The Cato Institute

Markets Empower Women

Market-driven technological and scientific innovations heighten women’s material standard of living, promote individual empowerment, reduce sexism and other forms of collective prejudice, and foster cultural change…

Over the last 200 years, economic progress has helped to bring about both dramatically better standards of living and the extension of individual dignity to women in the developed world. Today the same story of market-driven empowerment is repeating itself in developing countries.

Competitive markets empower women in at least two interrelated ways. First, market-driven technological and scientific innovations disproportionately benefit women. Timesaving household devices, for example, help women in particular because they typically perform the majority of housework. Healthcare advances reduce maternal and infant mortality rates, allowing for smaller family sizes and expansion of women’s life options. Second, labor market participation offers women economic independence and increased bargaining power in society. Factory work, despite its poor reputation, has proven particularly important in that regard.

In these ways, markets heighten women’s material standard of living and foster cultural change. Markets promote individual empowerment, reducing sexism and other forms of collective prejudice.

Women’s empowerment in many developing countries is in its early phases, but the right policies can set women everywhere on a path toward the same prosperity and freedom enjoyed by women in today’s advanced countries.

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Ten Reasons the Amazon Subsidies Hurt More Than They Help

Some New York and Virginia workers will be winners from the Amazon deal, but business subsidies are a loser for citizens overall…

Amazon has chosen New York City and Arlington, Virginia, for new corporate headquarters after the cities ponied up more than $2 billion in subsidies to the retail giant.

As with much of government spending, the costs of corporate pork to society are large but diffuse, while the benefits to the recipients are direct and visible.

Workers in the two cities will be winners as labor demand gets boosted, but business subsidies make losers of taxpayers, other businesses and good governance.

Ten Harmful Consequences of Handouts for Amazon

1. Fairness. Subsidies give Amazon an unfair edge other tech firms in New York City and Northern Virginia.
2. Alternatives. New York and Virginia would have generated more durable growth by cutting business taxes across the board by $2 billion. That would have boosted investment by many businesses, and thus created more balanced prosperity.
3. Diversity. Industry clusters such as Silicon Valley are successful not because they have big companies, but because they have a start-up culture that nurtures growth companies with venture capital. Rather than favoring big companies, state and local politicians would better spur growth by reducing tax and regulatory barriers to spawn a diversity of new companies.
   
4. Corruption. Allowing politicians to hand-out business subsidies at their discretion generates corruption because the hand-outs get swapped for campaign cash and outright bribes.
   
5. Bureaucracy. Amazon-style subsidy deals are jobs programs for accountants and lawyers.
   
6. Lobbyists. The high-profile Amazon win will inspire more companies to shake down politicians for subsidies. 
7. Dependency. Just as welfare undermines individual productivity, corporate welfare undermines business productivity. 
8. Bad Decisions. Subsidies induce companies to make bad decisions that backfire.
   
9. Politics. High-profile subsidy deals are politically risky. 
10. Priorities. State and local governments face serious problems that may sink their economies in coming years such as large unfunded pension costs. They should fix those problems rather than trying to micromanage the economy.
    

Rather than subsidizing big businesses, the states should aim to create a diverse business ecosystem — an Amazon, if you will — by cutting taxes and regulations for all types of investment. If states adopt low tax rates and repeal unneeded regulations on zoning, licensing, and other activities, growth will take care of itself.

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New Cato Institute Report Grades Governors on Fiscal Restraint

Policymakers in every state should adopt the fiscal approaches of this year’s top-scoring governors…

Today, the Cato Institute released its biennial Fiscal Policy Report Card on America’s Governors, produced by Chris Edwards, director of tax policy studies and editor of www.DownsizingGovernment.org. The report uses statistical data to grade the governors on their taxing and spending records from a limited-government perspective.

Five governors received the highest grade of “A”: Susana Martinez of New Mexico, Henry McMaster of South Carolina, Doug Burgum of North Dakota, Paul LePage of Maine, andGreg Abbott of Texas.

Eight governors received the lowest grade of “F”: Roy Cooper of North Carolina, John Bel Edwards of Louisiana, Tom Wolf of Pennsylvania, Jim Justice of West Virginia, David Ige of Hawaii, Dennis Daugaard of South Dakota, Kate Brown of Oregon, and Jay Insleeof Washington. 

