The Takeaway

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The Takeaway offers its readers concrete ideas to take away and integrate into their thinking about a policy problem or current event. It features concise, non-technical analysis, thoughtful policy discussion, and practical recommendations on the key issues facing decision makers.

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The Oil Debacle in the Gulf of Mexico: An Alternative to the Coming Flood of Offshore Regulations
(Mosbacher Institute for Trade, Economics & Public Policy, 2010-05) Griffin, James M.
In the wake of the recent oil disaster in the Gulf, Congress appears poised to impose new bans on offshore drilling along with a strict new regulatory regime. While these measures may meet a widely felt need for swift retribution, there is an alternative policy response that can both correctly assign liability and create stronger incentives for uncompromised safety among offshore operators. This article encourages policymakers to keep perspective on probability and cost of offshore drilling accidents and to avoid the temptation to over-regulate, but instead to have offshore operators bear full liability for accidents by removing the current $75 million liability cap and to require offshore operators to provide insurance guaranteeing full liability coverage.
The Time for a Carbon Tax is Now
(The Mosbacher Institute for Trade, Economics & Public Policy, 2010-09) Griffin, James M.; Gawande, Kishore; Bush School of Government and Public Service
The U.S. needs to get its finances under control without resorting to the usual fixes of raising taxes and/or cutting spending, which would stymie recovery. The case for a carbon tax is a compelling one, given our current macroeconomic quandary and our apparent inability to deal with climate change. Each of these factors alone can make the case persuasively. When we take them together, the tax becomes even more convincing as a solution to some seemingly insurmountable problems. A carbon tax has big long-term revenue potential and only small, short-term drawbacks. A carbon tax avoids the pricing pitfalls of cap-and-trade and moves towards gradually replacing our energy infrastructure over time. Paradoxically, a carbon tax would be a boon for natural gas.
Stop Playing Favorites with the Tax Code
(The Mosbacher Institute for Trade, Economics & Public Policy, 2011-01) Taylor, Lori L.; Bush School of Government and Public Service
The Great Recession has punched a gaping hole in state government budgets. California has a projected budget deficit of $21.3 billion for the 2012 fiscal year. Illinois has a projected shortfall of $17 billion; New Jersey’s is $10.5 billion. Texas may have a $10 billion dollar hole to fill in each year of the upcoming biennium. Fortunately, there are solutions that could not only narrow the state’s budget gap, but also reduce the distortions imposed by its current system of taxation. Tax breaks for some firms and industries necessarily mean higher tax rates for others. Keeping rules as consistent as possible appeals to our sense of equity and promotes economic efficiency. Sales taxes on business-to-business transactions are a particularly harmful form of playing favorites with the tax code by encouraging vertical integration and discouraging reliance upon outside small businesses. Eliminating sales tax exemptions and exclusions would go a long way toward solving budget problems. Via the Lone Star card system, Texas can help poor households at much lower cost. An inconsistent tax code hurts all consumers and firms, especially small businesses.
Deficit Reduction: $38 Billion Won’t Cut It
(The Mosbacher Institute for Trade, Economics & Public Policy, 2011-04) Griffin, James M.; Taylor, Lori L.; Bush School of Government and Public Service
Washington is awash in red ink, and no one seems willing to make the hard choices needed to set our fiscal house aright. Congress’ recent boast of cutting spending by $38 billion makes the problem seem just about solved. On the left, talk of letting the Bush tax cuts expire for those with annual incomes over $250,000 gives the false impression that only very rich taxpayers need sacrifice. And even that timid approach couldn’t get past a lame-duck Congress. On the right, many newly elected Tea Partiers claim that we can simultaneously cut expenditures and taxes. The deficit problem is huge and fixing it will affect us all. Cuts in Medicare, Medicaid, and Social Security must be part of any solution. Even with big spending cuts, tax increases are inevitable. Only a return to compromise and sacrifice can secure our fiscal future.
