Barry is a Senior Economist with the National Center for Policy Analysis, one of the most influential think tanks in America today.
The National Center for Policy Analysis (NCPA) is a nonprofit, nonpartisan public policy research organization, established in 1983. The NCPA's goal is to develop and promote private alternatives to government regulation and control, solving problems by relying on the strength of the competitive, entrepreneurial private sector. Topics include reforms in health care, taxes, Social Security, welfare, criminal justice, education and environmental regulation.
NCPA Motto - Making Ideas Change the World - reflects the belief that ideas have enormous power to change the course of human events. The NCPA seeks to unleash the power of ideas for positive change by identifying, encouraging, and aggressively marketing the best scholarly research.
- Infinite Social Security Solvency Projections
- 14 Oct 2015 07:00:58 CDT -
The 2015 Technical Panel on Assumptions and Methods reviewed the assumptions specified by the Board of Trustees and to evaluate the methods used by the Office of the Chief Actuary to project the future financial status of the Old-Age and Survivors Insurance and Disability Insurance Trust Funds.
Social Security's actuaries and Trustees have an enormously difficult task — projecting demographic and economic developments over the next 75 years and conveying to Congress and the public, in a comprehensible fashion, the health of the program and the associated risks.
Since Social Security operates basically on a pay-as-you-go basis, the number of people paying into the system compared with the number of people receiving benefits is a key component of program cost.
- The large increase in fertility rates in the post-war period followed by the sharp reduction and flattening out of fertility rates in subsequent decades to the present explain in large measure the changing fortunes of the OASDI trust funds being experienced now.
- Immigration is a volatile, unpredictable, poorly-understood, and increasingly politically-driven process, and that the long-range projections of immigration are exceptionally challenging.
- The rise in Social Security Disability Insurance claims over the past three decades stems from: rising incidence; population aging; and female catch-up in insurance coverage and incidence.
It is difficult to frame infinite horizon numbers, whether very large positive or negative, in a manner that makes them meaningful or useful to policymakers or the public. This would especially be true if the growth rate in annual deficits exceeded the discount rate.
Given the enormous uncertainty of long time horizons, Social Security solvency projections based on calculations to infinity should not be continued. However, should be done if and only if the government prioritizes a deeper discussion of the long-term sustainability of the Social Security system's finances.
Source: "2015 Technical Panel on Assumption Methods," Social Security Advisory Board, September 2015.
For more on Tax and Spending Issues:
- Do Increases in Subsidized Housing Reduce the Incidence of Homelessness?
- 14 Oct 2015 07:00:57 CDT -
A research study examines the impact of subsidized housing on homelessness using the Low-Income Housing Tax Credit (LIHTC), the largest place-based housing program in the United States.
LIHTC is a tax incentive that benefits affordable rental housing developments targeted at low-income households. The credits are distributed in each state to private developers through a competitive process. To qualify for the credit, a project must meet certain criteria over tenant incomes for a subset of units.
The study found that:
- LIHTC program increases the local stock of low-income rental units but there is no evidence that these increases reduce local area homelessness in poor neighborhoods.
- Increases in low-income housing may attract homeless individuals to areas with greater LIHTC activity because the homeless population is very mobile.
- Once mobility across neighborhoods is taken into account via county-level estimation, evidence suggests that LIHTC development does reduce area homelessness.
- Local housing demand of the homeless may be fairly price sensitive, likely due in part to high mobility across neighborhoods.
Therefore, the effects on homelessness and possibly other outcomes of local expansions of LIHTC may cross local boundaries. Additionally, the method of allocating low-income units is a particularly important channel for affecting homelessness.
The findings are consistent with proposed policies to encourage income mixing and to target LIHTC housing to those at risk of becoming homeless or those who already are homeless. Further examination of the LIHTC program, including more extensive effects on the already-housed, would be very useful.
Source: Osborne Jackson and Laura Kawano, "Do Increases in Subsidized Housing Reduce the Incidence of Homelessness?" Federal Reserve Bank of Boston, May 2015.
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- Actions Needed to Make USPS Delivery Performance Information More Complete, Useful, and Transparent
- 14 Oct 2015 07:00:56 CDT -
Lately the United States Postal Service (USPS) has had to balance cost-cutting actions to address its poor financial situation with efforts to provide prompt, affordable, and reliable mail service. The Government Accountability Office (GAO) was asked to review how USPS measures its delivery performance.
The Postal Regulatory Commission (PRC) had previously carried out assessments but they are not as useful as they could be for effective oversight because they do not include sufficient analysis to hold USPS accountable for meeting its statutory mission to provide service in all areas of the nation, including rural areas.
The recommendations the GAO made are the following:
- To improve the completeness of USPS delivery performance, the PRC should hold a public proceeding to address how USPS can improve the completeness of its delivery performance information.
- To improve the usefulness and transparency of reporting, the Postmaster General should provide additional information such as trend data for on-time delivery performance for all 67 postal districts.
- To improve the usefulness and transparency of USPS's and PRC's reporting of delivery performance information, the latter should provide readily available data and additional analysis of the information to better understand trends and variations in mail delivery performance.
