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151. What Markets Are Saying

Author:
John H. Makin
Publication Date:
06-2005
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Paul Samuelson once quipped elegantly that (falling) stock prices had predicted seven out of the last three recessions. There is indeed wisdom in the suggestion to ignore wiggles in the financial markets as indicators of the behavior of the real economy that produces goods and services.
Topic:
Development, Economics, and Government
Political Geography:
United States

152. The Difficult Search for "Neutrality"

Author:
John H. Makin
Publication Date:
05-2005
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
The Federal Reserve's measured move toward a "neutral" federal funds rate, the short-term rate that keeps the economy growing at about 3.5 percent, is a tricky process. No one knows with certainty what the neutral fed funds rate is, and it changes over time. As long as the Fed keeps raising rates and the economy keeps growing at or above trend, it is reasonable to infer that the neutral fed funds rate is higher than the current rate. The corollary to that proposition is that rates have to be boosted above the neutral rate, inducing an asset market collapse, a real economy slowdown, or both to infer that the neutral rate has been exceeded. It is beginning to appear as though the current rate of 2.75 percent is at or above neutral. If so, that would be about a full percentage point below what many were guessing.
Topic:
Development, Economics, and Government
Political Geography:
United States

153. Slower Growth

Author:
John H. Makin
Publication Date:
02-2005
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
The average forecast for 2005 U.S. growth is 3.5 percent, with some prognosticators hoping for 4 percent. This forecast is predicated upon the assumption that the economy is on a sustainable expansion path, where consumption will be supported by steady growth of employment and household incomes. The 3.5 percent growth forecast for 2005 is identical to the mean growth rate of the U.S. economy since 1947. However, there is good reason to believe that the consensus forecast is too high. This possibility has important consequences because U.S. growth must be sustained at least at average levels to avoid a sharp drop in global growth. There are no signs of higher growth in Europe and Asia. Growth in Japan is looking weaker, while Chinese growth is moderating.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
United States, Japan, China, Europe, and Asia

154. 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

155. 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

156. 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

157. 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

158. 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

159. Beware the Arafat Model in Iraq

Author:
Michael Rubin
Publication Date:
09-2005
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Iraqis gathered around television sets as midnight approached on August 22. They watched as constitutional-drafting committee members and political elites whispered among themselves. When the speaker of the national assembly, Hachim al-Hasani, declared, “We have received a draft of the constitution,” the assembly erupted in applause. “But,” he added, “there are some points that are still outstanding and need to be addressed in the next three days.” Late into the night, politicians and activists continued to meet in the Baghdad homes of the major powerbrokers, grappling with the roles of federalism and Islam in the new Iraq. While U.S. diplomats and Washington advisers continue to facilitate compromise among Iraq's disparate sectarian, ethnic, and political groups, the reality emerging outside Baghdad is directly challenging Iraq's aspirations to constitutionalism. The U.S. government has spent hundreds of thousands of dollars to bring outside experts to Baghdad for a period of a few days or a few weeks, but Iraqi powerbrokers dismiss their advice as naive or irrelevant. Massoud Barzani in the Kurdish north and Abdul Aziz al-Hakim and Muqtada al-Sadr in the Shiite south have rejected the experts' academic proposals, and have chosen instead a model perfected by Yasser Arafat, the late chairman of the Palestine Liberation Organization.
Topic:
International Relations and Politics
Political Geography:
United States, Iraq, Washington, Middle East, and Baghdad

160. Why Does College Cost So Much?

Author:
Richard Vedder
Publication Date:
09-2005
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
As college students begin a new academic year, many parents are reeling from tuition charges. This fall's estimated 8 percent average increase at public universities, added onto double-digit hikes in the two previous years, means tuition at a typical state university is up 36 percent over 2002—at a time when consumer prices in general have risen less than 9 percent. In inflation-adjusted terms, tuition today is roughly triple what it was when parents of today's college students attended school in the 1970s. Tuition charges are rising faster than family incomes, an unsustainable trend in the long run. This holds true even when scholarships and financial aid are considered. One consequence of rising costs is that college enrollments are no longer increasing as much as before. Price-sensitive groups such as low-income students and minorities are missing out. A smaller proportion of Hispanics between eighteen and twenty-four attends college today than in 1976. The United States is beginning to fall below some other industrial nations in population-adjusted college attendance.
Topic:
Development, Economics, Education, and Government
Political Geography:
United States