Once again, the Republican Party has unified control of the House, the Senate, and the White House. The last time that happened, during the George W. Bush administration, they delivered massive overspending, the biggest expansion of entitlements in 40 years, centralization of education, a war that has lasted longer than World War II, an imperial presidency, civil liberties abuses, the intrusion of the federal government into social issues and personal freedoms, and a $700 billion bailout of Wall Street and the automobile industry. Voters who believe in limited government had every reason to reject that record.
At the Cato Institute, we stand firmly on the principles of the Declaration of Independence and the Constitution — on the bedrock American values of individual liberty, limited government, free markets, and peace. Throughout our 40 years, we have been willing to criticize officials of both parties when they sought to take the country in another direction. But we have also been pleased to work with administrations of both parties when they seek to expand freedom or limit government. For example, in recent years, we worked with the Clinton administration on free trade, welfare reform, and a few tentative steps toward Social Security reform; with the Bush administration on tax cuts, the initial response to the 9/11 attacks, health savings accounts, immigration reform, and Social Security accounts; with the Obama administration on government transparency, surveillance reform, immigration, criminal justice, and the Trans‐Pacific Partnership. We look forward to opportunities to work with the Trump administration should it move to reverse the worst mistakes of the Obama years or otherwise advance policies that enhance peace, freedom, and prosperity. Of course, our scholars will not hesitate to criticize unwise, imprudent, or dangerous initiatives from any source.
We urge members of both parties to remember a few policy proposals that have recently been more popular than either presidential candidate or either political party:
• balancing the federal budget,
• school choice,
• legalizing marijuana,
• marriage equality,
• repealing the Affordable Care Act,
• a path to citizenship for illegal immigrants, and
• trade agreements.
The next section elaborates on some of the main policy challenges discussed in this volume. Subsequent sections address broad areas of concern. And near the end of this introduction, I outline four major tasks for Congress.
This edition of the Cato Handbook contains 80 chapters of policy advice on a wide range of issues. Here I’ll touch on just a few.
Peace and Security
The historical foreign policy of the United States, going back to the Founders, was expressed by Thomas Jefferson in his first inaugural address: “Peace, commerce, and honest friendship with all nations — entangling alliances with none.” In the 20th century, we moved away from that historical noninterventionist stance to a policy of global intervention. For the past 25 years, we have been involved in a seemingly endless war in the Middle East. Wars that began with limited purposes — to block Saddam Hussein’s takeover of Kuwait and to retaliate against al Qaeda and the Taliban in Afghanistan for the 9/11 attacks — have metastasized into a regionwide campaign of regime change and nation building.
During his campaign for president, Donald Trump criticized this “failed policy of nation building and regime change.” He promised that in his presidency, “war and aggression will not be [his] first instinct.” As president, Trump should work with Congress to undertake a comprehensive review of the foreign policy of the United States, the most secure power in world history, protected by two oceans and friendly neighbors. In an interconnected world, with terrorism and nuclear weapons, military conflicts should be kept limited and regional, not escalated through superpower involvement.
In Chapter 65, Christopher Preble and Trevor Thrall recommend a foreign policy of prudence and restraint. More broadly, in Chapters 9 and 66–77, Cato’s defense and foreign policy scholars explore terrorism, regional issues, and a defense budget appropriate for a constitutional republic.
In a world of global markets and rapid technological progress, we struggle along with annual growth rates far below what we achieved from World War II until the mid‐1970s. That trend has only worsened with the very slow growth that followed the Great Recession. We are by any measure a very wealthy country. Our gross domestic product (GDP) has risen every year, with the exception of a slight drop during the recession. But Americans know that our economy is not working as well as it should. Even before the recession, they feared that their children might not live as well as they did. This slow growth matters most to those who are not yet well off.
In Chapter 6, Brink Lindsey examines the growth slowdown. In Chapter 7, he proposes one particular way to raise the growth rate that should appeal across the political spectrum: taking on “‘regressive regulation’ — regulatory barriers to entry and competition that work to redistribute income and wealth up the socioeconomic scale.” Other chapters suggest more reforms that could increase growth, such as stabilizing monetary policy, reducing the burden of taxes and regulations, and reducing federal spending.