U.S. Ethanol Policy: The Unintended Consequences
(The Mosbacher Institute for Trade, Economics & Public Policy, 2012-02) Griffin, James M.; Soto, Maricio Cifuentes; Bush School for Government and Public Service
The Energy Independence and Security Act of 2007 (EISA) mandated a steep rise in domestic ethanol production. The goals were to ease dependency on imported petroleum and to cut greenhouse gas emissions. A new blend of ethanol and conventional gasoline was to cost motorists less. EISA mandated ethanol production to grow from 4.9 billion gallons in 2006, to 36 billion by 2022. Today, at 14 billion gallons, we’re not even halfway there. EISA envisioned that cellulosic ethanol would provide the future growth, but reasonable production costs remain elusive. The unintended consequences of the policy, especially those influencing world food prices, are negative and far outweigh the positives. Corn-based ethanol has had only small price, energy security, and environmental benefits; yet, the unintended consequences on food prices have been large and negative. Rich consumers can substitute away from higher-priced foods, but the world’s poor have no such options. Repealing EISA would bring food prices down, while keeping market incentives for ethanol use intact.
Warfare is a “Train Wreck” for Global Supply Chains: What can governments do to mitigate its ill effects?
(Mosbacher Institute for Trade, Economics & Public Policy, 2012-09) Jola-Sanchez, Andres; Bush School of Government and Public Service
The Elitism of Armed Rebellion
(Mosbacher Institute for Trade, Economics & Public Policy, 2012-09) Huang, Reyko; Bush School of Government and Public Service
Local Government Control: The Case of Municipal Incorporation in The Woodlands Township, Texas
(Mosbacher Institute for Trade, Economics & Public Policy, 2012-10) Greer, Robert; Bowman, Ann; Nakamara, Brian; Brubaker, Crayton; Bush School of Government and Public Service
Ethanol Waivers: Needed or Irrelevant?
(The Mosbacher Institute for Trade, Economics & Public Policy, 2012-10) Griffin, James M.; Dahl, Rachel; Bush School of Government and Public Service
Because of the magnitude of the existing corn harvest shortfall coupled with the large ethanol mandates, policymakers face extreme uncertainties looking into the future with potentially large economic ramifications. Precisely, because neither the economic modelers nor the decision makers can foretell all of the factors affecting corn harvests and ethanol use in 2013, a waiver is a wise course of action. To be sure, a waiver may have no effect and turn out to be irrelevant. Even so, we argue that it has no downside. But if an anemic harvest rebound occurs in 2013, a waiver could avoid substantial economic dislocations in 2013 and beyond. Regulators should opt for flexibility.
The Latest Unanticipated Consequence in the Ethanol Fiasco
(Mosbacher Institute for Trade, Economics & Public Policy, 2013-12) Griffin, James M.; Bush School of Government and Public Service
Until recently, the 2007 ethanol mandates have been a story of very small environmental and security benefits and large, unexpected increases in food prices as corn was diverted from food to fuel uses. Now we have another unforeseen consequence —falling gasoline consumption has made it impossible to meet the ethanol mandates and stay within the blend wall of a 10% limit on ethanol content in gasoline. To meet ever-increasing ethanol mandates, the EPA initially approved the use of 15% ethanol (E15) only to receive a vigorous push-back from auto manufacturers. Using E15 would void their new car warranties. Then on November 15, EPA proposed a temporary relaxation in the mandated ethanol targets enabling the continued use of E10. The EPA has found itself between the proverbial rock and a hard place. How did the EPA find itself in this predicament and what are the solutions?
A Time for Political Courage: The Federal Debt Crisis in 2014
(Mosbacher Institute for Trade, Economics & Public Policy, 2014-01) Taylor, Lori L.; Bush School of Government and Public Service
Like many Americans, Uncle Sam has a bad habit of spending more than he earns. The federal government’s total expenditures exceeded its total revenues in 36 of the last 40 years. In 2012, federal government revenues were 16% of gross domestic product (GDP) and expenditures were 23%, leaving a deficit equal to 7% of GDP or $1.1billion. The national debt is a large and growing problem. Recent budget accords have not solved the debt crisis. Low interest rates worldwide have held the interest burden of the US debt artificially low. Those days are over. In 2012, interest payments represented 6% of federal government outlays; in 2042 they are projected to be more than 30%. Congress must stop the vicious circle of debt and debt service.
