The Lighthouse^®

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The Lighthouse^® is the weekly email newsletter of the Independent Institute.
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Volume 16, Issue 24: June 17, 2014

1. Current VA Scandals Are Just the Latest in a Long Series of Fiascos
2. Pakistani Insurgency a Creature of U.S. War in Afghanistan
3. Housing Finance and the Great Recession
4. Income Inequality: Derek Jeter (and the Free Market) versus Al Capone (and the Government)
5. New Blog Posts
6. Selected News Alerts

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Should former Veterans Administration Secretary Eric Shinseki have quit his post last month—that is, should President Obama have accepted his resignation—while the agency was enmeshed in scandal? Independent Institute Senior Fellow John R. Graham argues that Shinseki’s departure was necessary but not sufficient. It can clear the way for addressing the agency’s latest problems, but because those problems are deep-seated, much more effort will be needed to identify and implement effective reforms—and even then, there’s a limit to how much lasting good we can reasonably expect from them.

On one level, the VA scandal demonstrates that bad incentives can be hazardous to your health—even deadly. Institutionalized lying by agency administrators ensured that many veterans wouldn’t get the health care they needed in a timely manner. One lesson for reformers is that healthcare data must be made transparent so that bureaucrats can be held accountable in real time. On another level, the current fiasco suggests that government-run healthcare systems are vulnerable to pathologies that may be immune to lasting correctives. Look at history. Ever since the Veterans Health Administration emerged from the ashes of the corrupt Veteran’s Bureau, it has suffered episodes of massive waste, political manipulation, and substandard care, as the late historian Ronald Hamowy explained in a 2010 report for the Independent Institute. The lesson here for reformers is that “reform” may just buy a little time—like applying a Band-Aid to a gushing wound.

“More money or a new Secretary are not solutions to the VA crisis,” Graham writes. “The VA is the crisis. Veterans should not be trapped in a system that forces them to get care in hospitals staffed by bureaucrats who lie. They should be free to use their veterans’ benefits to get hospital care wherever they choose.”

The VA Scandal Shows the Problem with Government-Run Healthcare, by John R. Graham (The Daily Caller, 6/9/14)

Failure to Provide: Healthcare at the Veterans Administration, by Ronald Hamowy (Independent Policy Report, 3/18/10)

Striking Back Against the VA’s Bonuses, by Craig Eyermann (MyGovCost News & Blog, 6/12/14)

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U.S. victory against the Taliban in Afghanistan may prove short lived, lasting only until American troops leave the country at the end of 2016. However, the restoration of the country’s former ruling party may not be the most tragic outcome of the war. What could be worse? Consider the destabilization of neighboring Pakistan. Last week’s attack on Karachi International Airport by armed insurgents—the Pakistani Taliban—raises disturbing concerns about the security of Pakistan’s 100 to 200 nuclear weapons.

“At least some chance exists that the Pakistani Taliban, through penetration of the Pakistani government, could get its hands on a nuclear warhead or that the weak Pakistani government might need to seek more domestic support by threatening arch rival and nuclear-armed India with war,” writes Independent Institute Senior Fellow Ivan Eland in his latest column for the Huffington Post.

Ironically, the Pakistani Taliban owes its existence indirectly to the United States, according to Eland. The group was formed in response to U.S. pressure on the Pakistani government to crack down on Afghan Taliban hideouts in Pakistan’s northwestern region. U.S. missile and drone attacks escalated their growth and incited them to announce that they would add American cities to their list of military targets. The U.S. government’s post-9/11 war in Afghanistan has thus proven counterproductive. America’s leaders failed to “soberly weigh the costs and benefits” of the Afghanistan war and its spread to western Pakistan.

Worst Effect of the U.S. Afghan War, by Ivan Eland (The Huffington Post, 6/9/14)

Recarving Rushmore: Ranking the Presidents on Peace, Prosperity, and Liberty, by Ivan Eland

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Independent Institute Research Fellow Burton A. Abrams has written another highly informative op-ed based on his IPPY Silver Medal winner, The Terrible 10: A Century of Economic Folly. The topic: how government policies set the stage for the Great Recession—and the current economic malaise, with its 6 percent unemployment rate. Which policies are most blameworthy? A large part of the story involves federal policies designed to expand homeownership by distorting the market for home loans.

Although some of them go back decades earlier, more recent culprits include the Community Reinvestment Act (1977), the Federal Housing Enterprises Financial Safety and Soundness Act (1992), and the Riegle-Neal Interstate Banking and Efficiency Act (1994). Two government-sponsored enterprises, Fannie Mae and Freddie Mac, were tasked with broadening homeownership by holding a growing share of their portfolios in the form of the mortgages of low- and medium-income homeowners: “By 2006, the mandate was 53 percent from low- and moderate-income families, and 38 percent from underserved areas,” Abram writes.

This helped shape the contours of the residential real-estate bubble of 1997 to 2006. (What inflated it, especially in the mid-2000s, was the Federal Reserve’s expansionary monetary policy.) The bubble began to burst on October 9, 2007, raising questions that policymakers have yet to adequately answer. For example, why should the government try to target the allocation of credit in the economy when doing so creates huge risks? And how can lawmakers and regulators be held accountable for bad policies whose effects we still feel today? Unless we come up with the correct answers, slow economic growth and high unemployment may persist for decades to come.

Central Planning Failure and the Great Recession, by Burton A. Abrams (The Fresno Bee, 6/10/2014; other McClatchy-Tribune newspapers on other dates)

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

Housing America: Building Out of a Crisis, edited by Randall G. Holcombe and Benjamin W. Powell

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With a salary last year of $17 million, New York Yankee shortstop Derek Jeter is among the top income earners in the United States. He’s not the top in Major League Baseball, mind you, but he’s certainly in the top 1 percent of all income earners in the United States. Should he and his high-earning cohorts pay a higher tax rate to help fund “social justice” programs? Independent Institute Research Fellow Dominick T. Armentano answers in the negative. Moreover, Armentano offers a moral defense of legitimately earned high income.

“I maintain, contrary to current critics, that legitimately acquired wealth is any wealth obtained through voluntary, non-fraudulent trade and/or through inheritance,” Armentano writes in American Thinker. “I also maintain that the owners of this wealth then have a legitimate property right to it and can legitimately ‘redistribute’ it in accordance with their own preferences.”

In cases in which wealth is acquired by political or economic favors obtained through government, the solution is to eliminate the processes that generate those advantages. But those instances are rare in a free-market economy, Armentano maintains. In most cases, income is earned legitimately. And every case of coercive wealth redistribution is wrong. “If stealing and [taxpayer-funded] welfare handouts are morally legitimate,” he continues, “then the gangster Al Capone and his Chicago soup kitchens should serve as an ethical gold standard for social justice.”

Redistribution Is Theft, by Dominick T. Armentano (American Thinker, 6/13/14)

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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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