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31. The Year Ahead

Author:
John H. Makin
Publication Date:
01-2010
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
We can expect 2010 to be a volatile year. This likelihood is underscored by looking back at 2008 and 2009. Two thousand eight was a highly volatile year leading up to the collapse of Lehman Brothers in September, which was followed by the risk of a total systemic meltdown. That sharp and obvious risk spike prompted massive policy responses that were simply the largest that central banks, with rate cuts and liquidity provision, and governments, with tax cuts and spending increases, could manage. The result—beginning in March 2009—was a linear rise in the prices of risky assets, the result of massive relief once the slip into a global depression had been averted and the acute phase of the crisis in the financial sector had passed.
Topic:
Economics, International Trade and Finance, Markets, and Financial Crisis
Political Geography:
United States, Japan, China, and Europe

32. Obama Appointees with Strong Union Ties Could Push National Labor Relations Board in Wrong Direction

Author:
Thomas P. Gies
Publication Date:
04-2010
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
How might recess appointments to the National Labor Relations Board (NLRB) affect federal labor law? Controversial appointee Craig Becker is known for advocating policies that fall outside the mainstream view of labor laws. Although the views of one member of the NLRB will not automatically translate into dramatic policy changes, concerns that members of the NLRB may rewrite important principles of federal labor laws through litigation are not unfounded. Whether President Barack Obama's NLRB would be able to enact key provisions of the Employee Free Choice Act through litigation rather than congressional action remains to be seen.
Topic:
Labor Issues and Law
Political Geography:
United States

33. Why Fiscal Stimulus Is Unlikely to Work

Author:
Kevin A. Hassett
Publication Date:
03-2009
Content Type:
Working Paper
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
This paper reviews the empirical literature on countercyclical policy. It finds that three types of countercyclical policies have been studied in the literature: built in stabilizers, temporary policy changes, and more permanent policy changes. The literature is decidedly mixed on the effectiveness of temporary changes, but more hopeful concerning the other two.
Topic:
Debt, Economics, Markets, and Political Economy
Political Geography:
United States

34. The Fed Makes History

Author:
John H. Makin
Publication Date:
01-2009
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
On December 16, 2008, Federal Reserve chairman Ben Bernanke exercised decisive leadership at a watershed meeting of the Federal Open Market Committee (FOMC). In its official statement after the meeting, the committee pledged to “employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability.” The pledge to preserve price stability was not a commitment to fight inflation, as is typical, but a highly unusual commitment to fight deflation.
Topic:
Economics, Markets, and Political Economy
Political Geography:
United States

35. The Crisis and Fix Cycle

Author:
John H. Makin
Publication Date:
02-2009
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
The global financial and economic crisis that emerged in August 2007 has entered a dismaying fourth phase. The January 17–18, 2009, weekend edition of the Financial Times, which has been a major chronicler of the crisis and its many aspects, laid out a frightening timeline of an accelerating and intensifying oscillatory cycle of crisis and failed policy response that started just fifteen months ago. Each phase begins with a shock and ends with a seemingly decisive policy measure meant to contain or “fix” the crisis. Each phase is shorter than the previous one and culminates in a much larger policy response. Throughout the crisis, the losses of financial institutions have steadily grown at an accelerating pace as the underlying conditions in the financial sector and, since September 2008, in the underlying global economy deteriorate more rapidly. Such a disturbing pattern must be truncated by a large, coordinated global policy response to arrest the accelerating erosion of the market capitalization of multinational banks and insurance companies that has resulted.
Topic:
Debt, Economics, Markets, and Political Economy
Political Geography:
United States

36. Inflation Is Better Than Deflation

Author:
John H. Makin
Publication Date:
03-2009
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
As the global financial and economic crisis has grown increasingly dire—the deterioration just since the November U.S. election is breathtaking—market participants and policymakers alike have looked to three past crisis models as part of an intensifying search for ways out of the current crisis. First, the Great Depression of the 1930s is being examined ever more closely for possible lessons now that commentators have moved past an under- standable reluctance to mention that experience as relevant to today's situation. Second, the Scandinavian financial crisis of the early 1990s, which included a proactive move toward bank nationalization by the Swedish government, is also widely discussed. Finally, many allusions have been made to the disquieting parallels between today's U.S. experience and that of Japan during its “lost decade” (1991–2001) of recession and deflation, especially after 1998.
Topic:
Economics and Markets
Political Geography:
United States and Japan

