The biggest concern that Americans have about unauthorized immigration, shared by 44 percent of those polled in a recent survey, is that unauthorized immigrants were overburdening government services. The effects of immigration reform on welfare and the fiscal shape of the U.S. government are legitimate concerns. By the same token, as Alex Nowrasteh and Sophie Cole make clear in “Building a Wall around the Welfare State, Instead of the Country” (Policy Analysis no. 732), immigration increases the size of the economy, improves productivity, and is an economic boon for almost all parties. Critics of immigration reform worry about immigrants disproportionately consuming public benefits. Instead, they should support legal changes to immigrant welfare eligibility. Eliminating immigrant welfare eligibility for Temporary Aid to Needy Families (TANF), Supplemental Nutrition Assistance Program (SNAP or food stamps), and other programs would, in the words of Cato’s late chairman William Niskanen, “build a wall around the welfare state, not around the country.” Doing so, according to Nowrasteh and Cole, would reduce immigrant welfare dependency and could increase the pace of intergenerational mobility among immigrants. Such measures would also be constitutional. Since access to public benefits shapes so much of the public’s perception of immigration, further restricting immigrant access to welfare will not only advance sound public policy, it will likely improve the public’s assessment of reform, Nowrasteh and Cole argue. “Contrary to what immigration restrictionists wrongfully believe, halting international labor movements in a world as economically integrated as ours is impossible without hampering economic growth,” he concludes.
Beating the Market?
High Frequency Trading (HFT) is a form of algorithmic trading where firms use highspeed market data and analytics to look for short-term supply and demand trading opportunities. Countries such as France and Germany have recently taken steps to significantly curtail or even ban HFT activities. As the U.S. regulators have been signaling a desire to increase formal regulations of HFT, this marks an important time to discuss the issue. In “High Frequency Trading: Do Regulators Need to Control this Tool of Informationally Efficient Markets?” (Policy Analysis no. 731), Holly A. Bell, an associate professor of business at the University of Alaska — Anchorage, delves into these transactions, which happen thousands of times a day, take microseconds, and often net less than a penny in profit. “Concerns have been raised in recent years about the potential market risks associated with HFT and algorithmic trading in general,” she writes. These risks include the creation of a two-tiered market system as a result of asymmetric information, potential volatility, “noise” and informational distortions, outof- control algorithms, and flash crashes. However, many of these concerns are neither new nor exclusively related to HFT. “HFT is, quite simply, a contemporary tool that facilitates informational market efficiency,” Bell continues, “and, as such, is capable of being regulated by the market and market participants.” Indeed, she provides significant evidence to indicate HFT activity is already being regulated by the market. There are, however, opportunities for regulators, HFT firms, and exchanges to continue to work together to ensure continued market stability and integrity, Bell concludes.
The Rail Less Traveled
Created by Congress in 1991, the New Starts program allows the Federal Transit Administration (FTA) to provide matching funds to transit agencies for new infrastructure such as rail transit and exclusive bus lanes. The program directs the FTA to ensure that each grant be “justified based on a comprehensive review of its mobility improvements, environmental benefits, cost effectiveness, and operating efficiencies.” Last year, Congress added “congestion relief” and “economic development effects” to this list, but dropped “operating efficiencies.” But according to Cato senior fellow Randal O’Toole, the program should be abolished by any of these criteria. In “ ‘Paint Is Cheaper Than Rails’: Why Congress Should Abolish New Starts” (Policy Analysis no. 727), O’Toole argues that this program has “effectively given transit agencies incentives to select the costliest, rather than the most cost-effective, alternative to any transit problem.” In his analysis, he details in full the problems that arise as a result. For instance, “many New Starts projects reduce transit mobility because transit agencies sacrifice bus service to low-income neighborhoods, where such mobility is needed, in order to deliver rail transit to middle-income neighborhoods, where such mobility is merely an amenity.” Until Congress is ready to stop funding transit, O’Toole writes, it should abolish New Starts and distribute all transit funds using formulas. Many suggest that the New Starts program simply needs firm cost-effectiveness requirements to work. “But the real lesson,” he concludes, “should be that the incentives to get federal dollars are greater than any bureaucratic safeguards or the implicit obligation for public officials to guard the public purse.”
In 2004, Congress allowed federal land managers to charge recreation fees only for certain kinds of recreation. In general, while national parks and wildlife refuges can charge entry fees, managers of other federal lands can only charge for developed recreation, such as campgrounds, not dispersed recreation, such as hiking and backpacking. In “Improving Incentives for Federal Land Managers: The Case for Recreation Fees” (Policy Analysis no. 726), Randal O’Toole, senior fellow at the Cato Institute, explains that, as a result, recreation is free on 98 percent or more of these lands. However, the 2004 law expires next year, giving Congress an opportunity to revisit this restriction. “Congress should allow federal land agencies to charge market rates for all forms of recreation,” O’Toole writes — noting that these fees would accomplish at least two goals. First, they’d cover at least some of the costs of maintaining and improving recreation areas. O’Toole calculates that the market value of recreation on federal lands is on the order of $20 billion. “Even if agencies are able to collect only a sixth of this amount,” he adds,” it would offset all current spending on federal land recreation and fish and wildlife programs.” Second, fees would give land managers incentives to cater to recreation values. “Charging fees will encourage private landowners to collect fees as well, leading to increased recreation opportunities for everyone,” he writes. O’Toole elaborates on these incentives, and the arguments behind them, with clarity and insight. In the end, transitioning to a model like this would “smooth the path to making the agencies completely self-sustaining in the long-run.”
The essential story of modern Asia is its market liberalization, which enabled an unprecedented expansion of economic freedom. Of course, technological innovation allowed for this transformation, but the crucial factors behind it were liberalization of internal and external trade, of domestic and foreign investment, and of product and factor markets. “These ‘negative’ acts — removing restrictions that repress economic activity — have unleashed the animal spirits of ordinary people,” writes Razeen Sally, a visiting associate professor at the National University of Singapore, in “Asia’s Story of Growing Economic Freedom” (Policy Analysis no. 725). However, most of Asia remains far behind the West. The continent is still home to two-thirds of the world’s poor, Sally notes, and economic freedom remains repressed across most of the region, despite its expansion in recent decades. In his analysis, Sally points to three key policy challenges to expanding economic freedom in Asia today. The first challenge is to open up financial markets, he notes, “which remain backward and repressed by command economy controls.” The second one is to renew trade and foreign-investment liberalization, which has stalled since the Asian crisis of the late 1990s. And the third is to open up energy markets, which — even more than financial markets — are throttled by government interventions. Sally concludes by noting that the Asian miracle is not the product of technocratic minds who concocted successful industrial policies. “Rather, freedom and prosperity bloomed on Asian soil because government interventions were curtailed and markets unleashed,” he writes. Classical liberalism, however partially implemented, has worked across the continent. “It is a system to which Asians should aspire.”