OM> Cato Online Update Vol. 2 No. 8 May 13, 1997

OM> http://www.cato.org

--------------------------- Welcome

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OM> -------------------------------------------- ANALYST

OM> OFFERS DETAILED SOCIAL SECURITY PRIVATIZATION PLAN =

OM> The Cato Institute has released a detailed plan for

OM> privatizing Social Security, without increasing taxes or

OM> cutting benefits.

OM> In "A Plan for Privatizing Social Security," Peter

OM> Ferrara, general counsel and chief economist at

OM> Americans for Tax Reform and a Cato associate policy

OM> analyst, offers a detailed reform plan that can be

OM> turned into legislation. Ferrara's proposal is based on

OM> freedom for current workers to choose either the private

OM> option or the current system, recognition bonds from the

OM> federal government for workers who opt out of Social

OM> Security and full promised benefits for current

OM> retirees.

OM> Ferrara notes that the biggest obstacle to privatizing

OM> Social Security has been the cost of the transition to a

OM> privatized system, but the projections of the fiscal

OM> impact of his plan show that the transition can be

OM> financed without new taxes and without cutting benefits

OM> for today's recipients.

OM> "These projections place the transition in a whole new

OM> perspective," Ferrara writes. "They show that the

OM> transition is financially feasible and manageable and

OM> that modest short-term sacrifices would lead to

OM> long-term surpluses that would ultimately reduce the

OM> federal budget deficit."

OM> Without endorsing any specific proposal, the Cato

OM> Project on Social Security Privatization presents

OM> Ferrara's plan as the first in a series of alternative

OM> scenarios for Social Security privatization.

OM> Social Security Paper no. 8

OM> (http://www.cato.org/pubs/ssps/ssp8es.html)

OM> -------------------------------------------- CONSUMER

OM> CHOICE IS BEST PLAN FOR UNIVERSAL SERVICE SUBSIDIES

OM> Competitive bidding can have anti-competitive effects,

OM> scholar says

OM> "By opening local telephone markets to competition,

OM> the Telecommunications Act of 1996 has unleashed market

OM> forces that will require a fundamental restructuring of

OM> the current system of subsidy payments designed to keep

OM> residential telephone rates affordable in high-cost,

OM> usually rural areas," writes Peter Pitsch, an adjunct

OM> fellow at the Hudson Institute and a former chief of

OM> staff to the Chairman of the Federal Communications

OM> Commission, in an analysis released by the Cato

OM> Institute.

OM> In "Reforming Universal Service: Competitive Bidding or

OM> Consumer Choice?," Pitsch argues that one proposal for

OM> administering subsidies- "consumer choice"- is

OM> preferable to a "competitive bidding" system in which

OM> companies bid against one another to serve a single

OM> market at the lowest price. He writes that competitive

OM> bidding is actually anti-competitive because it confers

OM> special advantages on one company in an area rather than

OM> allowing true competition.

OM> A consumer choice system, in which companies would be

OM> subsidized per customer and customers would be able to

OM> move from one company to another and carry their

OM> subsidies with them, is Pitsch's preferred option. He

OM> writes that a system of consumer choice would have

OM> numerous benefits, including competitive neutrality,

OM> pressure for low prices and high-quality services, and

OM> the likelihood of affordable rates that are reasonably

OM> comparable in urban and rural areas at minimum cost to

OM> other customers. Pitsch also notes that a consumer

OM> choice plan would be more easily administered and

OM> involves lower entry costs.

OM> In addition, Pitsch points out that, under a consumer

OM> choice plan, subsidies could be more easily phased down,

OM> noting that "the optimal means of reducing overall

OM> high-cost subsidy levels would be to adopt the consumer

OM> choice approach in conjunction with a phasedown and

OM> monitoring program."

OM> Briefing Paper no. 29

OM> (http://www.cato.org/pubs/briefs/bp-029es.html)

OM> -------------------------------------------- DESPITE

OM> POLITICIANS' RHETORIC, CORPORATE WELFARE SPENDING

OM> CONTINUES TO INCREASE Clinton and Congress defended

OM> corporate pork in 1996, analysts say

OM> In a newly released briefing paper, Cato Institute

OM> analysts Dean Stansel and Stephen Moore show that,

OM> despite White House and congressional promises to the

OM> contrary, in 1996 corporate welfare spending increased

OM> by almost $500 million.

OM> In "Federal Aid to Dependent Corporations: Clinton and

OM> Congress Fail to Eliminate Business Subsidies," Stansel

OM> and Moore highlight the top 30 corporate welfare

OM> programs=97defined as spending programs that provide

OM> unique benefits or advantages to specific companies or

OM> industries=97in th= e federal budget.

OM> "These subsidies tend to have a Robin-Hood-in-reverse

OM> impact: redistributing income from generally

OM> middle-income taxpayers to the relatively higher-income

OM> owners and shareholders in the companies," write Stansel

OM> and Moore.

OM> The authors note that eliminating all corporate welfare

OM> could cut the budget deficit in half.

OM> Briefing Paper no. 28

OM> (http://www.cato.org/pubs/briefs/bp-028es.html)

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