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The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 9, Issue 27: July 2, 2007

  1. Should Tax Cuts Lead Spending Cuts, or Vice Versa?
  2. The Fate of the Falklands
  3. European Union: Complacent at 50
  4. Eland Urges U.S. Withdrawal from Muslim Countries

1) Should Tax Cuts Lead Spending Cuts, or Vice Versa?

Do tax cuts force the federal government to reduce wasteful spending? That was the premise behind the conservative fiscal strategy affectionately known as “starving the beast.” But the growth of spending and deficits even in the face of large tax cuts has worn down some of its former supporters, according to syndicated columnist and former U.S. Treasury official Bruce Bartlett, in an article analyzing the origins and development of the curiously named fiscal strategy.

“There is now a growing fear among [many its former supporters] that the ultimate result of relying on starving the beast to support tax cuts may be to make future tax increases inevitable,” writes Bartlett in the cover article of the summer 2007 issue of The Independent Review. “Whether, on balance, taxpayers are ultimately better off than they would have been without the tax cuts remains to be seen, but there is at least a reasonable chance that they will be worse off.”

What does the future portend for the growth of government spending? “Perhaps a future fiscal crisis will provide political cover for massive cuts in entitlement programs that would be politically impossible except in such dire circumstances,” Bartlett continues. “However, many analysts now think as I do that the more likely result of such a crisis will be massive tax increases that will move the tax/GDP ratio in the United States closer to that in Europe.”

“‘Starve the Beast’: Origins and Development of a Budgetary Metaphor,” by Bruce Bartlett (The Independent Review, Summer 2007)

Buy the summer 2007 issue of The Independent Review.

Subscribe to The Independent Review.

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2) The Fate of the Falklands

Twenty-five years after Argentina’s military junta launched a short and ill-fated occupation of the Malvinas—better known as the Falkland Islands—the dispute over this tiny U. K. territory persists. Fortunately, a future hot war between Argentina and the United Kingdom over the fate of the islands is—in principle, at least—easily prevented, according to Independent Institute Adjunct Fellow William Ratliff.

“Perhaps the United Kingdom could simply recognize (without acceding to) the Argentine claim and then all parties could agree to another 175-year cooling-off period with U. N. oversight,” writes Ratliff in a new op-ed. “That would enable London, Buenos Aires, and Stanley to focus entirely on long-term cooperation in developing fishing, energy, and other matters with obvious rewards for all involved.”

Ratliff notes that recent agreements between Australia and Indonesia can serve as examples and inspiration for Argentina and the United Kingdom. The most important ingredient for establishing a lasting harmony, he continues, is a good-faith commitment by Argentine President Nestor Kirchner to reject “foolish nationalism” and to “strike a practical deal that would benefit Argentines and all others for generations to come.”

“Everyone Wins from a Realistic Falkland Islands Compromise,” by William Ratliff (7/2/07) Spanish Translation

More by William Ratliff

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3) European Union: Complacent at 50

Last month’s European Union summit in Brussels confirmed the “poverty of vision” at the helm of the 50-year-old political and economic organization, according to Independent Institute Senior Fellow Alvaro Vargas Llosa. To avoid putting the European Constitution proposal to a vote, where it risked defeat, EU leaders reclassified it as a “treaty.” To avoid making choices that would yield economic long-term benefits but short-term political costs, French President Nicholas Sarkozy expressed support for subsidizing favored national industries.

“Instead of free markets, the new treaty upheld interventionist policies responsible for the fact that Europe’s unemployment rate is nearly double that of the U.S.,” Vargas Llosa wrote in a recent guest column for the Wall Street Journal. “One wonders how hard Europe needs to be hit before a generation of leaders will wake up to the challenge.”

European economies are resting on their laurels, rather than laying the groundwork for future prosperity. “And even though the European economy has grown little in recent years,” Vargas Llosa continues, “there is still enough accumulated capital to continue subsidizing large chunks of society (nearly half the European budget goes to protect farmers). The result is the kind of complacency that turns historic summits into mediocre conformity. Old Europe is not getting any younger and, if things continue like this, new Europe will age fast.”

“A Lack of Euro Vision,” by Alvaro Vargas Llosa (The Wall Street Journal, 6/28/07)

For a longer version, see:

“Old Europe … Is Getting Older,” by Alvaro Vargas Llosa (6/27/07) Spanish Translation

Also see Alvaro Vargas Llosa’s books:

Liberty for Latin America: How to Undo Five Hundred Years of State Oppression

The Che Guevara Myth and the Future of Liberty

Center on Global Prosperity (Alvaro Vargas Llosa, Director)

Spanish Website and Spanish Blog

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4) Eland Urges U.S. Withdrawal from Muslim Countries

More than ever, costly military campaigns and deadly blowback from Islamist terrorists should prompt Americans to rethink U.S. intervention in the Arab and Muslim world, Independent Institute Senior Fellow Ivan Eland argues in his latest op-ed.

“During the Cold War, one could make a plausible argument for some U.S. involvement overseas to counter the expansionist Soviet superpower,” writes Eland. “When the Soviet Union collapsed, that rationale disappeared. Even if the United States believes the global oil market will fail to deliver Persian Gulf oil to U.S. shores without U.S. military forces protecting it (a dubious proposition), the U.S. military could protect our oil lifeline from offshore, without troops stationed in Muslim countries.”

Eland recommends pulling out U.S. forces not only from Iraq, but also from Afghanistan: “The United States should withdraw its forces from Afghanistan, inform the Afghans that U.S. forces will return if any Afghan government harbors al Qaeda, and use Special Forces to hunt down al Qaeda’s leadership. This process needs to be repeated in Iraq and the Persian Gulf.”

“U.S. Role in Islamist Terrorism,” by Ivan Eland (7/2/07) Spanish Translation

Ivan Eland’s Center on Peace & Liberty

The Empire Has No Clothes: U.S. Foreign Policy Exposed, by Ivan Eland

“The Way Out of Iraq: Decentralizing the Iraqi Government,” by Ivan Eland

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