Pre-K for All? Simple Keys to Maximizing Return on Investment and Avoiding Unintended Consequences
(Mosbacher Institute for Trade, Economics & Public Policy, 2014-05) Taylor, Lori L.; Bush School of Government and Public Service
The evidence suggests that the long-term benefits of a high-quality Pre-K program are substantial, regardless of whether the program is provided by a public school, a Head Start program, or a child care center. The near-term benefits, however, can be very sensitive to setting. If public pre-K programs crowd out the private child care industry, many of the near-term gains to the parents of four-year-olds could be offset by the losses to the parents of younger children. Therefore, maximizing the return on Texas’ Pre-K program investments means following two simple, but essential, rules: 1) Don’t settle for mediocrity. Quality costs more, but only high-quality pre-K programs have a demonstrated, long-term impact on student abilities, achievements, and earnings; and 2) Don’t cause undue harm to the child care industry. Wherever Head Start programs and licensed child care centers can meet quality standards, they should be part of the state’s Pre-K investment portfolio.
Avoiding the Mistakes of the Past: Rejecting Protectionism and Embracing the Global Economy
(Mosbacher Institute for Trade, Economics & Public Policy, 2014-08) Gawande, Kishore; LeClere, David; Bush School of Government and Public Service
The “Great Recession” of 2008 was the greatest global financial crisis since the Great Depression. It led to the bankrupting of businesses, caused credit markets to dry up, imploded the housing market, and led to a near collapse of global trade. The plunge in trade that occurred between the second quarter of 2008 and the third quarter of 2009 was the steepest fall of world trade in recorded history. By rejecting protectionism, and by embracing the global economy through initiatives like NAFTA and the TPP, the U.S. can foster increased job growth and economic prosperity for its own citizens, and for individuals around the globe.
Texas Cities in the Era of Government Transparency
(Mosbacher Institute for Trade, Economics & Public Policy, 2014-09) Bearfield, Domonic; Bowman, Ann O'M; Bush School of Government and Public Service
We are in the Era of Government Transparency. Recently, politicians from President Barack Obama to Texas Governor Rick Perry have touted a commitment to openness and transparency in their respective administrations. Citizens have also embraced the idea. No longer content with viewing the government as a mysterious black box where taxes go in and services come out, taxpayers today expect, and in some cases demand, to know how decisions are made. As discussions ensue about growing distrust between citizens and government, increased transparency can offer a way to bridge this divide. Clear, organized and useful data posted online is a good indicator of a city’s transparency. It is best for city governments to engage their citizens in a dialogue about what information the public wants and what format will encourage them to best use it.
Free Trade in Oil and Natural Gas, The Case for Lifting the Ban on U.S. Energy Exports
(Mosbacher Institute for Trade, Economics & Public Policy, 2014-11) Griffin, James M.; Gause, F. Gregory; Bush School of Government and Public Service
Not only should the US lift its ban on exporting oil and natural gas in light of today’s economic and political climate, but it was wrong to ever ban such exports in the first place. The US should cease to view its energy resources as a purely domestic issue but rather a global one that impacts not only global prices in energy but also international affairs. Energy security is a world-wide problem, not a US, China, or EU problem, and we are all dependent on the world oil market. As the US looks to extricate itself from energy dependence on the Middle East, increase its energy security through trade and innovation, and maintain a robust economy, the benefits of lifting the ban on US energy exports outweigh the costs say the authors. The writers propose that allowing US exports could add 8.7 million barrels per day of crude oil to the world market while also reducing possible shocks to the world economy. Griffin and Gause also believe that lifting a ban on US natural gas exports could reassure Western allies and send a message to Russia to stop holding Europeans hostage to its high gas prices in times of political strife.
Water Use for Hydraulic Fracturing: A Texas Sized Problem?
