 March - May 1997 |
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March - May 1997 |
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May 29, 1997
New Social Security
privatization plan: "No harm, no foul"
Study shows
that transition can occur without new taxes but must occur soon
The Cato Institute today released the second in a series of plans for Social Security privatization. The study, written by David Altig and Jagedeesh Gokhale of the Federal Reserve Bank of Cleveland, avoids the stark choice of cutting promised benefits or escalating tax burdens.
"Unlike many others," Altig and Gokhale write, "our proposal follows the ‘no harm, no foul,’ principle: the benefits of older generations are preserved while the young obtain the same or better benefits (on average) by investing a major part of their current payroll contributions in private capital markets."
Altig and Gokhale’s privatization scenario requires no new taxes to finance the transition. Workers under the age of 32 would be allowed to divert up to 46 percent of their payroll taxes into individually owned accounts, and the remainder of the payroll tax would be used to continue to provide benefits for the currently retired and those who will retire soon.
Individuals in the privatized system, under the proposed plan, would receive benefits equal to or greater than those currently promised by Social Security, assuming private investment returns below historic averages. And, during the early years of the transition, the government would issue new debt to supplement revenues from the continuing portion of the payroll tax. Once benefits to current and soon-to-be retirees had been paid, the continuing portion of the payroll tax would be used to service and retire the debt.
The authors note that the window of opportunity for moving to a privatized system is narrow. If the system were implemented immediately, workers under the age of 32 could shift to the privatized system, diverting 46 percent of their payroll taxes to individual accounts. However, if privatization were delayed until 2011, only individuals under the age of 20 could move to the new system, and they could divert only 22.1 percent of their payroll taxes.
Without endorsing any specific proposal, the Cato Project on Social Security Privatization presents Altig and Gokhale's plan as one in a series of alternative scenarios for Social Security privatization.
Social Security Paper no. 9 (http://www.cato.org/pubs/ssps/ssp9es.html)
May 27, 1997
U.S. Ranks 4th in Economic
Freedom
Global study shows
greater economic freedom leads to prosperity
The United States ranks fourth in economic freedom—behind Hong Kong, Singapore and New Zealand—according to a comprehensive study released today by the Cato Institute and research organizations in 46 other nations.
In Economic Freedom of the World 1997, 115 countries are ranked by a formula that uses 17 separate indicators of economic freedom.
"Despite its deficiencies, the United States economy is more free and creates more per-capita income than almost any other economy in the world," says economist James Gwartney, a study coauthor. "However, our economy isn’t problem-free: competition in schools, a legal system less focused on redistribution of wealth and an actuarially sound Social Security system would increase our freedom and our wealth."
The index—in development for more than a decade—was constructed with advice from 61 experts worldwide, including Nobel laureates Milton Friedman, Gary Becker and Douglass North. The index measures the personal choice, protection of private property and freedom of exchange in each country.
"Unlike other attempts to measure economic freedom, our study uses objective measures that apply across countries and can be updated regularly," Gwartney says.
The study finds a strong positive relationship between a country’s per-capita income, its economic growth and its economic freedom.
To order Economic Freedom of the World 1997, please call 604-688-0221.
May 21, 1997
New evidence that rent
control drives out affordable housing
Study shows dramatic contrast
between New York and other major U.S. cities
(New York, NY)—A new study released today shows that New York pays a very heavy price for having one of the strictest rent control laws in the country. The study, done for the Cato Institute by author William Tucker and released at a news conference here, examined the rental housing market in sixteen major cities in the United States. Tucker found a stunning contrast in cost and availability of rental units in New York and San Francisco, the two cities with strict rent control, compared with virtually all of the other cities studied.
In both New York and San Francisco, Tucker found that advertised rents peaked at more than $2,000—more than triple the U.S. Census median rent for each city. In cities without rent control, rental costs were dramatically lower. In Philadelphia, the comparable advertised rent was between $450 and $500, which was below the Census median. In Chicago, the most common advertised rent was between $500 and $550, also below the Census median.
Equally striking was the fact that in New York and San Francisco, "there were almost no rental units available at the low end of the market," Tucker observed. In contrast, "unregulated cities such as Philadelphia, Chicago, San Diego, Phoenix and Seattle seem to have almost perfectly competitive housing markets, with housing available at every price level but clustered at the low end."
