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5801. What Determines Interest Rates?

Author:
John H. Makin
Publication Date:
01-2005
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
The pundits who have been predicting higher interest rates based on large U.S. budget and current account deficits have some explaining to do. Beyond the fact that very little systematic empirical evidence exists of a close link between deficits of any kind and interest rates, many high-profile commentators such as Robert Rubin and Pete Peterson, not to mention Pimco's Bill Gross, have consistently warned that long-term interest rates would rise as America's budget and current account deficits rose. Actually, U.S. longterm interest rates have been falling-from 4.8 percent in early June to 4.1 percent at year-end. Despite this stellar performance, Gross has even gone so far as to suggest that U.S. government liabilities should be downgraded from their top rating of AAA to AA.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
United States

5802. Head Start's Broken Promise

Author:
Douglas Besharov
Publication Date:
10-2005
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
For forty years, Head Start has sought to improve the life prospects of low-income children. Since 1965, about 20 million children have gone through the program at a total cost of more than $100 billion. Head Start was supposed to be reauthorized in 2003, but for two years Congress was immobilized as the Bush administration and its Republican allies pushed for what they saw as needed improvements in the program—while Democrats and the Head Start establishment argued that the proposals would hurt poor children. The impasse was broken earlier this year when key Republicans gave up their efforts to change the program. Committees in both Houses have now voted unanimously to expand eligibility for Head Start. The Senate bill would raise the income-eligibility cap from the poverty line to 130 percent of poverty (a roughly 35 percent increase in the number of children eligible for the program), and the House bill would allow programs to enroll more one-and two-year-olds, rather than their traditional target group of three- and four-year-olds (ultimately doubling the number of eligible children).
Topic:
Development, Economics, Education, and Government

5803. Energy Conservation: An Economic Perspective

Author:
Robert W. Hahn
Publication Date:
10-2005
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
With oil and gas prices at record levels, Persian Gulf producers threatened by terrorists, and exploding demand from China likely to strain supplies for years to come, surely it is time for Washington to get serious about energy conservation. Well, yes . . . and no. While most economists (including me) are deeply skeptical about the value of government mandates for energy efficiency, in principle there is a case to be made for using taxes to “internalize” the costs of consumption that are not otherwise reflected in prices. But those costs are lower than you might expect—lower, perhaps, than the taxes currently charged at the pump. Moreover, while oil-security worries are now driving the calls for conservation, a careful look suggests that the neglected costs are actually related to traffic congestion and the threat of global warming. Taxing oil consumption (as opposed to taxing road use or carbon emissions) would hardly get to the roots of these problems.
Topic:
International Relations, Economics, Energy Policy, and Terrorism
Political Geography:
China and Washington

5804. The Summit of the Americas: Rescuing the Reform Agenda

Author:
Roger F. Noriega
Publication Date:
10-2005
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
The fourth regional Summit of the Americas in Mar del Plata, Argentina, on November 4–5, will be a test of courage for the region's leaders. Pressured by genuine popular dissatisfaction, they will either commit unequivocally to finish the hard work of creating economic opportunity for the region's 128 million poor, or they will let warmed-over populism undermine the consensus behind free-market reforms and democracy itself. The stakes are high, and the leaders must use the summit process to advance the reform agenda for their peoples' sake. At the summit, President George W. Bush will, no doubt, press his colleagues to reemphasize their commitments to defend democracy and the rule of law, deepen economic reforms, and expand trade as a recipe for sustained, equitable growth. But there is a significant number of Latin leaders who may try to scuttle this work plan and serve up sympathetic rhetoric to cynically court the poor.
Topic:
International Relations, Democratization, and Treaties and Agreements
Political Geography:
America, Argentina, and South America

5805. Why Is the World Bank Still Lending?

Author:
Adam Lerrick
Publication Date:
11-2005
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
World Bank money is building schools in China's impoverished western provinces, but the bill for interest charges is being mailed to the United Kingdom, attention Chancellor of Exchequer Gordon Brown. Mexico, Chile, and Brazil will soon be lining up for the same deal. This is but the latest scheme designed to preserve the World Bank's lending role at a time when the need and demand for its services are falling. Major middle-income countries, the cream of the bank's lending portfolio and where more than 80 percent of Latin Americans live, are curbing their borrowing and paying down their balances, setting off alarms at the bank. Net loan flows have shifted from a positive $10 billion in 1999–2001, to a negative $15 billion in 2002–2004.
Topic:
Debt, Development, Economics, and Third World
Political Geography:
China, United Kingdom, Brazil, Latin America, Mexico, and Chile

