Signs of an economic slowdown, or recession, have prompted the Federal Reserve to lower interest rates. The Fed reduces interest rates by increasing the supply of money available to borrow. This additional money is distributed to banks and loaned to consumers. Assuming a constant demand for money, an increase in the quantity of money will cause interest rates to drop. But how does the Fed increase the money supply?
Over the last 25 years, the wage gap between Mexico and the United States has grown progressively wider, making U.S. jobs increasingly attractive. This is a major reason for the increasing influx of immigrants from Mexico to the United States.
Rising oil and gasoline prices have many causes that are beyond the control of the U.S. government. However, government policies have contributed to higher prices by reducing domestic refining capacity, which has limited the supply of gasoline. No new oil refineries have been built in the United States for almost 30 years, and many refineries have closed.
A new technology called "smart" metering and innovative residential pricing plans have the potential to revolutionize the electric power industry and reduce monthly electricity bills for many consumers. Utilities in the states that have deregulated electric power have the strongest market incentives to implement these new features, and customers in some states are beginning to reap the benefits.
Can the economy grow faster without causing inflation to accelerate? Some argue that the downside of a rapidly rising gross domestic product (GDP) is more inflation, and that you can't have more of the former without more of the latter. But both logic and history suggest otherwise.
The problem for the Democrats is that the American people don't believe in class warfare. They don't hate the rich because they are rich. On the contrary, they want nothing more than to emulate them. And many Americans believe that they have a good shot at joining the ranks of the rich. The data confirm that such hopes and expectations are not unrealistic.
Over the last decade, the Social Security Administration has evaluated numerous reform proposals. Recently, when evaluating reforms that involve investments in the stock market, the Social Security Administration assumed the historical average annual real stock return of 6.5 percent will persist into the future. The Social Security Administration also projects the future status of the program. These projections are summarized in the annual Trustees Reports and form the basis for scoring the reform proposals. The most recent Trustees Report assumes the real annual gross domestic product (GDP) growth rate will be about 1.9 percent over the 75 year horizon. This assumption is lower than the actual experience of the past 75 years, a period in which the economy grew at a real rate of 3.4 percent a year, on average.
The United States is about to experience the greatest demographic change in its history. Most of this change will occur over the next 30 years, as 77 million baby boomers cease to work and pay payroll taxes and instead start to retire and collect benefits.
Measuring Labour Markets in Canada and the United States: 2004 Edition is the second instalment in ongoing research to assess the performance of labour markets and explain why results differ among jurisdictions.
Economic freedom raises incomes and improves living standards. It requires strong institutions and encourages their further development. Over time, poor developing countries that have adopted policies consistent with economic freedom have pulled ahead of their former peers.
The statistical results of this year's study persuasively confirm those published last year: economic freedom is a powerful driver of growth and prosperity and those provinces and states that have low levels of economic freedom continue to leave their citizens poorer than they need or should be.
Recent federal budget projections show much larger deficits over the next five years than were expected just a short while ago. However, these short-term projections convey almost no information about the true magnitude of our nation's financial problems. We need to adopt a comprehensive fiscal accounting system that communicates the size of unfunded future federal spending commitments under current policies.
The rising demand for more educated, experienced and technologically able workers has produced a more dispersed distribution of income. The increasing income gap between the highest and lowest paid workers is a concern if some groups of workers are fated to remain at the bottom of the economic ladder throughout their working lives.
The idea of sustainable development, the focus of the recent United Nations Earth Summit in Johannesburg, South Africa, is both commonsensical and contentious.
In March 2001, President Bush announced that the United States would not be a party to the Kyoto Protocol on Global Climate Change.
Reports about the enormous federal debt abound, as do dire predictions about the impact of that debt on future generations. But just how big is the debt?
401(k) retirement savings plans have been popular over the past three decades. However, the Enron debacle and the recent stock market slump are spurring Congress and the Bush administration to propose changes in the law. Wise reform could lead to higher returns and safer portfolios for the vast majority of workers. On the other hand, unwise reforms could induce employers to drop these plans altogether.
Traditional defined benefit pension plans, which are managed by employers and which promise workers a specific monthly payment on retirement, are disappearing. Instead, more than 42 million workers now participate in defined contribution retirement plans, primarily 401(k) plans, which specify the annual contributions to an employee's pension fund.
The regulatory climate for very small, neighborhood-based businesses, or microenterprises, in large American cities can significantly influence urban economic dynamism. Case studies of Boston, Dallas, Atlanta, and Los Angeles help illuminate the complexity and detail of regulatory barriers to entrepreneurship and identify programs and other efforts to encourage neighborhood-based development.
In its January forecast, the Congressional Budget Office (CBO) projected budget surpluses totaling $5.6 trillion between 2002 and 2011, up from $4.6 trillion a year earlier. This forecast assumes (1) no tax cut, (2) no spending increase and (3) no Social Security privatization. The forecast therefore assumes that the surpluses will be used to pay down the government debt available for repurchase and then buy assets that earn a return similar to that earned on Treasury issues. This means that beginning in 2006, the government would do something it has never done: accumulate and hold significant levels of private financial assets.
A surplus is political manna, enabling politicians to fund their favorite programs. The fundamental choice is between using the Social Security surpluses to reduce the federal debt and using them to prepay future Social Security benefits. All other policy choices derive from this choice. Thus, the bulk of our analysis deals with the choice between retiring debt and prepaying future benefits.
On March 21, the Federal Reserve raised both the federal funds rate (the interest rate banks charge each other on loans) and the discount rate (the interest rate the Fed charges banks) by another 25 basis points (1/4th of 1 percent). In the wake of this latest increase, growing numbers of economists and politicians are starting to question the Fed's action. They are asking why farmers, small businesses and home buyers must be punished when the Fed's principal target appears to be the stock market. They are urging the Fed to raise margin requirements (the maximum percent of an investment that can be made with funds investors borrow from their brokers) instead of raising interest rates.
For most of the 20th century, electric power has been produced and sold by local monopoly utilities. Consumers were prohibited from buying power from rival producers and other sellers were prohibited from entering utilities' protected markets. Deregulation of other industries, such as long-distance telephone service and natural gas, has reduced prices and increased the variety and quality of services available. This has led to increasing pressure to deregulate the electric power industry.
Things used to be made to order and made to fit. But they were labor-intensive and expensive. Mass production came along and made things more affordable, but at a cost – the cost of sameness, the cost of one-size-fits-all. Technology is beginning to let us have it both ways. And just as mass production was the hallmark of yesterday's Industrial Age, mass customization promises to dominate the modern stage of America's economic evolution-the Information Age.
Before a bank can merge with another bank – or even open a new branch – it must get permission from federal regulators. And in giving that permission, regulators are obliged by the Community Reinvestment Act of 1977 (CRA), to consider whether the lender has served the entire community, including low- and moderate-income neighborhoods.