The GAO recommended that USPS and PRC take steps to improve the completeness, analysis, and transparency of delivery performance information. The GAO had previously stated that complete, useful, and transparent delivery performance information is essential for USPS to achieve its desired balance.
Source: United States Government Accountability Office, "Actions Needed to Make Delivery Performance Information More Complete," Government Accountability Office, September 30, 2015.
For more on Government Issues:
- Macroprudential Policy: Case Study from a Tabletop Exercise
- 14 Oct 2015 07:00:55 CDT -
A new study presents a macroprudential tabletop exercise that was aimed at confronting Federal Reserve Bank Presidents with a hypothetical, macro-financial scenario that would lend itself to macroprudential considerations.
The primary objective of this exercise was to reduce the occurrence and severity of major financial crises and the possible adverse effects on employment and price stability. This objective focuses on economy-wide financial stability and differs from the Fed's monetary policy objectives of full employment and stable prices.
The scenario featured a compression of U.S. term and risk premia through the end of 2016, which keeps financial conditions loose and fuels valuation pressures in U.S. financial markets.
Financial system disruptions that macroprudential objectives aim to avoid include:
- Fire sales in financial markets and destabilizing runs on banking and quasi-banking institutions.
- Shortages of money-like assets and disruptions in credit availability to the non-financial business sector.
- Unwarranted spikes in risk premia and disorderly dissolution of systemically important financial institutions.
- Excessive spillovers in international funding and currency markets, and disruptions of the payments system.
Committee members agreed that the most immediate risks to financial stability present in this hypothetical scenario include financial conditions being too loose relative to the macro conditions, reliance on short-term wholesale funding provided by non-bank financial institutions, and elevated commercial real estate prices which in a downturn could have an adverse effect at the macro level.
Committee members also expressed interest in using stress test scenario design for macroprudential objectives and suggested the use of monetary policy in addition to prudential tools.
Source: Tobias Adrian, et al., "Macroprudential Policy: Case Study from a Tabletop Exercise" Federal Reserve Bank of New York, September 2015.
For more on Financial Crisis:
- Pro-Growth Tools for the Frozen Fed
- 14 Oct 2015 07:00:54 CDT -
After the lackluster September jobs report the Federal Reserve is less likely to end its near-zero interest rate policy. However, it is vital that the Fed consider other growth-oriented options such as tapering its huge bond reinvestment program, shifting some of its borrowing away from banks to encourage lending or shortening the maturity of its bond portfolio to relieve illiquidity.
The Fed says that it is still considering a rate increase in 2015, if the economy and inflation accelerate but recent data show the opposite, moreover, it needs offset the drag from years of poor U.S. tax and spending policies.
The Fed's theory that low interest rates will cause solid growth has been disproved repeatedly:
- The current unemployment rate at 5.1% excludes millions who have given up looking for a job but includes millions of part-time workers.
- The underemployment rate is 10%, twice the official unemployment rate and labor participation is just 59.2%, four percent below normal.
- With meager credit growth and sluggish business formation, the U.S. economy is suffering from stalled productivity and declining profits.
- The interbank market, which used to move funds from banks with extra deposits to those with demand for loans, remains frozen leaving local businesses without access to credit.
Furthermore, this policy failed in 2003-06, when the Fed held rates at 1%, which channeled credit into the housing glut. More balanced growth would have been attained if rates had been higher.
The current policy of near-zero rates combined with direct federal regulation of the quantity of credit doesn't work. It distorts credit markets, misallocates capital, and slows economic growth.
Source: David Malpass, "Pro-Growth Tools for the Frozen Fed," Wall Street Journal, October 6, 2015.
For more on Economic Issues:
- Repeal Ban on Oil Exports
- 13 Oct 2015 07:00:53 CDT -
After watching the price of oil and the size of their profits plunge, a dozen top executives from some of the nation's largest oil exploration companies flew to Washington late last winter on an urgent mission: push Congress and the White House to allow unlimited exports of American crude oil.
Now, their long-shot lobbying effort to repeal the 40-year-old export ban has gathered considerable momentum. Approval by the House is expected in the coming weeks, and two Senate committees have already endorsed the idea.
To industry executives, the swift progress validates the inherent strength of their argument that eliminating the export ban will create jobs and drive down gasoline prices by encouraging more domestic crude oil production.
The export ban has been a cornerstone of American energy policy since 1975, when Congress directed President Gerald R. Ford to largely prohibit the export of oil as "consistent with the national interest," although a few broad exemptions, like exports to Canada, were allowed.
But the calculus has changed since domestic oil production nearly doubled after 2008 because of the sharp increase in drilling and hydraulic fracturing in shale fields across the United States, slashing the country's dependence on imports from OPEC and producing a glut of several types of crude oil.
Lined up against the oil companies are the United Steelworkers union, which represents refinery workers, and environmental groups. Also against lifting the ban are a handful of refiners who benefit from the glut in domestic supplies, which lowers the price of their main raw material for producing gasoline, diesel and jet fuel.
Even if the legislation does not pass Congress, the oil industry will have increased leverage on the Obama administration to further loosen the ban -- as the Commerce Department has the power administratively to make more adjustments.
Source: Eric Lipton, et al., "Oil Industry Gaining in Push for Repeal of U.S. Ban on Petroleum Exports," New York Times, October 5, 2015.
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