Tucker analyzed data on all available apartments advertised in eighteen major cities (two of them in Canada) in April 1997. Cities with rent control included New York and San Francisco, with strict laws, and San Jose, Toronto and Washington, D.C., where rent control laws are less strict, or where depopulation has negated their impact. Boston, also surveyed, ended rent control in January 1997.
Tucker finds that the rents in free market cities follow a standard bell curve, with a steep climb on the low-rent side of the curve and a long tail toward the "luxury" end of the market. The situation in New York and San Francisco was virtually the opposite. "Rent control in both these cities appears to make housing spectacularly unaffordable," he concluded.
"Rent control is a disease of the mind that soon becomes a disease of the market," Tucker declared. "Those cities that resist infection—merely by having a healthy tolerance for the rights of others—are rewarded with a normal competitive housing market in which housing is available at every price level. Those cities that succumb to the disease of rent control are doomed to never-ending, house-to-house warfare over an ever-diminishing supply of unaffordable housing."
Policy Analysis no. 274 (http://www.cato.org/pubs/pas/pa-274es.html)
May 15, 1997
Legislative activism, not judicial activism, is major threat to liberty
"Many of those who have complained most often about judicial activism are distracting us from the real issue—legislative activism on the part of Congress," says Roger Pilon, a senior fellow and director of the Center for Constitutional Studies at the Cato Institute.
Testifying before the Courts and Intellectual Property Subcommittee of the House Judiciary Committee today, Pilon told legislators, "We should hardly be surprised that judges today are thought so often to be engaged in ‘judicial activism’ when they are called upon so often to apply law that is inconsistent, incoherent and fairly invites them to make all manner of value judgments."
Pilon testified that judges work in a political climate. "If we who shape that climate persist in believing that it is proper for government to be addressing our every problem, no matter how trivial or personal, and persist in believing that our Constitution can legitimately be read to authorize that result, then we should not be surprised that the judiciary is dragged along to play its part in the process—today, often, to try to undo the mess that legislatures make of the effort."
Conservatives, according to Pilon, are wrong to assail judges for overruling the will of the people on questions of fundamental liberties: "In our legal system, judicial review often requires a judge to do just that," he said. "In such a case, were the judge to defer to the political will, exercising ‘judicial restraint’ when the law requires active, judicial intercessions, that restraint would itself be a kind of activism, for it would amount to an ‘active’ failure to apply the law in deference to democratic or majoritarian values."
"What we all want, I assume, is judges who are neither ‘active’ nor ‘restrained’ but ‘responsible’ —responsible to the law. But when the law is unclear or inconsistent, judicial responsibility may be difficult to achieve—and ‘activism’ inevitable. In the end, if we are unhappy with the role the judiciary sometimes plays in this setting, it may be that we need to look first to the material we give judges to work with—the reams of statutory material we have enacted over the course of the century."
Congressional Testimony (http://www.cato.org/testimony/ct-rp051597.html)
May 7, 1997
Consumer choice is best
plan for universal service subsidies
Competitive
bidding can have anti-competitive effects, scholar says
"By opening local telephone markets to competition, the Telecommunications Act of 1996 has unleashed market forces that will require a fundamental restructuring of the current system of subsidy payments designed to keep residential telephone rates affordable in high-cost, usually rural areas," writes Peter Pitsch, an adjunct fellow at the Hudson Institute and a former chief of staff to the Chairman of the Federal Communications Commission, in an analysis released today by the Cato Institute.
In "Reforming Universal Service: Competitive Bidding or Consumer Choice?," Pitsch argues that one proposal for administering subsidies—"consumer choice"—is preferable to a "competitive bidding" system in which companies bid against one another to serve a single market at the lowest price. He writes that competitive bidding is actually anti-competitive because it confers special advantages on one company in an area rather than allowing true competition.
A consumer choice system, in which companies would be subsidized per customer and customers would be able to move from one company to another and carry their subsidies with them, is Pitsch’s preferred option. He writes that a system of consumer choice would have numerous benefits, including competitive neutrality, pressure for low prices and high-quality services, and the likelihood of affordable rates that are reasonably comparable in urban and rural areas at minimum cost to other customers. Pitsch also notes that a consumer choice plan would be more easily administered and involves lower entry costs.
