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The Lighthouse is the weekly email newsletter of the Independent Institute.
Subscribe now, or browse Back Issues.

Volume 15, Issue 53: December 31, 2013

  1. The Folly of Ethanol
  2. Better Choices for Educational Reform
  3. Taxpayer Bailouts for Big Insurance?
  4. U.S. Should Avoid Syrian Civil War
  5. New Blog Posts
  6. Selected News Alerts


1) The Folly of Ethanol

In an effort to conserve resources, federal and state policymakers have discarded one of the most important resources of all: common sense. Take the government push for ethanol. Mandating that gasoline suppliers blend their products with ethanol is supposed to be good for the environment. But the result is more economic and environmental waste, according to Independent Institute Research Fellow Burton A. Abrams, author of The Terrible 10: A Century of Economy Folly.

Ethanol now accounts for about one third of the corn crop in the United States. As more and more farmland is devoted to growing corn for ethanol, the production of other crops falls, leading to higher prices for them. Higher agricultural prices make it easier for politicians to cut farm subsidies, but don’t be fooled. You’re paying for this reduction in the form of higher prices. The government’s mandates and subsidies for ethanol have also entailed another hidden cost: Because ethanol tends to corrode metal parts and rubber tubing on some motors, consumers are stuck with higher bills for equipment repairs and more frequent replacements.

But perhaps the greatest folly related to ethanol policy is environmental. More fertilizers, pesticides, and water are now used for corn production. More diesel and gas-powered farm equipment are used to manage corn crops. More ground transportation must be employed to move corn and ethanol, compared to fossil fuels. And more gasoline must be used because gas that’s combined with ethanol results in worse car mileage. “All told, the environmental costs from using corn-based ethanol may be higher than using straight gasoline,” Abrams concludes.

Ethanol Isn’t Green, Isn’t Efficient, and Shouldn’t Be Subsidized, by Burton A. Abrams (The Daily Caller, 12/27/13)

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

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2) Better Choices for Educational Reform

Common Core is supposed to make America’s school children better prepared for college and work life. In reality, its leaders have proposed weakening academic standards in order to obtain political buy-in. Stanford University mathematician James Milgram and University of Arkansas education professor Sandra Stotsky both served on the Common Core Validation Committee and have written stinging critiques exposing the lack of rigor in the Common Core curriculum. The program is also under fire for its role in the dissemination of personal data—including students’ disciplinary records and parents’ political affiliations—to subsidized educational testing companies. Yet as bad as these problems are—and politicization and invasions of privacy are serious charges—they are not Common Core’s chief flaws, according to Independent Institute Research Fellow Vicki E. Alger.

“Ultimately, Common Core rests on the faulty premise that one centralized entity knows what’s best for all 55 million students nationwide,” Alger writes in U.S. News and World Report. “Of course, children need to learn the basics, but there are better ways of accomplishing that goal than embracing a national curriculum developed by Washington. Parental choice programs, for example, educate students to high standards, without limiting the diverse schooling options needed to meet their unique needs.”

Parental choice means higher graduation rates, higher college attendance rates, and higher reading and math scores than their peers. This is good news to the nearly 245,000 students, most of them from low-income families, who are enrolled in voucher and tax-credit scholarship programs. But much can be done to extend these and related educational benefits to the millions of students who lack access to the parental choice programs offered in 16 states and the District of Columbia. “Parental choice,” Alger concludes, “ensures high standards and encourages the customization students need to succeed in school and beyond—without all the cost, compromised rigor, or political agendas.”

Rotten to the Core, by Vicki E. Alger (U.S. News & World Report, 12/17/13)

School Choices: True and False, by John D. Merrifield

Can Teachers Own Their Own Schools? New Strategies for Educational Excellence, by Richard K. Vedder

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3) Taxpayer Bailouts for Big Insurance?

