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2921. 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

2922. 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

2923. 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

2924. 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

2925. 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

2926. 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

2927. 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

2928. 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

2929. Small Leaps or Giant Leaps

Author:
Scott Gottlieb
Publication Date:
07-2005
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
There are seldom eureka moments in health care. Few new drugs or medical devices save scores of lives or cure diseases when they first hit the market. New technologies rarely translate into immediate life expectancy gains, and it is uncommon that results of a single study will transform how medicine is practiced. Medical progress is not magic, and sudden discoveries do not lead to dramatic cures, although a new book by Marcia Angell, a former editor of The New England Journal of Medicine, would lead you to think all of our gains in health have been achieved from just a handful of the most potent new medicines. Instead, medical breakthroughs unfold over time, and gains in life expectancy and health are realized only after a series of small technological advances are collected into new ways of practicing medicine or attacking a disease. The practice of medicine unfolds not in a series of certainties, but in a series of doubts.
Topic:
Civil Society, Development, Human Welfare, and Science and Technology
Political Geography:
England

2930. A Bias against the Best and Brightest

Author:
John R. Lott Jr.
Publication Date:
06-2005
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Statistical evidence indicates that qualifications, experience, and potential influence are far greater factors in delaying or rejecting judicial nominees than perceptions of extremism.
Topic:
Development, Government, and Politics
Political Geography:
United States