In addition, Pitsch points out that, under a consumer choice plan, subsidies could be more easily phased down, noting that "the optimal means of reducing overall high-cost subsidy levels would be to adopt the consumer choice approach in conjunction with a phasedown and monitoring program."
Briefing Paper no. 29 (http://www.cato.org/pubs/briefs/bp-029es.html)
May 1, 1997
Despite
politicians’ rhetoric, corporate welfare spending continues
to increase
Clinton and
Congress defended corporate pork in 1996, analysts say
In a newly released briefing paper, Cato Institute analysts Dean Stansel and Stephen Moore show that, despite White House and congressional promises to the contrary, in 1996 corporate welfare spending increased by almost $500 million.
In "Federal Aid to Dependent Corporations: Clinton and Congress Fail to Eliminate Business Subsidies," Stansel and Moore highlight the top 30 corporate welfare programs—defined as spending programs that provide unique benefits or advantages to specific companies or industries—in the federal budget.
"These subsidies tend to have a Robin-Hood-in-reverse impact: redistributing income from generally middle-income taxpayers to the relatively higher-income owners and shareholders in the companies," write Stansel and Moore.
The authors note that eliminating all corporate welfare could cut the budget deficit in half.
Briefing Paper no. 28 (http://www.cato.org/pubs/briefs/bp-028es.html)
April 30, 1997
Analyst offers detailed Social Security privatization plan
The Cato Institute today released a detailed plan for privatizing Social Security, without increasing taxes or cutting benefits.
In "A Plan for Privatizing Social Security," Peter Ferrara, general counsel and chief economist at Americans for Tax Reform and a Cato associate policy analyst, offers a detailed reform plan that can be turned into legislation. Ferrara’s proposal is based on freedom for current workers to choose either the private option or the current system, recognition bonds from the federal government for workers who opt out of Social Security and full promised benefits for current retirees.
Ferrara notes that the biggest obstacle to privatizing Social Security has been the cost of the transition to a privatized system, but the projections of the fiscal impact of his plan show that the transition can be financed without new taxes and without cutting benefits for today’s recipients.
"These projections place the transition in a whole new perspective," Ferrara writes. "They show that the transition is financially feasible and manageable and that modest short-term sacrifices would lead to long-term surpluses that would ultimately reduce the federal budget deficit."
Without endorsing any specific proposal, the Cato Project on Social Security Privatization presents Ferrara’s plan as the first in a series of alternative scenarios for Social Security privatization.
Social Security Paper no. 8 (http://www.cato.org/pubs/ssps/ssp8es.html)
April 30, 1997
Flag burning amendment threatens American principles, Cato scholar says
"Men have fought and died not for the flag but for the principles it represents," said Roger Pilon today before the House Judiciary Committee’s Subcommittee on the Constitution. "How can this Congress so lightly abandon those principles?"
Pilon, senior fellow and director of the Center for Constitutional Studies at the Cato Institute, told lawmakers that "there is all the difference in the world between defending the right to desecrate the flag and defending flag desecration itself. It is the difference between a free and an unfree society."
"This amendment, as it tries to shield us from offensive behavior, gives rise to even greater offense," Pilon said. "By offending our very principles, it undermines its essential purpose, making us all less free."
Congressional Testimony (http://www.cato.org/testimony/ct-rp043097.html)
April 25, 1997
Foreign aid does not
prevent social breakdown
Cash assistance
should be eliminated; trade barriers should be dropped
"Complex domestic factors cause states to fail, and foreign aid can do little or nothing to change the situation," says Cato Institute senior fellow Doug Bandow, author of a policy analysis released today. "Few programs have consumed as many resources with as few positive results as has foreign aid."
In "Help or Hindrance: Can Foreign Aid Prevent International Crises?" Bandow examines economic and humanitarian crises in over a dozen countries and finds that all have received cash assistance from the United States. Despite claims that aid can be used to prevent social catastrophes, Bandow reports that some of the worst crises, such as that in Rwanda, have occurred in countries receiving large amounts of economic aid.
