow 1959: 42). Prices exist independent of consumer and firm behavior. A complete model would have to provide a solution to the conundrum.
Topic:
Markets, History, Entrepreneurship, and Economy
Political Geography:
North America and United States of America

64. The American News Media’s Volatile Perspectives on China

Author:
Ted Galen Carpenter
Publication Date:
10-2020
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
In the decades since the founding of the People’s Republic of China (PRC) in 1949, wild swings have occurred in the way that American media outlets view that country. At most times, a herd mentality is evident, as a large percentage of news stories portray China in one particular fashion, although there always are some dissenters from the dominant narrative. The nature of that narrative sometimes shifts rapidly and dramatically, however. During some periods, the prevailing perspective has been extremely hostile, with nearly all accounts seeing the PRC as a monstrous oppressor domestically and an existential security threat to the United States. That was the case for more than two decades following the communist revolution, until Richard Nixon’s administration suddenly altered U.S. policy in 1971–1972, and Washington no longer treated the PRC as a rogue state.
Topic:
Security, Foreign Policy, Public Opinion, Media, and Economy
Political Geography:
China, Asia, North America, and United States of America

65. U.S. Policy Options Toward China: An Appraisal

Author:
Simon Lester
Publication Date:
10-2020
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Most Americans will agree that the Chinese government has behaved badly in a number of ways, although they may not agree on exactly which Chinese government behavior is a problem. Perhaps it’s the treatment of ethnic or religious minorities, such as the Uighurs or Tibetans or Christians; maybe it’s the crackdown on protests in Hong Kong and failure to uphold the “one country, two systems” principle; or assertiveness in territorial disputes; or censorship; or protectionist trade practices; or intellectual property theft; or cyber‐​hacking; or spying; or most recently, being slow to disclose the emergence of the coronavirus and engaging in a propaganda war regarding who is at fault. It’s a long list, and everyone has their own priorities. But while there is loose agreement on the existence of a problem, there is great difficulty in coming up with an appropriate response. What can or should the United States government do about any of this? Is it possible to change the behavior of other governments? Is the U.S. government in a position to do it? Is it appropriate to do so?
Topic:
Foreign Policy, Human Rights, Bilateral Relations, and Trade
Political Geography:
China, Asia, North America, and United States of America

66. The Fall of Chile

Author:
Axel Kaiser
Publication Date:
10-2020
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Following the failed Marxist experiment of Chilean President Salvador Allende, a free‐​market revolution led by the so‐​called Chicago Boys in the 1970s and 1980s created the conditions necessary for the country to experience an “economic miracle” that captured worldwide attention.1 As Nobel laureate economist Gary Becker (1997) put it, Chile became “an economic role model for the whole underdeveloped world.” This performance, said Becker, “became still more impressive when the government was transformed into a democracy.” Along the same lines, Nobel laureate economist Paul Krugman argued that the reforms introduced by the Chicago Boys “proved highly successful and were preserved intact when Chile finally returned to democracy in 1989” (Krugman 2008: 31). Indeed, from 1990 to 2010 a left‐​wing coalition called “Concertación” came to power. Despite having been comprised of opponents to the military dictatorship and by many former members of Salvador Allende’s government, Concertación kept in place the foundations of the free‐​market system. A pragmatic view prevailed, leading to the recognition and adoption of the economic legacy of the Pinochet years.
Topic:
Economics, Reform, Neoliberalism, Ideology, Crisis Management, Transparency, and Free Market
Political Geography:
South America, Chile, and United States of America

67. Immigration and State Institutions: Does Region of Origin Matter?

Author:
Meg Tuszynski and Dean Stansel
Publication Date:
10-2020
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Some immigration opponents claim that immigrants import bad institutions and policies from their country of origin into their new home country. We argue just the opposite—namely, that immigrants are more likely to self‐​select into countries with better institutions than those in their home countries. Researchers have examined this issue in both a cross‐​country and within‐​country context. Their findings have been mixed. Although others have found small or nonexistent impacts of immigrants on state institutions, those papers assume that all immigrants are the same. Our approach is unique in that it divides immigrant populations in a variety of ways. We build on the previous literature that examines the relationship between immigration and institutions at the state level, where there are smaller inherent differences in economic institutions (compared to differences across countries). We do so by incorporating the regional diversity of immigrant populations, examining whether immigrants’ countries of origin matter for economic outcomes in their new home country. Controlling for the diversity of immigrant populations in a way that previous researchers have not done improves our ability to assess immigration opponents’ claims that immigrants from economically worse‐​off countries hurt U.S. economic institutions. We find virtually no evidence of an economically and statistically significant relationship between the levels of immigration we have experienced in recent decades and a decline in economic institutions in the United States, regardless of the region or economic conditions of recent immigrants’ home countries. The limited statistically significant evidence we do find is mixed and small in magnitude. Thus, one of the key rationales used to call for immigration restrictions is not supported by our findings.
Topic:
Immigration, Institutions, and Macroeconomics
Political Geography:
North America, Global Focus, and United States of America