Although the snafus of the Obamacare rollout have received ample media coverage, the problems with President Obama’s other major first-term reform legislation—the Dodd-Frank Act—have escaped media scrutiny and public concern. The law was supposed to save taxpayers money by preventing government regulators from bailing out financial institutions whose problems the regulators would deem to be a threat to the stability of the entire financial system. But rather than end the policy of “too big to fail,” Dodd-Frank has enshrined it, according to Independent Institute Research Fellow Vern P. McKinley and Hester Peirce.

The Dodd–Frank Wall Street Reform and Consumer Protection Act created a commission—the Financial Stability Oversight Council—with the power to designate certain companies as “systemically important” to the stability of the financial system. Those companies would face greater regulatory oversight. If that extra scrutiny were deemed insufficient, the firms could potentially receive federal bailouts if the regulators believed this would prevent harm to the entire financial system. Unfortunately for taxpayers, there’s ample justification for skepticism about the need for the bailout of so-called “systemically important” institutions. Years after the 2008 bailout of AIG, the regulators still haven’t made public their internal memos detailing the basis for their interventions. Could it be because they lacked a solid analysis that demonstrated a threat to the financial system? Former FDIC Commissioner Sheila Blair has admitted as much in her memoir.

The bad news for the economy is that, despite several protests from within the Financial Stability Oversight Council, the commission this year designated several large insurance companies as “systemically important.” They include GE Capital, AIG, and Prudential Financial; MetLife may be next. One problem is that Dodd-Frank has a provision called the Collins Amendment that requires regulators to apply bank-style capital standards to the designated institutions, even though insurance companies are structured differently than banks. (This “one-size-fits-all” approach is why several members of the council voted against these designations.) Moreover, designating these firms as “systemically important” could mean that regulators will grant them special favors—access to subsidized lines of credit, for example—much to the competitive disadvantage of their smaller rivals. Here’s how McKinley and Peirce sum up the problem in their new Forbes op-ed: “Dodd-Frank has exacerbated too-big-to fail by making it a permanent fixture of the insurance industry.... It’s just a matter of time before bad legislation turns into market chaos.”

President Obama Faces a Bigger Ticking Time Bomb than Obamacare Itself, by Vern P. McKinley and Hester Peirce (Forbes, 12/19/13)

Financing Failure: A Century of Bailouts, by Vern P. McKinley

Risky Business: Insurance Markets and Regulation, edited by Lawrence S. Powell

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4) U.S. Should Avoid Syrian Civil War

Prince Turki al-Faisal of Saudi Arabia recently scolded the White House for limiting U.S. involvement in Syria’s civil war. Like the leaders of Israel, the prince wishes the United States would help bring down the Assad regime. It’s safe to say that his remarks have more to do with the Saudi regime’s animosity toward its Shiite rivals—in Tehran as well as in Damascus—than with genuine humanitarian concerns.

“In fact, the Saudis, who have a horrendous human rights record, likely don’t care, one way or the other, about harming Syrian civilians,” Independent Institute Senior Fellow Ivan Eland writes in the Huffington Post.

The Syrian civil war, many Saudis and Israelis fear, is a litmus test for whether the United States will attack Iran’s nuclear research and development sites: If Washington fails to bomb Syrian military installations, perhaps it won’t bomb Iran either. “However, even if this is true,” Eland writes, “Iran has nevertheless come to the negotiating table and reached an interim agreement to freeze its nuclear programs and even roll back at least one part of it.” The Obama administration should continue its policy of relative restraint with respect to Shiite governments, Eland argues, lest it spark retaliation in the form of terrorist acts against Americans.

Ignore Saudi and Israeli Goading for a More Muscular U.S. Mideast Policy, by Ivan Eland (The Huffington Post, 12/23/13)

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

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5) New Blog Posts

From The Beacon:

From MyGovCost News & Blog:

Obamacare Holiday Cheer
K. Lloyd Billingsley (12/30/13)

The Road that Costs $5.32 Million per Mile
Craig Eyermann (12/28/13)

Stockings Stuffed All Year for California City Officials
K. Lloyd Billingsley (12/25/13)

Christmas for Government Waste! (Part 2)
Craig Eyermann (12/24/13)

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

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6) Selected News Alerts

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