Bandow notes that foreign aid has helped cause and aggravate crises in many countries by supporting regimes that have maintained disastrous policies, such as those of Ethiopia, Somalia, Sudan and Zaire. Further, he argues that aid intended to promote free-market reforms takes the pressure off recipient governments and tends to delay reforms. If the United States and other developed countries truly wish to help, they "should allow poorer nations to participate more fully in the international marketplace."
"Naturally, advocates of aid are attempting to come up with new arguments for preserving their programs," Bandow writes. "However, the understandable desire to do something should not become an excuse for maintaining the failed policies of the past. Foreign aid has not delivered self-sustaining economic growth or prevented the collapse of numerous poor societies into chaos over the past five decades. It will do no better in the future."
Policy Analysis no. 273 (http://www.cato.org/pubs/pas/pa-273es.html)
April 16, 1997
A Victims' Rights
Amendment
Cato
scholar testifies in Congress
Roger Pilon, director of the Cato Institute's Center for Constitutional Studies, testified before the Committee on the Judiciary of the U.S. Senate.
Congressional Testimony (http://www.cato.org/testimony/ct-rp041697.html) April 16, 1997
April 15, 1997
Cato study shows how
national sales tax would work
Analysts
recommend replacement of income and capital gains taxes,
abolition of IRS
Replacing the income tax with a 15 percent national sales tax would have a highly beneficial impact on the U.S. economy and raise the standard of living of the American public, according to David R. Burton and Dan R. Mastromarco, authors of a new Cato Institute analysis.
In "Emancipating America from the Income Tax: How a National Sales Tax Would Work," Burton and Mastromarco, partners in the Argus Group, show that a national sales tax, while exempting low-income Americans, could replace the individual and corporate income tax, the capital gains tax, the estate and gift taxes and non-trust-fund excise taxes while raising the same amount of revenue.
Burton and Mastromarco propose a national sales tax plan that includes a 15 percent sales tax on the final purchase of goods and services at the retail level; a universal rebate for every household, exempting all consumption up to the poverty level; reimbursement to states and retailers of the cost of collecting the tax; and abolition of the Internal Revenue Service.
Burton and Mastromarco highlight the privacy and convenience of a national sales tax, writing that "under the national sales tax most Americans would be freed from the intrusive scrutiny of the IRS. More than 100 million Americans who are not business owners or self-employed would no longer have to file tax returns. The number of tax returns filed may fall as much as 80 percent."
Noting that the national sales tax is now a formal policy proposal before Congress, Burton and Mastromarco write, "A national sales tax is more compatible with the principles of a free society than any other alternative tax system."
Policy Analysis no. 272 (http://www.cato.org/pubs/pas/pa-272es.html)
March 31, 1997
President Clinton derelict
in his constitutional duties
Fundamental
constitutional principles undermined on Clinton’s watch,
scholar says
President Clinton took an oath to support and defend the Constitution and the Bill of Rights, but over the past four years he has attempted to undermine a number of fundamental guarantees, according to a comprehensive analysis released today by the Cato Institute. Timothy Lynch, assistant director of Cato's Center for Constitutional Studies, notes that President Clinton has sought to limit rights to free speech, private property and trial by jury. The president has also supported retroactive taxation and warrantless searches and seizures, both prohibited by the Constitution. Among the study’s findings:
Free Speech: The Clinton Justice Department has attempted to censor the rights of peaceful protesters and the expression of priests’ and doctors’ views. President Clinton has also supported additional governmental controls on radio, television and the Internet.
Double Jeopardy: The Clinton Justice Department has signed off on several double prosecutions, including the federal prosecution of the Los Angeles police officers who beat Rodney King in 1991.
Separation of Powers: The Clinton administration has violated the separation of powers principle by trampling on the constitutional prerogatives of Congress. President Clinton, for example, has ordered air strikes in Bosnia and missile attacks against Iraq without congressional authorization and claims to have constitutional authority to attack other countries whenever he deems that course of action to be appropriate.
Federalism: "President Clinton has exhibited utter disdain for the Tenth Amendment and the doctrine of enumerated powers," Lynch writes. "His ongoing efforts to consolidate all power in the federal domain are simply indefensible." The president has sought to federalize health care, crime fighting, environmental protection and education and has tried to thwart efforts to downsize federal agencies and programs.
