The cold war’s effects are very much with us in two major spheres.

This essay describes the origins of the divided China problem and how it has become the most troublesome factor in Sino-U.S. relations. From interviews and documentary evidence, the authors argue that Taiwan and mainland China achieved a détente in April 1993 and agreed on rules for negotiations to take place. Rather than propose a federation formula for resolving the Taiwan-China sovereignty issue, and to counter the 1979 federation proposal offered by Beijing's leaders, the Lee Teng-hui administration tried to redefine Taiwan's relationship with "China" and win U.S. support for its strategy, thereby undermining Sino-U.S. relations and aggravating Taiwan-mainland China relations. The authors propose how the divided China problem might be peacefully resolved and argue that the U.S. government and Congress should extend military support for the Republic of China regime only on the condition that it negotiate with the People's Republic of China regime under the "one-China" principle to resolve the divided China problem.

The U.S. government emphasizes the importance of stable political leadership as a necessary condition for economic growth. Contrary to this view, I show that high leadership turnover is strongly associated with high economic growth both in autocracy and in democracy. The effect of "unstable" leadership is stronger in democracies than autocracies because democratic political systems have institutions that promote competition over policy ideas rather than over the distribution of private benefits to cronies. Two institutions are shown to be particularly important in promoting such public goods as a fair legal system, transparent decision making and accounting, a strong national defense, and a healthy, growth-oriented infrastructure. These two institutions are a large selectorate (the set of people with a say in choosing leaders) and a large winning coalition (the set of people whose support keeps the incumbent in office).

Political leaders are eager to stay in office and, contrary to the neoclassical economic model, are not benign agents of the people in whose name they lead. Because autocrats depend on small groups of supporters, they emphasize the use of private benefits to their cronies as the means to gain political loyalty and stay in office. This means that they generally have little incentive to pay attention to the overall quality of their public policies.

Democrats, in contrast, require the support of a large coalition to stay in power. Because private rewards have to be spread thinly to many people, democrats find it easier to compete for office by providing public goods that benefit everyone rather than private benefits for a few cronies. This means that, in democracies, political competition is over policy ideas. Two effects follow from the fact that democratic leaders must build large coalitions: Democratic leaders provide better policies to improve their chances of surviving in office, and because competition is over policy ideas, they are more easily turned out of office in favor of a political challenger than are autocrats. Thus, autocrats have longer terms in office and produce less-efficient economic growth. The U.S. government emphasis on stable leadership as a necessary condition for growth is mistaken and can lead to global economic contraction rather than expansion.

Congress has before it more than two dozen proposals for reforming Social Security. Many proposals call for the creation of a large reserve fund within the federal budget. This fund is necessary, proponents argue, to keep the Social Security program solvent when the baby boom generation retires and begins to draw its benefits.

This essay presents a historical examination of the federal government's policy toward Social Security reserves. The historical review casts doubt on the viability of sustaining a large reserve policy. From time to time throughout the program's history, policy decisions, wartime economic conditions, and business-cycle expansions have created large reserves or projections thereof. Those reserves have generated pressures for greater spending. Congress has invariably responded by raising benefits or expanding eligibility.

These results contain an important implication for Social Security reform. Unless a method can be found for altering congressional behavior from its sixty-year norm, any attempt to ensure Social Security's solvency by building a large trust fund reserve will likely prove futile. A large reserve will lead to higher spending. In doing so, it will add to the burden of government borne by both current and future generations of taxpayers.