Health care has been a major issue in American politics for many years. Dissatisfaction with the Affordable Care Act of 2010 may have played a role in several recent elections. America leads the world in medical innovation. Yet research indicates that much of what Americans spend on medical care, through both government programs and a private sector heavily dominated by government interference, offers no benefit to patients. As research also indicates, this is in large part because American health care is so often unsafe.
The fundamental problem with U.S. health care is that the consumer does not control the money spent in the sector; the system, instead, serves those who do control the money. For 70 years, government has been assuming greater control over consumers’ health care dollars, either by giving workers’ earnings to employers or by spending that money itself. When consumers lose control of their health care dollars, they lose control of their health care decisions. Consumers cease to be cost‐conscious, and prices rise. Government decides what kind of health insurance we get, where we get it, and how doctors will practice medicine — and more patients end up falling through the cracks. The Affordable Care Act didn’t do anything to take us off that path.
In Chapter 4 and Chapters 35–39, Michael Cannon proposes reforms that would make health care higher quality, more affordable, and more secure by putting patients in charge of their health care dollars and decisions.
Federal spending increased by more than a trillion dollars during the George W. Bush years, and then by another trillion dollars during the Obama administration. The national debt rose even more sharply, from $5.7 trillion to more than $10.6 trillion under Bush, and it has almost doubled again under the Obama administration. Trends like this are unsustainable, as Jeffrey Miron notes in Chapter 31. Yet elected officials continue to promise more spending on everything from new weaponry to college tuition to infrastructure. Congress and the administration must find a way to rein in this profligacy. Budget‐cutting ideas can be found throughout this Handbook, most notably in Chapter 32.
The current rates of spending don’t yet reflect the acceleration of entitlement spending that is occurring as baby boomers start to retire. Entitlements are already more than 60 percent of the federal budget, and they continue to grow. The unfunded liability of Social Security and Medicare is nearly $80 trillion, an unfathomably large number. Entitlement spending will accelerate as baby boomer retirement picks up in coming years and America continues to age. Congress needs to think seriously about this problem. Are members prepared to impose the taxes necessary to fund such levels of transfer payments? Do we want that many Americans dependent on a check from the federal government? Eventually, the projected level of entitlements will not be feasible. Now is the time to make changes — rationally, rather than in a panic a few years hence. Chapters 4 and 35–40 discuss health care and Social Security reform.
Trade and Immigration
Americans sense that our economy isn’t working right. Too many of them look for some external force to blame, especially imports, outsourcing, and immigration. And in 2016 they found plenty of candidates ready to propose policies to restrict trade and immigration. That’s the wrong approach.
If there’s any topic that economists agree on, it is that free trade benefits the whole society. Free trade ensures that goods and services are produced at the lowest cost possible, benefiting consumers. It directs investors, entrepreneurs, and employees toward firms at which they can produce the most value and earn the most income. As trade barriers have come down since World War II, more people in more countries have been able to participate in the global economy and move out of poverty.
Immigration is more controversial, but it too has benefited this nation of immigrants. Immigrants move to the places where opportunities are greatest. They come as producers of goods and services for all Americans and as consumers of the things other Americans produce. Both free trade and immigration can cost particular people their jobs and investments, and that is a painful process. But so can technological development. The invention of farm machinery and the automobile destroyed millions of jobs, but it created more and better jobs. That’s a continuing process. There is surely no point in the past — 1900, 1950, 1975 — at which we should have frozen technology and trade in an attempt to prevent future job losses. Nor is today such a point. The solution for suffering communities in the so‐called Rust Belt is not the vain hope of bringing back lost jobs; the solution is to reduce tax and regulatory obstacles to business expansion and job creation.
The term “economic nationalism” has cropped up lately. It may sound good to many ears. Why wouldn’t we want our nation’s economy to succeed? But what does the term mean? Wall Street Journal columnist Bret Stephens answered that question recently: