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2121. 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

2122. 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

2123. Europe's Struggling Currency Union

Author:
John H. Makin
Publication Date:
07-2005
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Clear signs of political and economic stress have emerged from Europe in recent weeks. Rumors have circulated about discussions of a possible breakup of Europe's currency union, and one renegade Italian official, Welfare Minister Roberto Maroni, expressed a wish that Italy could return to the lira in order to get some help from a weaker currency to relieve Italy's current recession. Perhaps more telling, 54 percent of Germans polled would like to abandon the euro and return to the deutschemark. Similarly, the inflationary impact of the move from the gilder to the euro was cited by many of the Dutch citizens who voted decisively against ratifying the European Constitution.
Topic:
Economics and Government
Political Geography:
Europe, Germany, and Italy

2124. 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

2125. 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

2126. 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

2127. 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

2128. Milton and Rose Friedman: Liberty's Couple

Author:
Lawrence B. Lindsey
Publication Date:
12-2005
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
In the company of history's great revolutionaries, Rose and Milton Friedman stand out as clear anomalies. Diminutive in stature and modest in speech and manner, they cannot easily be imagined manning the barricades or hectoring the crowds from a soapbox. Most important, unlike other visionaries who sought to change the world, the Friedmans did not say, “Put us in charge of the government, and we will make your life better.” Rather, they argued that governments then in charge should get out of the way so that individuals could get on with the job of making their own lives better. Their 1980 book Free to Choose successfully instigated a revolution in public policy because it offered conservatives both a rhetorical weapon and a legislative program. Until then, the Left had a clear advantage on both scores. Rhetorically, the Left promised compassion and equality and packaged them with programmatic action in the form of ever-increasing government power. Those opposed to an ever larger and more intrusive state were thus forced to defend hardheartedness and inequality, and to oppose legislative change.
Topic:
Civil Society, Economics, Government, and Politics

2129. 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

2130. Rediscovering the Underclass

Author:
Charles Murray
Publication Date:
10-2005
Content Type:
Policy Brief
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
Watching the courage of ordinary low-income people as they deal with the aftermath of Katrina and Rita, it is hard to decide which politicians are more contemptible—Democrats who are rediscovering poverty and blaming it on George W. Bush, or Republicans who are rediscovering poverty and claiming that the government can fix it. Both sides are unwilling to face reality: We have not rediscovered poverty, we have rediscovered the underclass. The underclass has been growing during all the years that people were ignoring it, including the Clinton years; and the pro- grams politicians tout as solutions are a mismatch for the people who constitute the problem. We have rediscovered the underclass. Newspapers and television understandably prefer to feature low-income people who are trying hard—the middle-aged man working two jobs, the mother worrying about how to get her children into school in a strange city. These people are rightly the objects of an outpouring of help from around the country, but their troubles are relatively easy to resolve. Tell the man where a job is, and he will take it. Tell the mother where a school is, and she will get her children into it. Other images show us the face of the hard problem: those of the looters and thugs, and those of inert women doing nothing to help themselves or their children. They are the underclass.
Topic:
Civil Society, Economics, Government, and Human Welfare