"If constitutional report cards were handed out to presidents, Clinton would receive an F," Lynch writes. Should the president continue to ignore the Constitution in his second term, Congress and the Supreme Court should stand fast against any constitutional transgression. "The Constitution cannot enforce itself," Lynch warns. "But if the American people demand adherence to the Constitution, government officials, including President Clinton, will respect the limitations that were wisely placed on their power."
Policy Analysis no. 271 (http://www.cato.org/pubs/pas/pa-271es.html)
March 27, 1997
Campaign finance reform
proposals gut First Amendment
Efforts to
restrict political speech are unconstitutional and unneeded,
scholar testifies
Campaign finance reform proposals in both the U.S. Senate and the House of Representatives are misguided and unconstitutional, according to election law scholar Bradley Smith.
Smith, an associate professor of law at Capital University and an adjunct scholar at the Cato Institute, testified today before the Subcommittee on the Constitution of the House Judiciary Committee that both the Shays-Meehan bill in the House and the McCain-Feingold proposal in the Senate abrogate free speech rights. The bills restrict political speech through "voluntary" but coercive limits on spending and out-of-district contributions, the elimination of PACs, and broadened regulation of "express advocacy" by groups engaged in legitimate political activities.
"That opposing political interests can invoke the powers of a government bureaucracy in an effort to silence voices they disagree with is a much more serious blight on our system than the alleged effects of campaign contributions," said Smith.
Smith also warned of the danger of a proposal to amend the Constitution to authorize the adoption of "reasonable regulations" that do not "interfere with the right of the people to fully debate issues."
"Historically, debates on the First Amendment have concerned the extent to which it covers commercial speech, or hate speech, or ‘fighting words," he said. "What has always been accepted is that it covers political speech. So let’s be honest about it: What the amenders really seek is a clause reading ‘the First Amendment to this Constitution is hereby repealed.’"
Smith noted that, for most of this country’s history, the funding of political campaigns was largely unregulated. The "golden age" of 19th-century politics, which produced serious debates over monumental issues like slavery and western expansion, was "one in which people talked and debated these issues, and one in which voter turnout was considerably higher than it is today."
Congressional Testimony (http://www.cato.org/testimony/ct-bs022797.html) delivered February 27, 1997
March 20, 1997
Trade and the
Commerce Department
Cato
scholar testifies in Congress
Dr. Edward L. Hudgins, director of regulatory studies at the Cato Institute, testified before the Government Affairs Committee of the U.S. Senate.
Congressional Testimony (http://www.cato.org/testimony/ct-eh032097.html) March 20, 1997
March 19, 1997
Communications Decency
Act could chill Internet speech, scholars say
Previous
content regulations constrained the quality and quantity of
public debate
As the Supreme Court hears arguments today on the constitutionality of the Communications Decency Act, a new Cato Institute paper warns of the chilling effect that broad, vague legislation and regulation such as the CDA have on public debate of controversial issues.
In "Chilling the Internet? Lessons from the FCC Regulation of Radio Broadcasting," Thomas W. Hazlett and David W. Sosa of the University of California, Davis, write that previous federal government content controls failed to "improve" the content of speech over electronic media and constrained robust public debate.
The Fairness Doctrine, which required radio and television broadcasters to give a fair hearing to both sides of an issue, resulted in self-censorship by broadcasters. Hazlett and Sosa note that the such censorship was not limited to public affairs; it also affected commercial speech. They write that "the volume of informational programming increased dramatically immediately after controls were ended—powerful evidence of the potential for regulation to have a ‘chilling effect’ on free speech."
Hazlett and Sosa note that, as was the Fairness Doctrine, the CDA would be subject to arbitrary interpretation. "Just as it proved impossible for regulators, broadcasters, and the public to develop a working definition of what constituted ‘fair’ or even ‘local’ media coverage," they write, "it is equally improbable that a diverse society can settle upon a clear definition of indecent speech."
"Whether the standard is ‘fairness’ or ‘indecency,’ the end result can be a frigid chill on constitutionally protected speech, as fear of litigation discourages individuals from producing and disseminating controversial speech."
