The Lighthouse^®

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The Lighthouse^® is the weekly email newsletter of the Independent Institute.
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Volume 15, Issue 50: December 10, 2013

1. Toasting the End of Prohibition—and the Drug War
2. Obamacare and Health-Care Spending
3. Past Deregulation Gives Reasons for Hope
4. Obama Should Call Afghan Leader’s Bluff and Pull Out
5. New Blog Posts
6. Selected News Alerts

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Prohibition was so bad for the United States that even the vast majority of teetotalers can see the merits of toasting the 80th anniversary of its repeal this month. The alcohol ban, which the 18th Amendment made the law of the land, was among the worst economic interventions of the past 100 years. It enriched violent criminals. It corrupted public officials. It wasted vast resources in a futile attempt at law enforcement. And, worst of all, it curtailed the liberties of peaceful Americans. But as bad as it was, the $88 billion per year War on Drugs may be even worse, according to Independent Institute Research Fellow Burton Abrams.

Drug prohibition has increased violent crime, hastened the spread of AIDS and hepatitis, strained public treasuries, and destabilized foreign governments. Even on its own terms the drug war has failed. “Illegal drugs are still relatively cheap and widely available,” Abrams writes in Forbes. Why then does the war continue?

One factor is that drug dealers and users wield little or no political clout. “If the War on Drugs routinely led to the arrest and imprisonment of rich, politically connected Americans, it would have been abandoned or scaled back decades ago,” Abrams continues. “Another reason it continues is because federal agencies have a financial stake in the conflict. The [Drug Enforcement Administration], for example, needs to preserve its budget of nearly $3 billion, and that is only one agency.” The president and Congress could easily overcome any bureaucratic resistance to drug liberalization if they would acknowledge—publicly and consistently—the drug war’s failures. “An embattled American public just might thank them for it,” Abrams concludes.

80 Years After Prohibition’s Repeal, President Obama Continues a Failed Drug War, by Burton Abrams (Forbes, 12/5/13)

The Terrible 10: A Century of Economy Folly, by Burton Abrams

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Has Obamacare cut the overall growth in health care spending? Paul Krugman says it has. Independent Institute Senior Fellow John C. Goodman takes issue with Krugman’s claim, citing data from the Centers for Medicare and Medicaid Services. “Health care spending growth in 2010 was exactly the same as it was in 2009,” Goodman writes. “It remained exactly the same in 2011. And again in 2012.” In fact, the annual growth rate for national health-care spending was falling as far back as 2002. “Whatever the cause,” Goodman continues, “it started early on George Bush’s watch—not under Barrack Obama.”

The cost-savings provisions of the Affordable Care Act have done little to curb health-care spending. Some of the provisions Krugman credits haven’t even gone into effect. Most payment cuts to private Medicare Advantage plans, for example, don’t kick in until 2014. And penalties to hospitals with high readmission rates have kicked in only recently; so far “the savings are scant,” Goodman writes.

What to make of U.S. health-care spending trends? It’s difficult to say. A new study by the Commonwealth Fund ranks the United States among the lowest of eleven developed countries on health-care spending. But meaningful comparisons are harder to make than the study suggests—and they most emphatically shouldn’t be taken to mean that the United States would be better off by mimicking the spending patterns of other countries. “Reducing the cost of U.S. health care is a worthy goal,” writes Independent Institute Research Fellow John R. Graham, “but it needs to be achieved by reducing the role of government at home, not importing a different model of government intervention from abroad.”

Paul Krugman Is Wrong Yet Again about Obamacare, by John C. Goodman (Forbes, 12/4/13)

U.S. Ranks Third Lowest of Eleven Countries on Health Care Spending, by John R. Graham (The Beacon, 11/26/13)

Priceless: Curing the Healthcare Crisis, by John C. Goodman

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To say that President Obama and Congress aren’t riding high on a wave of popularity would be an understatement. The nation is beset with major problems. Fortunately, even major economic problems are not insoluble. For evidence, recall the 1970s. The economic malaise that covered most of the decade eventually led political entrepreneurs to deregulate important sectors of the U.S. economy, including trucking and airlines, as Independent Institute Research Fellow Edward J. López and Wayne A. Leighton explain in a recent piece in Forbes.

Thanks to congressional hearings led by Sen. Ted Kennedy (and assisted by future Supreme Court Justice Stephen Breyer), Washington and the nation came to realize that regulation had killed airline competition and raised fares. The Carter administration responded to new awareness by appointing an economics professor—Alfred Kahn—to head the Civil Aeronautics Board and implement a program of deregulation. The result: more competition and lower fares—and the eventual extinction of the agency, which before Kahn’s arrival had been captured by the airlines it was supposed to regulate. Support for this transformation was initially minimal—and limited to academic economists and think-tank policy wonks—but deregulation became a huge success.

This story gives us hope for optimism. “History tells us that new ideas—hopefully good ones—will come along,” Lopez and Leighton write. “A few people, acting like entrepreneurs, will look for the right ideas and the right moment. Whether it’s a reform or a revolution, ideas have had consequences. They will again.”

Washington’s Bipartisan Crack-Up Foretells a Turn Toward Economic Freedom, by Edward J. López and Wayne A. Leighton (Forbes, 12/4/13)

The Pursuit of Justice: Law and Economics of Legal Institutions, edited by Edward J. López

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Hamid Karzai, Afghanistan’s enigmatic leader, has added conditions to the security agreement with the United States. Among them: free the prisoners at the Guantanamo detention camp and stop the raids against Afghan homes. Karzai isn’t the only party to the agreement to change his position. In his latest op-ed, Independent Institute Senior Fellow Ivan Eland chastises President Obama for redefining the term “combat forces” in order to justify the expansion of U.S. forces in Afghanistan after the United States was supposed to withdraw them.

Conducting counterterrorism operations and training Afghan military forces would leave the U.S. advisors and troops vulnerable to enemy attack. “So in reality, by leaving any U.S. forces in Afghanistan, Obama is really breaking his promise to the American people to remove all combat forces by the end of 2014,” Eland writes.

What should the Obama administration do? Eland urges the White House to call Karzai’s bluff and withdraw U.S. forces from Afghanistan. The United States doesn’t need troops on the ground to prevent terrorists from coming to power—it has high-altitude means to do so. “That threat is credible and should deter a Taliban that likely has learned its lesson from sheltering such unwanted visitors the last time around,” Eland concludes.

Call Hamid Karzai’s Bluff, by Ivan Eland (The Huffington Post, 12/4/13)

No War for Oil: U.S. Dependency and the Middle East, by Ivan Eland

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From The Beacon:

From MyGovCost News & Blog:

You can find the Independent Institute’s Spanish-language website here and blog here.

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