(Mosbacher Institute for Trade, Economics & Public Policy, 2014-12) LeClere, David; Bush School of Government and Public Service
The state of Texas could face a 2.7 trillion gallon shortfall of water by 2060. Hydraulic fracturing (HF) requires large amounts of water for each well. Tax incentives should be offered to companies that substitute brackish groundwater for fresh. However, HF technology is not the only or even the most significant contributor to the longstanding problem of water stress in Texas. Accurate and transparent data reporting on all water consumption (irrigation, municipal use, mining, and others) and policy changes to address inefficient water use practices in all sectors are needed. Without broad water regulation efforts the state will continue to suffer from overuse of its most precious resource—water.
The War on Poverty Needs a New Map
(Mosbacher Institute for Trade, Economics & Public Policy, 2014-12) Taylor, Lori L.; Dar, Jawad; Bush School of Government and Public Service
Since the start of Lyndon B. Johnson’s War on Poverty, the federal government has spent vast sums of money trying to lower U.S. poverty rates. Yet, despite the repeated allocation of massive financial resources, overall poverty rates have barely budged. There are two particularly pervasive possible explanations for that lack of success. First, official measures of poverty are geographically biased and financially incomplete. Second, federal policy relies heavily on those biased and incomplete measures to allocate aid. Despite the difficulties, adjusting the federal poverty thresholds used to determine eligibility for anti-poverty programs is the right thing to do. If the U.S. is going to win the War on Poverty, it needs a new map.
Reaching More for Less: Modernizing US International Food Aid Programs
(Mosbacher Institute for Trade, Economics & Public Policy, 2015-01) Natsios, Andrew; Bush School of Government and Public Service
The Food for Peace program has saved millions of lives around the world for more than a half century and has been perhaps the most powerful and visible symbol of American generosity to those in need. The question is not whether the program has been successful in saving lives, but whether it can be improved to make it more effective, more efficient, and faster, so that more lives can be saved? The author, Director of the Scowcroft Institute of International Affairs and a former USAID administrator, makes the case that the program should have more flexibility to procure emergency food relief locally and regionally.
Fairer Trade, Removing Gender Bias in US Import Taxes
(Mosbacher Institute for Trade, Economics & Public Policy, 2015-03) Taylor, Lori L.; Dar, Jawad; Bush School of Government and Public Service
Tariff rates on most articles of imported apparel and footwear are classified by the gender of the intended user, and for some items the rates differ. In this issue of The Takeaway the authors describe the discriminatory impact that gender-based tariffs have on consumers – primarily women. Even though for some gender-classified goods the tariff is higher on menswear, for some lower, and for some there is no difference, the authors have calculated that overall the tariffs paid on imported clothing are higher for women than for men. The authors argue that tariffs, in general, hurt competition and lead to higher prices; that gender-based tariffs have a discriminatory impact on consumers; and that tariffs on apparel and footwear harm American consumers. They offer a few solutions, including eliminating the tariffs altogether, and strongly maintain that differential taxation of apparel based on gender cannot be defended and should be abolished.
Bumpy Road Ahead: Bracing for Insolvency in the Highway Trust Fund
(Mosbacher Institute for Trade, Economics & Public Policy, 2015-03) Dar, Jawad; Taylor, Lori L.; Bush School of Government and Public Service
Funding for the federal Highway Trust Fund (HTF) is not keeping up with the deteriorating condition of America’s roads and bridges. HTF outlays have exceeded revenues in almost every year since 2001, and the fund faces an estimated shortfall of $167 billion over the next ten years. In this article the authors argue that instead of a series of one-time fixes, a more permanent solution is needed to provide the Highway Trust Fund (HTF) with sufficient revenues to keep up with increasing needs. They recommend a congestion-adjusted vehicle mileage tax (VMT) as an economically efficient means of tackling infrastructure funding issues in a way that reflects the costs of road use. However, given the serious privacy issues associated with tracking road use, they propose it may be more politically viable to target only commercial vehicles who have lesser expectations for privacy and a higher impact on road wear with a VMT, while private vehicles pay only a higher gas tax. The authors acknowledge that no one likes higher taxes, but if road repairs are worth having, they are worth paying for.

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