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The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 16, Issue 3: January 21, 2014

  1. Robert Gates: Dereliction of Duty?
  2. The Truth Behind Unemployment Statistics
  3. The Prescription for Low-Cost Medical Innovations
  4. 2014 Challenge of Liberty Summer Seminars for Students
  5. New Blog Posts
  6. Selected News Alerts


1) Robert Gates: Dereliction of Duty?

Former Secretary of Defense Robert Gates, who headed the Pentagon for both Barack Obama and George W. Bush, has garnered a string of criticisms since his news-making memoir, Duty, hit bookstores last week. Some critics have scolded Gates for revealing President Obama’s private skepticism about the troop surge in Afghanistan while U.S. soldiers still remain in harm’s way. Others have chastised the stoical Gates, who takes pride in his ability to maintain a poker face during stressful encounters, for failing to voice his objections against dubious White House policies and procedures in real time, when doing so might have made a difference. In contrast, Independent Institute Senior Fellow Ivan Eland offers a more fundamental (and original) criticism.

Gates is wrong to criticize his bosses for any ambivalence they may have had about the U.S. wars in Afghanistan and Iraq, Eland argues, because those campaigns were wrongheaded to begin with, and because they’ve been plagued with operational mistakes since the get-go. “Yet after all this buffoonery, Gates criticizes any policymaker, such as [Vice President] Biden, who is skeptical of the military brass’s bureaucratic gamesmanship and often disrespect for their political bosses,” Eland writes. Biden’s suspicion of the military leadership was wholly warranted, as the grandstanding by former Afghan war commanders David Petraeus and Stanley McChrystal, who publicly criticized White House decisions, made clear.

And Gates suggests that the civilian leadership should defer to the generals on matters of war and peace, rather than the other way around. This attitude smacks of “German or Russian-style martial patriotism, not the republican (small r) patriotism of America’s founders, who were deeply suspicious of standing armies and who would roll over in their graves at the current adoration of the military,” Eland continues. “Such militarism is dangerous for the country and is even bad for the military.”

Gates Memoirs Illustrate How Militaristic the U.S. Has Become, by Ivan Eland (The Huffington Post, 1/14/14)

Lessons in Government from Robert Gates, by K. Lloyd Billingsley (MyGovCost News and Blog, 1/20/14)

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

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2) The Truth Behind Unemployment Statistics

What’s ahead for the American economy in 2014? The Obama administration and its allies in Congress would like for you to believe that last year’s decline in the unemployment rate—official data put the “U-3” rate at 6.7 percent in December, down from 7 percent the previous month—signals that economic good times are just up ahead. If only it were that simple. In reality, focusing too much on a dip in the unemployment rate can blind us to a worrisome fact: two million fewer people are employed now than were working when the economy began its slide into the Great Recession six years ago. Independent Institute Senior Fellow Robert Higgs puts this into context in an op-ed that ran in several newspapers last week.

“The White House and its allies don’t want to talk about this issue,” Higgs writes. “They continue to focus on the slow-but-steady monthly job gains and equally slow-but-steady decline in the unemployment rate.” They neglect to mention, for example, that only 58.6 percent of the population is now working for a living, and that millions of people have stopped looking for work, retired early, or found ways to qualify for government disability programs, using them “as a de facto long-term unemployment insurance program,” Higgs adds.

One cause of the weakness in job hiring, but certainly not the only culprit, is an unstable business climate. In particular, Higgs cites the unknown future costs associated with Obamacare, the Dodd-Frank financial reforms, and other pending regulations and taxes that hinder the recovery of private investment and job growth. “It seems clear from the evidence that these policies have discouraged hiring,” Higgs continues. “Whatever the reason, one thing is clear: unless the labor force resumes something like its historically normal growth, we cannot expect the economy to resume its historically normal growth.”

Are Our Unemployment Statistics Broken?, by Robert Higgs (Newsday, 1/14/2014; other McClatchy publications, other dates)

Crisis and Leviathan: Critical Episodes in the Growth of American Government (25th Anniversary Edition), by Robert Higgs

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3) The Prescription for Low-Cost Medical Innovations

Consumers don’t expect their auto insurance or homeowners insurance to cover routine and predicable maintenance costs: They know such coverage would push up premiums. Yet when it comes to health insurance, consumers like having a low copayment—even though a low copay means higher premiums. Of course, consumers often don’t pay the full amount of the premiums—third-party payers like employers or the government cover part of it—and that creates bad incentives. The implication, according to Independent Institute Senior Fellow John R. Graham, is that too much health insurance coverage has made us insensitive to value and cost.

In a recent op-ed for the Washington Times, Graham relates the story of a woman who shopped for a hearing aid and found an abundance of devices for sale online, at wholesale prices that were only one-tenth the retail price her audiologist would have charged. The woman had strong incentives to shop around because Medicare doesn’t cover hearing aids. The larger lesson, Graham argues, is that innovative healthcare would cost much less if only consumers could send providers a direct signal indicating how much they value healthcare products and services. Unfortunately, when third parties pick up a significant share of the bill, that communication process gets short-circuited.

“If we weren’t inoculated by over-insurance, medical innovation generally would follow a similar path [as the falling price in hearing aids],” Graham writes. Instead of widening the role of third-party payers, he argues, “the right way to reform health insurance would be to give every American a tax credit to spend directly on medical care, relying on insurance only for unpredictable or expensive accidents and illnesses. The cost of insurance would fall. The same for routine medical expenses...since we’d be paying for these things ourselves, and the market would respond accordingly.”

Can You Hear Me Now?, by John R. Graham (The Washington Times, 1/13/14)

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

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4) 2014 Challenge of Liberty Summer Seminars for Students

We are pleased to announce the dates for the Independent Institute’s 2014 Challenge of Liberty Summer Seminars!

  • June 16−20: College Student Seminar in Denver, Colo.
  • July 7−11: College Student Seminar in Berkeley, Calif.
  • July 14−18: High School Student Seminar in Oakland, Calif.

These five-day seminars feature a wide variety of topics, including:

  • The rise of liberty and economic development
  • Economics fundamentals, property rights, and civil liberty
  • Taxation, regulation, antitrust, and interventionism
  • Education, healthcare, immigration, and the environment
  • The economics of war and peace
  • The Great Depression and the Great Recession
  • Classical Economics, Austrian Economics, and Public Choice

Speakers include: Robert Higgs (The Independent Institute), José Yulo (Academy of Art University), James C. W. Ahiakpor (California State University, East Bay), Anthony Gregory (The Independent Institute), Ivan Pongracic, Jr. (Hillsdale College), Benjamin Powell (Texas Tech University), Gregory Rehmke (EconomicThinking.org), and Michael Winther (Institute for Principle Studies), Abigail Hall (Mercatus Center), Alexandre Padilla (Metropolitan State College), Fred Foldvary (Santa Clara University), and Michael D. Thomas (Utah State University).

Apply today!

The 2014 Challenge of Liberty Summer Seminars

View videos from past years!

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5) New Blog Posts

From The Beacon:

From MyGovCost News & Blog:

Lessons in Government from Robert Gates
K. Lloyd Billingsley (1/20/14)

Breaking the Dysfunctional Budget Cycle
Craig Eyermann (1/17/14)

Peninsula Rail Versus Grand Bunk Railroad
K. Lloyd Billingsley (1/17/14)

Cuidado Con Obamacare
K. Lloyd Billingsley (1/15/14)

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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