68. Financial Transactions Taxes: Inaccessible and Expensive

Author:
Diego Zuluaga
Publication Date:
10-2020
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Financial transactions taxes (FTTs) have become increasingly popular since the 2008 financial crisis. During the 2020 Democratic presidential primary race, FTTs featured prominently on the platforms of both moderate Michael Bloomberg and socialist Bernie Sanders. The likely nominee, Joe Biden, has also expressed support for an FTT, albeit without offering any details in his election platform.
Topic:
Financial Crisis, Finance, Domestic Politics, Tax Systems, and Transactions
Political Geography:
North America and United States of America

69. Perspectives on Balance Sheet and Credit Policies: A Tribute to Marvin Goodfriend

Author:
Esther L. George
Publication Date:
10-2020
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Iappreciate this opportunity to pay tribute to Marvin Goodfriend and his many contributions to the theory and practice of monetary policy. At the Kansas City Fed, we knew Marvin as a scholar and a good Federal Reserve colleague. Marvin also was a participant in a number of our Jackson Hole Economic Symposiums. As a Research Officer at the Richmond Fed, he attended the first symposium that we held in Jackson Hole, Wyoming, in 1982, where his work on “Discount Window Borrowing, Monetary Control, and the Post‐​October 6, 1979 Federal Reserve Operating Procedure” was widely cited.1 Thirty‐​four years later in 2016, as a professor at Carnegie Mellon, he presented a paper making the case for deeply negative interest rates as a policy tool that could breach the zero lower bound on nominal rates. He argued that “the zero interest bound encumbrance on monetary policy should be removed so that movements in the intertemporal terms of trade can be reflected fully in interest rate policy to sustain price stability and full employment with a minimum of inefficient and costly alternative policies” (Goodfriend 2016; 128; emphasis added).
Topic:
Monetary Policy, Finance, Interest Rates, and Credit
Political Geography:
Global Focus and United States of America

70. Illegal Immigration and Crime in Texas

Author:
Alex Nowrasteh, Andrew C. Forrester, and Michelangelo Landgrave
Publication Date:
10-2020
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
Donald J. Trump launched his candidacy for the Republican presidential nomination in June 2015 by comments on illegal immigrants and the crime they commit in the United States. “When Mexico sends its people, they’re not sending their best. They’re not sending you. They’re not sending you,” he said. “They’re sending people that have lots of problems and they’re bringing those problems with us. They’re bringing drugs, they’re bringing crime, they’re rapists, and some, I assume, are good people.” A few weeks after Trump’s announcement, 32‐​year‐​old Kate Steinle was shot and killed by an illegal immigrant Jose Inez Garcıa Zarate in San Francisco, California. Although Zarate was later acquitted of all murder and manslaughter charges due to mistakes made by the prosecutor, his shooting of Steinle seemed to support Trump’s worry about illegal immigrants causing a crime spree and helped win him the election in 2016.
Topic:
Crime, Immigration, and Border Control
Political Geography:
North America, Texas, and United States of America

71. Immigrants Do Not Negatively Affect the Economic Institutions of American States

Author:
Alex Nowrasteh and Andrew C. Forrester
Publication Date:
11-2020
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
Freer immigration could potentially lead to trillions of dollars in additional annual global output. However, the movement of many more immigrants could produce negative externalities that swamp the benefits, particularly if immigrants undermine productivity in their new countries by bringing with them the institutions or cultures that are responsible for low productivity in their home countries. We examine this by seeing how immigrants affect state budgets — a proxy for the quality of economic institutions — between 1970 and 2010 in the United States. We find that larger immigrant shares of the population produce large reductions in the growth of real per capita tax revenue and outlays in the short run that moderate to smaller longer‐​term growth declines in both.
Topic:
Immigration, Economy, Immigrants, Tax Systems, Institutions, and Revenue Management
Political Geography:
North America and United States of America