The report card looks at data since 2016 for each state and awards an objective grade based on spending variables, a revenue variable, and tax rate variables. Governors who have cut taxes and spending the most receive the highest grades, while those who have increased taxes and spending the most receive the lowest grades.

Susana Martinez receives the highest score in this year’s report due to her spending restraint, tax cuts, and steadfast opposition to tax increases. New Mexico’s budget has remained roughly flat in recent years, and Martinez has repeatedly vetoed wasteful spending. She has pursued reforms to make New Mexico more competitive, including cutting the corporate tax rate. With revenues from energy production stagnant in recent years, balancing New Mexico’s budget has been a challenge. But Martinez has held firm against tax increases proposed by the legislature, including vetoing $350 million worth of tax increases last year.

Jay Inslee is the worst-scoring governor this year. The report argues that his “appetite for tax and spending increases has been insatiable.” Though he originally campaigned on a promise not to raise taxes, Inslee has pushed many hikes over the years, including increases in business taxes, capital gains taxes, cigarette taxes, sales taxes, and a huge new carbon tax. Inslee has also been spendthrift— the current biennial budget in Washington state is up 17 percent over the prior budget.

In this year’s report, Edwards discusses how the federal Tax Cuts and Jobs Act of 2017 is affecting state fiscal environments. He also examines revenues from marijuana legalization and recent Supreme Court decisions on online sales taxes and public-sector labor unions.

Edwards notes, “The 2017 federal tax act has ushered in a new era of state tax competition. Governors need to lead efforts to deliver better services at lower costs, else risk losing residents to other states. Policymakers in every state should adopt the fiscal approaches of this year’s top-scoring governors.”

Read the report, then join the conversation on Twitter with #GovReportCard…

Regulators Struggle to Identify What Exactly Cryptocurrency Is

Cryptocurrencies have moved from the fringes of financial market activity to a $300 billion asset class traded on exchanges and owned by mainstream investors. And, yet a great deal of regulatory uncertainty still surrounds them…

In less than a decade, cryptocurrencies have moved from the fringes of financial market activity to a $300 billion asset class traded on exchanges and owned by mainstream investors. The technology underlying Bitcoin and Ethereum has spawned more than 1,600 new platforms designed to compete with established providers.

Yet a great deal of regulatory uncertainty still surrounds cryptocurrencies, particularly when it comes to whether cryptocurrencies are securities — which affects who can buy and hold them, who can deal in them and keep custody of them, and what disclosure laws pertain to them.

An unresolved question that has recently gained prominence with the advent of ICOs (initial coin offerings) is whether new issues of cryptocurrency are disguised securities offerings operating outside of applicable laws.

For example, one former regulator from the Commodity Futures Trading Commission (CFTC) has suggested that the second-most-popular cryptocurrency, Ethereum, is a security to which securities regulations should apply retroactively. However, this view has been recently contradicted by a top official at the Securities and Exchange Commission (SEC), who stated that the decentralized nature of the Ethereum network means its cryptocurrency does not fit the established definition of a security.

An overzealous application of securities laws to cryptocurrencies could raise barriers to investor access and capital formation, which would have a chilling effect on the development of cryptocurrency technology and markets. As a sitting regulator recently warned, cryptocurrencies’ many novel features can lead policymakers to focus excessively on their potential harm rather than on their likely benefits.

A clear, reasonable, and appropriate definition of what qualifies as a security would allow the market for cryptocurrencies to develop while also enabling securities regulators to properly fulfill their mission to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation.

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Trump’s Trade Policy Is The Opposite of “Draining the Swamp”

Last week, President Trump told an audience of steel and aluminum executives that he would impose tariffs of 25% on steel and 10% on aluminum, and that these tariffs would last “for a long period of time”… 

When it comes to trade, President Trump is going directly to special interests (i.e. business executives), and giving them favors at the expense of the rest of the country. That’s about as far from draining the swamp as it could possibly get.

President Trump seems to truly believe in his cause, and it may take actual implementation and subsequent failure of a protectionist trade policy to cure him of his misconceptions. Nevertheless, there is still time to push back. As of right now, these tariffs are just words. Trump said some things, but no action has been taken. As a result, it is worth it for everyone to make their case against these actions.

Other governments can make clear to the Trump administration how serious they are by announcing possible retaliatory measures now. Congress can assert its constitutional power over trade, through direct communication with the White House, and even through legislation designed to take back some power it had previously delegated to the executive branch. And the broader business community needs to make clear to the administration how badly it could be hurt by this.

