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741. Stern Lessons on Fed Policies and Actions

Author:
Amity Shlaes, Vincent R. Reinhart, Allan H. Meltzer, and John L. Chapman
Publication Date:
04-2008
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
How fragile is our financial system? What are the implications of the Fed's actions on Bear Stearns? Do we need new ways of thinking about the risks the system entails? In recent articles, four AEI scholars have looked closely at the evidence of what went wrong and what is ahead.
Topic:
Economics and Government
Political Geography:
United States

742. Benefit Growth That We Cannot Afford

Author:
Alan D. Viard
Publication Date:
04-2008
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Buried in the 227-page Social Security trustees' report are some dramatic numbers about Social Security's future promises. AEI resident scholar Alan D. Viard tells us that "a typical worker retiring in 2050 has been promised 47 percent more than today's retirees, and one retiring in 2080 has been promised more than double today's benefits." To address the program's financial problems, he says, the rules need to be changed to link future retirees' benefits to inflation. That move, he says, would go a long way toward solving the system's problems.
Topic:
Security, Economics, and Political Economy
Political Geography:
United States

743. The Wealth Trajectory: Rewards for the Few

Author:
N. Gregory Mankiw
Publication Date:
04-2008
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Income inequality is rising, and in this article, AEI visiting scholar N. Gregory Mankiw looks at the statistical evidence and causes. Government policy, he says, is unlikely to be the culprit because inequality has risen in Democratic and Republican administrations--we need to look instead at skills-based technological change and educational attainment. Education, Mankiw says, is key to understanding the broader trends, but it cannot fully explain the incomes of the super-rich.
Topic:
Economics and Education
Political Geography:
United States

744. Fallout from a Bailout

Author:
Vincent R. Reinhart
Publication Date:
05-2008
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
The Senate Banking Committee approved legislation on May 20 that would empower the Federal Housing Administration to provide relief to mortgage borrowers teetering on the brink of default. The House has already passed similar legislation. Only two months ago, mortgage aid was viewed as unlikely, but the odds now favor it becoming law. For this change of fortune, the legislation's chief sponsors, Senator Chris Dodd (D-Conn.) and Representative Barney Frank (D-Mass.), should thank one person in particular: Federal Reserve chairman Ben Bernanke.
Topic:
Economics and Government
Political Geography:
United States

745. It's Only Going to Get Worse

Author:
Lawrence B. Lindsey
Publication Date:
06-2008
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
America has not had a nationwide housing crash since the 1930s. At one point during that calamity, an estimated 60 percent of all mortgages were in technical default. The rather primitive housing credit system of the time, which relied on five-year balloon mortgages, certainly exacerbated the problem, but the bulk of the problem was related to the general economic downturn. There have been some regional housing crashes that were short and relatively mild, most notably in California, Texas, and New England in the late 1980s and early1990s. Most of those were caused by declines in key local industries: oil in Texas, aerospace and defense in Southern California and Massachusett.
Topic:
Economics and Markets
Political Geography:
United States, California, and England

746. Obama Turns FDR Upside Down

Author:
Lawrence B. Lindsey
Publication Date:
06-2008
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Two AEI scholars have recently assessed the merits of Senator Barack Obama's approach to fixing the Social Security system's problems. In a March On the Issues, Andrew G. Biggs argued that the senator's plan would not fix the system's long-term problems and would impose significant costs on the economy as a whole. To read Biggs's article, visit www.aei.org/publication27704/. In June, Lawrence B. Lindsey wrote that requiring higher-end workers to pay additional taxes without getting additional benefits linked to their extra contributions would be “a big step toward turning Social Security from a contributory pension scheme into just another welfare program.” Below, Lindsey spells out the details.
Topic:
Economics, Political Economy, and Politics
Political Geography:
United States

747. Decision Factors Affecting Semiconductor Industry Location and the Regional Advantages of Kumamoto Prefecture, Japan

Author:
Kyoko Ii
Publication Date:
01-2008
Content Type:
Working Paper
Institution:
Walter H. Shorenstein Asia-Pacific Research Center
Abstract:
The objective of this research is to pinpoint the key determining factors that managers in multinational semiconductor firms use to decide upon a location to expand their business. Interviews were conducted with seventeen executives at eight companies, at both the U.S. and Japanese headquarters. Based on these interviews, the author analyzed the data to determine the strengths and weaknesses of Japan's Kumamoto Prefecture, in particular, as a semiconductor investment location. One important research finding is an assessment of these strengths and weaknesses, their importance to foreign executives, and how Kumamoto can capitalize on them in order to attract more business to the region.
Topic:
Economics, Industrial Policy, and Science and Technology
Political Geography:
United States, Japan, Iran, and Asia

748. The US Housing Bust and Soaring Oil Prices: What next for the world economy?

Author:
Daniel Gros and Cecilia Frale
Publication Date:
06-2008
Content Type:
Working Paper
Institution:
Centre for European Policy Studies
Abstract:
This paper estimates the impact of the ongoing housing bust and oil price boom on the US and European economies. It finds that large house price movements (changes in construction investment) are useful to predict exceptionally bad and good times for the US economy, but not for most large European countries. In Europe housing market developments have led to extreme values of GDP, mainly in the UK, Spain and some Nordic countries.
Topic:
Economics and Oil
Political Geography:
United States and Europe

749. Stress-Testing the Regulators: Market Risks and the EU Economy

Author:
Max Watson
Publication Date:
04-2008
Content Type:
Policy Brief
Institution:
Chatham House
Abstract:
Today's market turbulence and global imbalances prompt the question whether economic and regulatory policies are poorly designed or just badly implemented. The question is urgent for Europe, which has its own asset booms and imbalances to worry about as well as the backwash of US problems. The imbalances in Europe's economies in large part reflect favourable shocks, such as falling interest rates and growing financial integration. But the 'growth crisis' in Portugal underscores the fact that there can be hard landings, even without a financial crisis, if fiscal policy is unwise and if productivity fails to take off. The current global imbalances and turbulence also have a common backdrop in the long period of unusually easy liquidity and low risk premia during which today's problems built up. This suggests that central banks should be prepared more often to 'lean against the wind' in times of asset price exuberance, and that politicians should not cut taxes or boost spending permanently on the back of revenue gains that result from transient financial booms. Banks and supervisors have many lessons to draw. Some involve going 'back to basics' on issues such as liquidity, off-balance-sheet operations, and the ability to close and reopen banks. Others require a careful look at incentives – in executive pay, rating agency roles and loan production systems. Supervisors also need to take better account of boom-bust cycles when they assess risks, and address cross-border issues in EU banking. Moral hazard has been partly addressed by pain inflicted on bank managements and shareholders. But at the macro level it may be building up as policy-makers act to limit losses in a setting where they cannot trace the ultimate fallout from risks. In future, their discretionary interventions need to be truly exceptional and much more symmetrical, or the money supply and the public debt will ratchet up amid serious resource misallocation.
Topic:
Economics, Government, and Financial Crisis
Political Geography:
United States and Europe

750. Friedman and Russia

Author:
Andrei Illarionov
Publication Date:
01-2008
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
One day I asked Milton Friedman a question. That question was in my mind every time we met: “Could he have achieved the same status he did in America if he had lived in Russia—not only in terms of his research, but in shaping his outlook on life and in his under-standing of freedom?” Having kept silent for a moment, he answered: “no.”
Topic:
Economics
Political Geography:
Russia, United States, America, Europe, and Asia