72. Qualified Immunity: A Legal, Practical, and Moral Failure

Author:
Jay Schweikert
Publication Date:
09-2020
Content Type:
Commentary and Analysis
Institution:
The Cato Institute
Abstract:
Qualified immunity is a judicial doctrine that protects public officials from liability, even when they break the law. The doctrine has no valid legal basis, it regularly denies justice to victims whose rights have been violated, and it severely undermines official accountability, especially for members of law enforcement. Accountability is an absolute necessity for meaningful criminal justice reform, and any attempt to provide greater accountability must confront the doctrine of qualified immunity. This judicial doctrine, invented by the Supreme Court in the 1960s, protects state and local officials from liability, even when they act unlawfully, so long as their actions do not violate “clearly established law.” In practice, this legal standard is a huge hurdle for civil rights plaintiffs because it generally requires them to identify not just a clear legal rule but a prior case with functionally identical facts.
Topic:
Law, Reform, Criminal Justice, Accountability, Police, and Qualified Immunity
Political Geography:
North America and United States of America

73. Space Force: Ahead of Its Time, or Dreadfully Premature?

Author:
Claire Farley
Publication Date:
12-2020
Content Type:
Commentary and Analysis
Institution:
The Cato Institute
Abstract:
In December 2019, Congress established the U.S. Space Force as an independent uniformed military service within the Department of the Air Force. Although many defense analysts had long argued for a reorganization of the Department of Defense’s space capabilities, few had settled on this particular solution. This policy analysis evaluates the reasoning behind the Space Force’s establishment, concluding that the service’s creation is premature. The Space Force is the first new independent U.S. service since the creation of the Air Force in 1947. At its inception, the Air Force had hundreds of thousands of personnel, several years of battle experience, a coherent body of doctrine, and a robust organizational culture. Even so, the creation of the Air Force sparked bitter interservice conflict for the first decade of its existence. However, the Space Force lacks a strong institutional basis, an identifiable organizational culture, and an established foundation of strategic theory. In the short term, it runs the risk of disrupting existing procedures and relationships that enable the U.S. military to function. In the long term, it runs the risk of distorting the procurement and force structure of U.S. space capabilities.
Topic:
Science and Technology, Armed Forces, Military Affairs, and Space Force
Political Geography:
North America and United States of America

74. COVID-19 and the U.S. Fiscal Imbalance

Author:
Jeffrey Miron
Publication Date:
12-2020
Content Type:
Commentary and Analysis
Institution:
The Cato Institute
Abstract:
Policymakers must do something to slow the growing debt burden or else face a major fiscal meltdown. Proposals such as Medicare for All and the Green New Deal would only make the looming fiscal crisis worse. Before COVID-19, the U.S. debt burden was large and on an unsustainable path under reasonable assumptions about economic fundamentals. Standard policy responses, such as higher taxes or lower discretionary spending, could not substantially slow the growth of the U.S. debt burden; only reduced growth in entitlement spending, especially on Medicare, had the potential to avoid eventual fiscal default. COVID-19, the ensuing recession, and the subsequent policy responses have all increased U.S. deficits substantially, potentially altering these conclusions. But these events are likely to be temporary and may be partially offset by other demographic and economic changes related to COVID-19. As a result, the pandemic did not substantially alter the projected path of the U.S. fiscal imbalance. That bit of good news does not alter the grim long‐​term U.S. fiscal outlook. The most effective way to slow the growth of the debt burden is to cut entitlement spending substantially.
Topic:
Debt, Tax Systems, Fiscal Policy, COVID-19, and Fiscal Deficit
Political Geography:
North America and United States of America

