We at CFIF have consistently highlighted the peril of federal, state and local government efforts targeting…
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New Study Shows How Overregulating Short-Term Lenders Harms Consumers

We at CFIF have consistently highlighted the peril of federal, state and local government efforts targeting the short-term consumer lending sector.

Less than two years ago, we specifically sounded the alarm on a New Mexico law artificially restricting interest rates on short-term consumer loans.

Well, a new study entitled "A New Mexico Consumer Survey:  Understanding the Impact of the 2023 Rate Cap on Consumers" that surveyed actual borrowers confirms our earlier warnings:

Key findings include:

•Short-term,small-dollar loans help borrowers manage their financial situations, irrespective of the borrower’s income.

•The rate cap has failed to improve the financial wellbeing of New Mexicans, specifically those who had previously relied on short-term, small-dollar loans.

•…[more]

November 27, 2023 • 03:57 PM

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Here's One Way to Demand Rational Government Print
By Veronique de Rugy
Thursday, November 16 2023
The lack of courage or clarity from our elected officials, and their inability or unwillingness to make the politically painful trade-offs necessary to fix fiscal problems, is why we are in this mess in the first place.

In a world where economic decisions are mostly driven by short-term goals and political pressures, the need for a long-term, evidence-based approach is more pressing than at any time in memory. Enter the Copenhagen Consensus  a beacon of analytical clarity conceived by Danish intellectual Bjorn Lomborg. It aims to reshape global discourse by prioritizing initiatives based on their cost-effectiveness. Imagine harnessing this model to direct fiscal policy!

Many of today's budgetary problems could be solved if only politicians and voters recognized that not every need and problem is equally weighty. Such recognition  a staple of successful private-sector projects  ought to become commonplace in the public sector.

The Copenhagen Consensus has long championed a cost-benefit approach for dealing with the world's most critical environmental problems. It does this by sorting global issues and their proposed solutions according to potential impact under the constraint of a reality-based budget, rather than ranking them by sentiment. While some critics would prefer a less-compromising approach, the result is that investments are guided to where they can do the greatest good for the world when measured by lives saved per dollar. In doing so, the project wields the scalpel of economic analysis to slice through the Gordian knot of global challenges.

This pragmatic thinking should not just be used for global health or climate issues; it's also a perfect model for how Congress should be making its fiscal policy decisions, where resources are equally scarce and the need for maximum impact is equally urgent. It would also be revolutionary considering the unfortunate way Congress has behaved for decades. A fiscal project modeled on this approach would shift the focus from spending that's politically expedient to spending that promises the most substantial economic returns for society. It would also veer us off a fiscal path that only leads to crisis.

A Congress that makes its decisions based on the Copenhagen model would evaluate each proposed policy's costs against its benefits  only now, they would do so in ways both substantial and consistent. Members would compare how these returns on investment stack up against other programs. They would cut the least effective programs and reform those with the potential of higher returns and the most impact for the most Americans.

In this scenario, Congress would not be the irresponsible institution it has become, mostly eager to pass legislation that serves special interests or renames post offices. Drawing from the Copenhagen playbook, it could even set out to evaluate the single biggest budgetary challenge: "How do we make Social Security, Medicare and Medicaid solvent?"

Rather than aiming at a political target that moves by the day, Congress would start with a definition of what solvent means; one that doesn't blindly accept that Uncle Sam can simply borrow some $120 trillion in the next 30 years no matter the cost in terms of lower growth and growing social tensions. Then, they would have to come up with a variety of alternative ways to meet that goal. Next, they would rank these options based on which provides the best outcome for the most people, including taxpayers and future generations. Finally, by providing clear, compelling evidence to support each recommendation and mapping out pathways to implementation, the findings would be translated into actionable policies.

Is all of this realistic? No. The lack of courage or clarity from our elected officials, and their inability or unwillingness to make the politically painful trade-offs necessary to fix fiscal problems, is why we are in this mess in the first place. The result is debt exploding, interest rates rising, inflation still chipping away at our standard of living and Treasury auctions failing to sell all the government bonds that the government is trying to sell. Special interests and egomaniac politicians are the only ones winning under the current regime.

All that said, there's no reason to accept the situation any longer, hence this column. It's up to us to demand that Congress adopt a Copenhagen-inspired fiscal mindset and embrace it with urgency. We need to impose a new fiscal ethos upon them: drop the easy and expedient in favor of the effective.

And if, as I suspect, the irresponsible politicians we've elected refuse to change, we don't have to give up on a future where fiscal policy is designed rationally and coherently, or one where we no longer run from crisis to crisis. It simply means that American voters need to do a little prioritization of their own.


Veronique de Rugy is the George Gibbs Chair in Political Economy and a senior research fellow at the Mercatus Center at George Mason University. 

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