CATO TODAY - December 10, 2009 THE CITIZENS' GUIDE TO TRANSPORTATION REAUTHORIZATION Sometime in 2010 or 2011, Congress expects to decide how to spend the $250 billion or more of federal gas taxes and other highway user fees that will be collected over the next six years. A major point of contention in this law is how much of our transportation system should be centrally planned and how much should be built and operated in response to the needs of actual transportation users. In a new study, Cato scholar Randal O'Toole examines two conflicting views of transportation, and offers recommendations to Congress for the next surface transportation reauthorization. - The Citizens' Guide to Transportation Reauthorization, by Randal O'Toole (www.cato.org/pub_display.php?pub_id=11039) CATO HANDBOOK: U.S. POLICY TOWARD LATIN AMERICA In limited but important ways, Washington can positively influence economic policy in Latin America. At a time when some countries in the region have seen the rise of populist governments, political turmoil, and a general backlash against free-market reforms that were partially implemented in the 1990s, the United States should exercise its influence by opening its market to the region’s goods and by encouraging market reforms. In the U.S. Policy Toward Latin America chapter of the Cato Handbook for Policymakers, Ian Vasquez explains why Congress should: - Unilaterally open the U.S. market to goods from Latin America, - Support the Colombia and Panama Free Trade Agreements, - End the hemispheric war on drugs, and - Facilitate dollarization for any country that wishes to adopt the dollar as its national currency. (www.cato.org/pubs/handbook/hb111/hb111-61.pdf) COMMENTARY NEW! New Underground Economy, by Richard W. Rahn. The underground or black economy is rapidly rising, and the fault is mainly due to government policies. Tax revenues are falling far more rapidly at the federal, state and local level than would be expected by the small drop in real gross domestic product (GDP) and changes in tax law that have occurred since the recession began. The currency in circulation outside the U.S. Treasury, Federal Reserve banks and the vaults of depository institutions - that is, the currency held by individuals and businesses - has grown by 13.3 percent in the last two years, while real nominal (not inflation-adjusted) GDP has not grown at all, and real (inflation-adjusted) GDP incomes have fallen by more than 3 percent. With the growth of electronic means of payment and financial service providers, it would be expected that the currency component of GDP would fall, not rise. The underground economy refers to both legal activities, such as often found in construction and services industries where taxes are not withheld and paid, and illegal activities, such as drug dealing and prostitution. It is no accident that those governments that allow their citizens a high degree of personal and financial liberty, including financial privacy, and spend taxpayer dollars wisely, honestly and competently, have much smaller underground sectors than corrupt and oppressive governments. Washington, take note. (www.cato.org/pub_display.php?pub_id=11038) NEW! Public Option's Rotten Replacements, by Michael D. Tanner. Searching for an acceptable alternative to the controversial public option, Senate Democrats on Tuesday night adopted three bad ideas instead. Having tried and discarded the robust public option, the opt-in and opt-out approaches, co-ops and the trigger, Senate Majority Leader Harry Reid proposed a program similar to the Federal Employees Health Benefit Program, which covers government workers, including Congress members. Reid's plan would also expand Medicare and Medicaid. The FEHBP offers a variety of private insurance plans under a program managed by the US Office of Personnel Management. Each year, OPM uses the federal procurement process to solicit bids from insurance firms to be one of the plans offered. Premiums can vary, but participating plans operate under stringent rules. It's easy to understand why Senate liberals would support this compromise : It expands government health-care programs and further squeezes private insurance. But why would self-professed moderates sign on to a proposal that raises costs, results in higher insurance premiums and provides a lower quality of care? (www.cato.org/pub_display.php?pub_id=11041) CATO BLOG HIGHLIGHTS - IS KEYNESIAN STIMULUS WORKING? NEW! On Cato's daily blog Cato@Liberty, Chris Edwards writes: In his Brookings Institution speech [Tuesday], President Obama called for more Keynesian-_style_ spending stimulus for the economy, including increased investment on government projects and expanded subsidy payments to the unemployed and state governments. The package might cost $150 billion or more. The president said that we’ve had to 'spend our way out of this recession.' We’ve certainly had massive spending, but it doesn’t seemed to have helped the economy, as the 10 percent unemployment rate attests to. It’s not just that the Obama 'stimulus' package from February has apparently failed. The total Keynesian stimulus is not measured by the spending in that bill only, but by the total size of federal government deficits. The deficit-fueled Keynesian approach to recovery is not working. The time is long overdue for the Democrats in Congress and advisors in the White House to reconsider their Keynesian beliefs and to start entertaining some market-oriented policies to get the economy moving again. To read more, check out Edwards' full post: (www.cato-at-liberty.org/2009/12/09/is-keynesian-stimulus-working/) RECENT PAPERS, TESTIMONY, & LEGAL BRIEFS NEW! The Citizens' Guide to Transportation Reauthorization, by Randal O'Toole (December 10, 2009) (www.cato.org/pub_display.php?pub_id=11039) Made on Earth: How Global Economic Integration Renders Trade Policy Obsolete, by Daniel J. Ikenson (December 2, 2009) (www.cato.org/pub_display.php?pub_id=11020) Nuclear Proliferation Update: Nuclear Weapons Spending Deserves Greater Scrutiny, by Christopher A. Preble (November 2009) (www.cato.org/pubs/npu/npu_november2009.pdf) 480.00 Acres of Land v. United States, legal brief on eminent domain by Ilya Shapiro (November 23, 2009) (