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The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 16, Issue 42: October 21, 2014

  1. China Subsidizes Patent Trolls
  2. Obamacare’s Medicaid Problem
  3. Obama’s Silence on Immigration Is Deafening
  4. California Water Ballot Measure Is All Wet
  5. New Blog Posts
  6. Selected News Alerts



1) China Subsidizes Patent Trolls

In recent years, high-tech companies have faced a rise in expensive lawsuits from firms that specialize in litigating intellectual-property rights—so called “patent trolls”—who can win hundreds of millions of dollars in a single judgment and who directly cost the economy an estimated $29 billion per year, according to professors at Boston University School of Law. With its recent funding of Ruichuan IPR Funds, the People’s Republic of China seems eager to enter the fray. Beijing has reportedly given the Chinese firm some $50 billion with which to purchase foreign patents.

“China will now be in a better position to manipulate markets, handicap the overseas competition, and push itself to the head of the pack in the global patent wars,” writes Independent Institute Research Fellow William J. Watkins, Jr., author of Patent Trolls: Predatory Litigation and the Smothering of Innovation.

“By entering this disreputable business, China has shown that it puts its national interest well ahead of fair and open competition,” Watkins continues. “Given that many technological innovations can have military application, Ruichuan IRP Funds might well be used to undermine U.S. advances in defense. China is using America’s outdated patent law system as a weapon of economic war.”

China Declares War on U.S. Intellectual Property, Gets Into the Patent Trolling Business, by William J. Watkins Jr. (The Daily Caller, 10/8/14)

Patent Trolls: Predatory Litigation and the Smothering of Innovation, by William J. Watkins Jr.

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2) Obamacare’s Medicaid Problem

Could it be that, after spending $2 trillion over the next decade, Obamacare will have done little to improve healthcare outcomes overall? The possibility is real, and it became more apparent with the release last month of a report from the inspector general of the Department of Health and Human Services. The study concludes that, despite having added several million people to state Medicaid programs, government officials “have done little to ensure that new beneficiaries have access to doctors after they get their Medicaid cards.”

This revelation is especially alarming given that half of those whom Obamacare aims to get insured are supposed to obtain coverage through Medicaid. Thus according to the Department of Health and Human Services—the same agency tasked with implementing the Affordable Care Act—President Obama’s signature legislative achievement may on balance end up not doing much to improve the healthcare of the previously uninsured, according to health policy expert and Independent Institute Senior Fellow John C. Goodman.

This study is broadly consistent with research by healthcare economist Amy Finkelstein, now with the Massachusetts Institute of Technology. Her investigations focused not on Medicaid, but on Medicare, in the decades before the Affordable Care Act. “She found that the creation of Medicare had no impact on the health of the elderly,” Goodman writes. Expanding “access” to healthcare (that is, increasing the demand) without increasing the supply of healthcare providers creates only the illusion of a better healthcare system. “Next year will be the fiftieth anniversary of Medicaid, and after 50 years and trillions of dollars we still don’t know what we bought with all that money,” Goodman continues. The American people may well find themselves wondering the same thing about Obamacare. Promising greater “access” by increasing the demand for services, but without delivering the increase in supply needed to make good on those promises, is a prescription for failure.

What if Obamacare Doesn’t Change Much of Anything?, by John C. Goodman (Forbes, 10/6/14)

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

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3) Obama’s Silence on Immigration Is Deafening

A study about illegal immigration, published last month by the Pew Research Center, dispels numerous myths about recent newcomers to the United States. It also suggests that, by going silent on the issue, President Obama has surrendered an important opportunity to bring immigration reform to the fore in the weeks leading up to next month’s midterm elections. Independent Institute Senior Fellow Alvaro Vargas Llosa, author of Global Crossings: Immigration, Civilization, and America, discusses the Pew study and Obama’s political gaffe in an op-ed published last week in the Miami Herald and elsewhere.

Analysts at the Pew Research Center examined data from the U.S. Census Bureau and found the number of illegal newcomers entering the United States has leveled off since the onset of the economic recession. That’s because immigration trends are tied to job opportunities. But news reports earlier this year about unaccompanied minors from Central America crossing the U.S.-Mexico border illegally typically failed to note that the overall level of undocumented immigrants has hovered around 11.3 million since 2009. Also, most news stories about immigration have failed to correct misperceptions that many Americans have about immigrants’ willingness and ability to culturally assimilate to the United States. In reality, the children of Latin American immigrants become bilingual, and the grandchildren learn English but don’t become not fluent in their grandparents’ native language.

“These data tell a compelling story that was justification enough for the President’s proposed unilateral initiative on immigration,” Vargas Llosa writes. “Instead he bowed to politics.” Obama shouldn’t have run from the topic, Vargas Llosa adds. “He should have embraced it.”

Immigration Reality Check, by Alvaro Vargas Llosa (Miami Herald, 10/13/14)

Global Crossings: Immigration, Civilization, and America, by Alvaro Vargas Llosa

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4) California Water Ballot Measure Is All Wet

California voters will soon decide the fate of Proposition 1, a bond measure that would raise more than $7 billion to fund a variety of state water projects. The Golden State is suffering from a severe drought, but the most sensible way to overcome this problem isn’t to deplete the financial reserves of future taxpayers. Instead, policymakers should stand up to interest groups who perpetuate massive subsidies that encourage farmers in the arid Central Valley to grow rice, alfalfa, corn, cotton, and other water-intensive crops. How wasteful are the subsidies? From 1995 through 2012, California rice farmers received subsidies estimated to be worth $2.6 billion. Corn and cotton cost the state even more in water subsidies. But the sheer size of water subsidies isn’t the only absurdity about California’s wasteful water policies, as Independent Institute Senior Fellow Lawrence J. McQuillan and Public Policy Analyst Rebecca Harris explain in a new op-ed.

Water has long been underpriced in California, especially water designated for agricultural use. That’s because policymakers have resisted the idea of a free market for water. But California’s regulatory and legal climate makes matters worse. County restrictions often limit the amount of farmland allowed to become fallow. Moreover, rice farmers who might want to convert to crops that use less water run the risk of lawsuits from environmental organizations suing to protect habitat for the giant garter snake and other species that live in man-made rice paddies. In addition, government agencies sometimes encourage wasteful water consumption through ill-conceived water-efficiency programs.

“California has a policy problem disguised as a water problem, and approving a $7.5 billion water bond will not fix this,” McQuillan and Harris write. “Californians should insist that lawmakers dismantle irrational government policies and politically motivated subsidies that incentivize waste. California can find a better way forward through metering and market pricing of crops and water.”

Deeper in Debt or a Better Water Policy? Voters Will Decide in November, by Lawrence J. McQuillan and Rebecca Harris (Fox&Hounds Daily, 10/14/14)

Aquanomics: Water Markets and the Environment, edited by B. Delworth Gardner and Randy T. Simmons

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5) New Blog Posts

From The Beacon:

From MyGovCost News & Blog:

California Covered in Cronyism
K. Lloyd Billingsley (10/20/14)

So Much Explained...
Craig Eyermann (10/18/14)

France on Debt Row
Craig Eyermann (10/17/14)

Parcel Tax Rip-off
K. Lloyd Billingsley (10/16/14)

Secret Service Blames Bureaucracy
K. Lloyd Billingsley (10/14/14)

The Danger of the National Debt
Craig Eyermann (10/14/14)

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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