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4232. Japan Moves toward Sustainable Recovery
- Author:
- John H. Makin
- Publication Date:
- 10-2005
- Content Type:
- Policy Brief
- Institution:
- American Enterprise Institute for Public Policy Research
- Abstract:
- Japan's stock market, one of the world's strongest this year, is up about 20 percent since spring. It is doing remarkably well for a country whose nominal GDP is still below its 1997 level. By contrast, the U.S. stock market has been drifting lower all year. The S 500 Index is down about 4 percent in the last five months, even more when the highflying energy sector is excluded. This is the case despite U.S. nominal GDP having grown by a cumulative 46 percent since 1997. Clearly, stock markets are looking ahead and seeing a brighter future for Japan than for the United States.
- Topic:
- International Relations, Development, and Economics
- Political Geography:
- United States, Japan, Israel, and East Asia
4233. Can Disasters Be Good for Growth?
- Author:
- John H. Makin
- Publication Date:
- 10-2005
- Content Type:
- Policy Brief
- Institution:
- American Enterprise Institute for Public Policy Research
- Abstract:
- The U.S. economy was in recession when the 9/11 terrorist attacks struck New York and Washington, D.C. Yet within a few months, despite fears of a collapse in confidence, consumption growth surged to a fourth-quarter annualized rate of nearly 5 percent, up sharply from a 1 percent rate during the third quarter. That consumption surge was enough to drag the economy out of what turned out to be a mild recession. By the first quarter of 2002, overall growth reached a booming 5 percent rate.
- Topic:
- Development, Economics, Environment, and Terrorism
- Political Geography:
- United States, New York, and Washington
4234. America's Resilient Consumers
- Author:
- John H. Makin
- Publication Date:
- 08-2005
- Content Type:
- Policy Brief
- Institution:
- American Enterprise Institute for Public Policy Research
- Abstract:
- Among the more remarkable features of the U.S. economy over the past five years—through a tech-stock collapse (from which we have still not recovered), the 9/11 disaster, and numerous chastening corporate scandals —has been the extraordinary resilience of American consumers. To paraphrase H. L. Mencken, no one has ever gone broke (at least not recently) by overestimating the willingness of Americans to spend money.
- Topic:
- Development, Economics, and Government
- Political Geography:
- United States and America
4235. Can the Fed Achieve a Goldilocks Tightening?
- Author:
- John H. Makin
- Publication Date:
- 08-2005
- Content Type:
- Policy Brief
- Institution:
- American Enterprise Institute for Public Policy Research
- Abstract:
- The persistence of annualized economic growth of about 3.5 percent—despite crude oil prices between $50 and $60 per barrel—has led many analysts to claim that the U.S. economy has already "absorbed" the shock of $2.35-plus-pergallon prices for self-serve regular gasoline along with a rise in heating oil costs of more than 30 percent over the last year. As if to underscore their insouciance over energy costs, American consumers accelerated the volume of vehicle purchases in June, especially those of light trucks that get only twelve or thirteen miles per gallon.
- Topic:
- Development, Economics, and Government
- Political Geography:
- United States and America
4236. 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
4237. 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
4238. 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
4239. 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
4240. Junk Science Reigns
- Author:
- John E. Calfee
- Publication Date:
- 09-2005
- Content Type:
- Policy Brief
- Institution:
- American Enterprise Institute for Public Policy Research
- Abstract:
- If we know anything about the American tort liability system, we know that it works badly when it gets infected by junk science. The recent Vioxx verdict in Angleton, Texas, is a case in point. The jury awarded $253 million to the widow of a man who died after taking the now-infamous pain reliever. The award will almost certainly be reduced to something like $5 million or $10 million because it ignored statutory limits on punitive damages, and it may eventually get thrown out because of mistakes by the judge. But even at “only” $10 million a case, a string of adverse Vioxx decisions would prove an expensive example of the triumph of the junk lawsuit over science. Most press accounts portray the jury's decision as simply a reflection of medical science, which supposedly has indicted and convicted Vioxx of causing excess heart attacks. This view prevailed in the four months after September 30, 2004, when Merck voluntarily pulled Vioxx from the market. Those months saw vituperous debate and criticism of both Merck and the Food and Drug Administration in leading medical journals. A renegade FDA staffer testified at congressional hearings along with other critics.
- Topic:
- Development, Government, Human Welfare, and Science and Technology
- Political Geography:
- America