5806. A Fitting Address

Author:
James Q. Wilson
Publication Date:
12-2005
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
My fellow Americans, we are winning, and winning decisively, in Iraq and the Middle East. We defeated Saddam Hussein's army in just a few weeks. None of the disasters that many feared would follow our invasion occurred. Our troops did not have to fight door to door to take Baghdad. The Iraqi oil fields were not set on fire. There was no civil war between the Sunnis and the Shiites. There was no grave humanitarian crisis. Saddam Hussein was captured and is awaiting trial. His two murderous sons are dead. Most of the leading members of Saddam's regime have been captured or killed. After our easy military victory, we found ourselves inadequately prepared to defeat the terrorist insurgents, but now we are prevailing.
Topic:
Civil Society and Government
Political Geography:
United States, Middle East, and Baghdad

5807. American Dilemma: Problems of Race Still Cry to Be Solved

Author:
James Q. Wilson
Publication Date:
12-2005
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
National Review, at its founding in 1955, had as its mission stating and defending a conservative view in a nation that many believed had known only a liberal tradition. It was a difficult task, not only because of liberalism's apparent supremacy, but because it was not easy to define a conservative alternative. Conservatism could mean free-market economics, the reassertion of a traditional morality, or the endorsement of a religious or classical basis for moral thought. In the spirited discussions that took place in this magazine and elsewhere, each of these views had its proponents, and—as they made quite clear—their views were often in conflict. Individualism and free-market economics could leave morality to personal and even aberrant judgments, but a revival of moral thought and a reassertion of its religious basis could easily suppress individual choice and impose regulatory restraints on the market.
Topic:
Civil Society, Ethnic Conflict, and Human Rights
Political Geography:
United States and America

5808. Milton and Rose Friedman: Liberty's Couple

Author:
Lawrence B. Lindsey
Publication Date:
12-2005
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
In the company of history's great revolutionaries, Rose and Milton Friedman stand out as clear anomalies. Diminutive in stature and modest in speech and manner, they cannot easily be imagined manning the barricades or hectoring the crowds from a soapbox. Most important, unlike other visionaries who sought to change the world, the Friedmans did not say, “Put us in charge of the government, and we will make your life better.” Rather, they argued that governments then in charge should get out of the way so that individuals could get on with the job of making their own lives better. Their 1980 book Free to Choose successfully instigated a revolution in public policy because it offered conservatives both a rhetorical weapon and a legislative program. Until then, the Left had a clear advantage on both scores. Rhetorically, the Left promised compassion and equality and packaged them with programmatic action in the form of ever-increasing government power. Those opposed to an ever larger and more intrusive state were thus forced to defend hardheartedness and inequality, and to oppose legislative change.
Topic:
Civil Society, Economics, Government, and Politics

5809. Fighting to Win

Author:
Frederick W. Kagan
Publication Date:
12-2005
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Is retreat from, withdrawal from, or defeat in Iraq inevitable? Almost all opponents of the Bush administration say it is. As Representative John Murtha (D-Pa.) put it in mid-November, when demanding the “immediate redeployment of U.S. troops” consistent with their safety, “The United States cannot accomplish anything further in Iraq militarily. It is time to bring the troops home.” This was echoed more recently by Democratic National Committee chairman Howard Dean: “The idea that we're going to win this war is an idea that, unfortunately, is just plain wrong.” Advocates of withdrawal point to continuing attacks on coalition and Iraqi targets and to the steady, somber flow of U.S. casualties, as well as the increasing fear that our army will break under the strain of prolonged occupation. Administration supporters of course share these concerns, and some seem (privately) to share the view that the war may be unwinnable. Even a few inside the administration may have their doubts. In any case, the administration clearly believes that it has to promise a significant reduction of U.S. forces in Iraq—“conditions permitting”—in 2006. Reports are circulating that preparations for troop reductions have already begun.
Topic:
International Relations and War
Political Geography:
United States, Iraq, and Middle East

5810. Germany's Bad Example for Iraq

Author:
Michael S. Greve
Publication Date:
10-2005
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Berlin is far from Baghdad, and the Germans at least want to keep it that way. But for all the obvious differences, Germany's inconclusive election results and the impending constitutional referendum in Iraq point to some identical obstacles to effective and constitutional government. These obstacles are proportional representation and “cooperative federalism.” As it happens, well-meaning UN officials, NGOs, and U.S. advisers have been urging these constitutional arrangements upon numerous fledgling democracies, including Iraq. That may not be good advice.
Topic:
Government and United Nations
Political Geography:
United States, Iraq, Europe, Middle East, Baghdad, Germany, and Berlin