37. The Fed Battles Deflation and Class Warfare

Author:
John H. Makin
Publication Date:
04-2009
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
On March 18, Federal Reserve chairman Ben Bernanke intensified the important battle against global deflation with a commitment to expand the Fed's balance sheet by an extra $1.15 trillion. With some luck and persistence, that step could boost growth by a percentage point or more and, even more important, substantially reduce the risk of deflation.
Topic:
Economics, Markets, and Political Economy
Political Geography:
United States

38. Economic Conditions and U.S. National Security in the 1930s and Today

Author:
Martin S. Feldstein
Publication Date:
08-2009
Content Type:
Working Paper
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
This paper comments on the experience of the U.S. economy in the 1930s, its lessons for managing the current economic downturn, and the relation of U.S. economic conditions to our future national security. Some of the conclusions are: (1) Although the current recession will be long and very damaging, it is not likely to deteriorate into conditions similar to the Depression of the 1930s. Policy makers now understand better than they did in the 1930s what needs to be done and what needs to be avoided. (2) The focus on domestic economic policies in the 1930s and the desire to remain militarily neutral delayed the major military buildup that eventually achieved the economic recovery. (3) A well-functioning system of bank lending is necessary for economic expansion. We have yet to achieve that in the current situation. (4) Raising taxes, even future taxes, can depress economic activity. The administration's budget proposes to raise tax rates on higher income individuals, on dividends and capital gains, on corporate profits and on all consumers through the cap and trade system of implicit CO2 taxes. (5) Inappropriate trade policies and domestic policies that affect the exchange rate can hurt our allies, leading to conflicts that spill over from economics to impair national security cooperation. Reducing long-term U.S. fiscal deficits would reduce the risk of inflation and thereby reduce the fear among foreign investors that their dollar investments will lose their purchasing power. (6) The possibilities for domestic terrorism and of cyber attacks creates risks that did not exist in the 1930s or even in more recent decades. The scale and funding of the FBI and the Department of Homeland Security is not consistent with these new risks.
Topic:
Economics, International Trade and Finance, Terrorism, and Financial Crisis
Political Geography:
United States

39. The United States-Peru Trade Promotion Agreement

Author:
Philip I. Levy
Publication Date:
10-2009
Content Type:
Working Paper
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Bilateral free trade agreements have generally been analyzed as instances of preferential reciprocal tariff liberalization. Viewed through this lens, such agreements raise concerns both about new competition and about trade diversion. The United States-Peru Trade Promotion Agreement, an example of a serious North-South accord, demonstrates that new market access was not a principal Peruvian goal in the trade negotiations. Instead, the agreement was intended to encourage investment by locking in Peru's economic reforms. This motivation has very different implications for the global trading system than a quest for preferential access.
Topic:
International Trade and Finance, Markets, and Treaties and Agreements
Political Geography:
United States, Latin America, and Peru

40. Building Up to Tearing Down the Wall

Author:
Ronald W. Reagan
Publication Date:
11-2009
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
In 1988, as he was about to step down as president, Ronald Reagan received the Francis Boyer Award, AEI's highest honor. He chose for the theme of his speech that December evening, eleven months before the Berlin Wall fell, the struggle of people everywhere for freedom. In his speech, he anticipated the momentous events that would occur in 1989: “So while our hopes today are for a new era, let us remember that if that new era is indeed upon us, there was nothing inevitable about it. It was the result of hard work—and of resolve and sacrifice on the part of those who love freedom and dare to strive for it.” Freedom works, he said. He saluted the Solzhenitsyns, the Sakharovs, and the Sharanskys, saying, “We have seen the thrilling spectacle of mankind refusing to accept the shackles placed upon us.” As we recall the events of November 1989, it is important to remember the struggle and to recommit ourselves to the hard work of extending freedom to those who have yet to enjoy its blessings.
Topic:
Conflict Resolution, Cold War, and Power Politics
Political Geography:
Russia, United States, and Berlin