75. Assessing President Trump’s Trade Priorities

Author:
Daniel Griswold
Publication Date:
01-2019
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
President Trump has delivered on his promise to shake up Washington, arguably nowhere more so than in the policy space of international trade. President Trump’s trade agenda has challenged more than seven decades of bipartisan policy commitment to seeking lower trade barriers at home and abroad through negotiated agreements. While President Trump pays lip service to pursuing free trade and eliminating tariffs, his trade policies so far have been marked by higher U.S. duties on a range of products, from washing machines to steel. Under Section 301 of the Trade Act of 1974, the administration has imposed duties on $250 billion of imports from China, with those duties set to escalate in 2019 absent an agreement with China. And under Section 232 of the Trade Expansion Act of 1962, the president is threatening to impose a 25 percent duty on imported automobiles in the name of national security. The Trump administration has renegotiated existing trade agreements with Canada, Mexico, and South Korea, but its modifications are as likely to restrict trade as expand it. One of the president’s first actions after assuming office was to withdraw the United States from the pending Trans-Pacific Partnership, which would have eliminated almost all duties with 11 trading partners around the Pacific Rim, including Japan.
Topic:
Economy, Tariffs, Trade, and Donald Trump
Political Geography:
North America and United States of America

76. U.S.-China Relations: The Way Forward

Author:
P. H. Yu
Publication Date:
01-2019
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
As confrontation looms over Washington and Beijing, it is critical to identify the true nature of this challenge from an international relations perspective before any attempt to devise a counter measure. Wrong presumptions or prejudicial interpretations may lead to dire consequences of unforeseeable magnitude. One past example would be the U.S. government’s belief that Iraq was developing weapons of mass destruction (WMDs) before the American invasion in 2003. A more current example would be the American nuclear anxiety on North Korea and how President Trump bypassed conventional American strategic thinking and circumvented hawkish threats of preemptive nuclear annihilation to resolve a “draconian crisis” via “smart diplomacy.” These examples may shed light on a pathway to resolution for the current U.S.-China trade conflict. The United States and China have ample experience of weathering a crisis on the brink of war, whether it was on the Korean Peninsula or in Indochina. China today remains on the U.S. sanctions list for certain high-tech products and military equipment. Both the Trump administration and Congress continue to criticize China regularly, ranging from human rights to religious rights, from the rule of law to the autocratic political system, from the state-owned banks to restrictive market access to foreign corporations, and from currency manipulation to unfair trade practices.
Topic:
International Relations, Bilateral Relations, Trade Wars, and Trade
Political Geography:
China, Asia, North America, and United States of America

77. Flawed Plan to Keep Out Welfare‐​Using Immigrants

Author:
David Bier
Publication Date:
01-2019
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The Trump administration has proposed a new regulation that would greatly expand an old rule banning legal residence to immigrants deemed “likely to become a public charge”—that is, someone who the government has the responsibility to care for (USCIS 2018). The rule does not, nor could it, change eligibility for welfare programs for noncitizens in the United States. Instead, it requires applicants to prove that they are not likely, in the future, to become so dependent on welfare that they become a “public charge.” Therefore, the question regarding this regulation is not whether it is appropriate for noncitizens to become dependent on welfare, but whether the government will accurately predict their likelihood of doing so.
Topic:
Immigration, Welfare, and Donald Trump
Political Geography:
North America and United States of America

78. American Constitutional Theory and History: Implications for European Constitutionalism

Author:
Roger Pilon
Publication Date:
10-2018
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
It is perhaps not impertinent to suggest that American constitutional theory and history, owing to the longevity of the document that is their subject, hold lessons for constitutionalism everywhere, but especially for European constitutionalism—the more recent and ever evolving treaties that serve as a “Constitutional Charter” for the European Union. An American constitutionalist looking east today, seeing everything from Brexit to Grexit plus the reactions in European capitals, must be struck by the tension in the EU between exclusion and inclusion in its many forms, including individualism and collectivism. Those themes underpin my discussion here. The issues surrounding them are universal. They are at the heart of the human condition.
Topic:
Markets, History, European Union, and Constitution
Political Geography:
Europe, North America, and United States of America

79. Rethinking the International Monetary System

Author:
John B. Taylor
Publication Date:
06-2016
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
In previous articles in the annual monetary issue of the Cato Journal, I drew on historical facts and economic theory to explain the benefits of rules-based monetary policy and why legislation could help the United States reap those benefits (Taylor 2011, 2013a). In this article, I discuss the international aspects of monetary policy, a subject often glossed over in modern debates about rules-based policy, at least compared with discussions about the classic rulesbased gold standard.
Topic:
Economics, International Cooperation, and Monetary Policy
Political Geography:
North America, Global Focus, and United States of America

80. 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