There has been lots of talk of “trade wars” recently. This may be the start, but let’s keeping fighting for peace nonetheless.

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Protectionism Won’t Make America Great. Free Markets Will.

Over 400 trade-remedy restrictions are now in place on a wide range of products from more than 40 countries…

Public support for free trade has dwindled as the United States has imposed more and more import restrictions. It is a weak argument to suggest that imposing a few more tariffs will make Americans more confident of their ability to succeed and prosper in an open global marketplace, but, unfortunately, protectionism begets more protectionism, not more trade liberalization.

The Trump administration’s efforts to tighten import restrictions on behalf of favored industries will harm economic growth, lead to lower employment, and increase costs to consumers. Not exactly a strategy to make America great again.

Rather than pursuing protectionism, the government should develop a better set of trade priorities. Here are some suggestions….

1. Help to increase public understanding of trade economics. The United States would be better off if it simply ended all of its trade restrictions unilaterally.

2. Give higher priority to adjustment assistance. Companies and workers dealing with overseas competition can be eligible for transitional assistance to overcome import challenges. The administration should consider upgrading assistance for firms to encourage them to increase their competitiveness through restructuring or adopting best practices.

3. Reform U.S. trade remedy laws. It makes no sense to implement policies that make the American economy weaker.

4. Have more faith in open and competitive markets. Capitalism spurs economic growth; government protection for favored industries slows it down.

Instead of imposing new import restrictions, the Trump administration should strive to expand economic freedom for all Americans.

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The Long History of America’s Protectionist Failures

America has a long history of destructive protectionist policies. Are we doomed to repeat our past failures?

The recent rise in American economic nationalism has accompanied the view that past restrictions on foreign competition were successful in achieving stated policy objectives: decreased imports, increased jobs, industrial revival, open foreign markets, and economic prosperity more broadly.

But, contrary to the fashionable rhetoric, American protectionism has repeatedly failed as an economic strategy

Politicians and pundits use such assertions to justify new nationalist economic proposals, but they ignore a vast repository of academic analyses and contemporaneous reporting that show that American trade protectionism—even in the periods most often cited as “successes”—not only has imposed immense economic costs on American consumers and the broader economy, but also has failed to achieve its primary policy aims and fostered political dysfunction along the way.

A renewed focus on international trade’s disruptions to the U.S. economy, while worthwhile, has spawned troubling suggestions that the U.S. government should be more willing to experiment again with protectionism to help American workers and the economy. 

History is replete with examples of the failure of American protectionism; unless our policymakers quickly relearn this history, we may be doomed to repeat it.

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Happy Earth Day!

Cato’s energy and environment research promotes policies that would help protect the environment without sacrificing economic liberty, goals that are mutually supporting, not mutually exclusive.

Some Good Earth Day Reads…

Centrally Planned Energy: Bad for the Economy, Bad for the Environment

“On Earth Day, the United States will sign the Paris Climate agreement. In terms of the actual climate policy already implemented by the Obama administration, however, the events of the previous week were much more important.“

Save the Polar Bears? They’re Fine, Actually

"This Earth Day, it’s time to give the polar bear the respect it deserves. Nothing humans can do to the climate is going to wipe it out. That’s because we can’t change the Arctic as much as Nature has during the bear’s existence.”

We Need a New Earth Day

“We need a new Earth Day. It should be dedicated to righting the past deceptions and correcting the ongoing errors in environmental regulation.”

We Can’t Save the Environment without Freedom

“Air, water, wildlife, forests, and other things we call ‘the environment’ are precious and deserve our care. But freedom is also precious. The most important lesson of my four decades as an environmentalist is that you can’t have one without the other.”

A Historic Perspective on the Greenland Ice Sheet and its Contribution to Global Sea Level

“One of the most feared of all model-based projections of CO2-induced global warming is that temperatures will rise enough to cause a disastrous melting/destabilization of the Greenland Ice Sheet (GrIS), which would raise global sea level by several meters. But how likely is this scenario to occur? And is there any way to prove such melting is caused by human activities?”

The Cato Institute would like to wish you a happy and safe holiday season. Amidst your celebrating, please take a moment to remember the traditional American principles of limited government, individual liberty, free markets and peace.

This time of year provides a great opportunity to step back and consider how America is different from much of world history — and why immigrants still flock here.

Here are a few things to be thankful for this year….