Policy Analysis no. 270 (http://www.cato.org/pubs/pas/pa-270es.html)
March 19, 1997
NASA and Mission
to Planet Earth
Cato
scholar testifies in Congress
Dr. Edward L. Hudgins, director of regulatory studies at the Cato Institute, testified before the U.S. House of Representatives, Committee on Science Subcommittee on Space and Aeronautics
Congressional Testimony (http://www.cato.org/testimony/ct-eh031997.html) March 19, 1997
March 12, 1997
School vouchers:
educational freedom or dangerous regulation?
Critics of
public schooling present opposing views of reform in Cato paper
Today, for the first time, the Cato Institute has released a "dueling" Policy Analysis—a debate between supporters of educational freedom about the wisdom of "school vouchers" as a solution to the failure of government schooling.
Joseph Bast, president of the Heartland Institute, and David Harmer, an architect of California’s 1993 educational choice initiative effort, argue that voucher plans are "a bona fide form of privatization" that would help millions of children immediately and eventually lead to the complete separation of school and state. They contend that vouchers would not subject private schools to excessive regulation and that libertarian opponents of vouchers ignore the plight of children in inner-city schools.
Douglas Dewey, president of the National Scholarship Center, counters that vouchers would not substantially reduce the state’s coercive role in education. Indeed, he says, vouchers would make both parents and private schools dependent on government largesse—which always comes with strings attached. That dependency would undermine the quality and independence of private schools.
"We at the Cato Institute believe the debate over how we improve education in this country is vitally important," says executive vice president David Boaz. "If our goal is high-quality education that reflects the moral values of families, and we believe that that goal can best be achieved outside the realm of the coercive state, we should carefully consider whether vouchers or any other education reform would move public policy in that direction. We are pleased to present this contribution to the debate on educational freedom."
Policy Analysis no. 269 (http://www.cato.org/pubs/pas/pa-269es.html)
March 6, 1997
From paper to
sand: The future of money in the information age
Greenspan,
high-tech executives examine implications of technology for the
‘new monetary universe’ in new Cato book
"In the new monetary universe, people will benefit from more information and more freedom," says James A. Dorn, vice president for academic affairs at the Cato Institute. "The danger is that government may try to stifle that information and freedom by overregulation."
Dorn is the editor of a new Cato Institute book, The Future of Money in the Information Age, a collection of papers, most of which were presented at a May 1996 Cato conference. The contributors consider the implications of the information revolution for financial innovation and the future of money.
Articles examine the regulatory climate; the impact of e-money on taxation, banking, and monetary policy; and the problem of maintaining privacy in the new monetary universe.
"The basis of the new monetary universe is sand rather than paper—a computer chip rather than a federal reserve note," Dorn writes in the preface. "The advent of e-money offers the possibility of privatizing the supply of currency, paying interest on small deposits, and making offshore banking accessible to many individuals. In the future, government fiat money may disappear as people choose to hold digital money issued by private firms rather than non-interest-bearing paper money issued by central banks."
The Future of Money in the Information Age includes contributions from Alan Greenspan, chairman of the Federal Reserve Board; Scott Cook, chairman of Intuit, Inc.; Rep. Michael Castle (R-Del.); William Niskanen, chairman of the Cato Institute; Richard Rahn, president of Novecon, Ltd.; Shalom Rosen, vice president of Citibank; Lawrence Gasman, director of telecommunications and technology studies at the Cato Institute; William Melton, chief executive officer of CyberCash, Inc.; Rosalind Fisher, executive vice president of VisaNet Services for Visa U.S.A.; David Chaum, founder and managing director of DigiCash; and Jerry Jordan, president and chief executive officer of the Federal Reserve Bank of Cleveland.
To order copies of this book ($12.95 paper), please call (800) 767-1241.
March 1, 1997
A Commission to
Review and Terminate Corporate Subsidies
Cato scholar
testifies in Congress
Dean Stansel, fiscal policy analyst at the Cato Institute, testified before the Senate Committee on Governmental Affairs on February 16, 1997.
Congressional Testimony (http://www.cato.org/testimony/ct-ds021397.html) February 16, 1997
