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The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 10, Issue 8: February 25, 2008

  1. Economic Myths of the Stimulus Package
  2. Gun Buyback Misfires
  3. Higgs on Illegal Immigration
  4. Kosovo: The Way Forward

1) Economic Myths of the Stimulus Package

The Economic Stimulus of 2008 Act, signed into law by President Bush the day before Valentine’s Day, won’t work as advertised. The $168 billion measure won’t increase consumer spending by much because people don’t spend a temporary increase of income as readily as a permanent increase, as our experience with past rebates (and Nobel laureate Milton Friedman’s Permanent Income Hypothesis) have shown. Thus, those $600 rebates ($1,200 for married couples who file jointly) will largely go toward credit-card payments, rather than to make new purchases. Except for one provision that encourages businesses to make more capital investments, the stimulus package is merely a feel-good measure by which politicians can show voters that they are “doing something” to shore up an ailing economy during an election year.

“Even so, there is another reason that any economic benefits ultimately generated by the stimulus plan will be fleeting at best,” writes Independent Institute Senior Fellow William Shughart in a new op-ed. “The federal government has no means of its own, so the $168 billion needed to finance the package can come from just three sources: taxing, borrowing, or printing money.”

“For obvious political reasons, raising taxes is not an option during the run-up to an election,” Shughart continues. “The economic stimulus plan thus will be paid for through a combination of new deficit spending and currency creation. The former implies higher future taxes to pay interest to bondholders and to retire the debt when it matures; the latter adds to the inflationary pressures already evident in the economy. Both impose a heavier burden on the private sector, and auger slower rates of economic growth in the years to come.... If our elected representatives truly were interested in jumpstarting a sluggish economy, they would have acted to reduce uncertainty about future tax bills by cutting marginal income tax rates now and forevermore. Predictably, they chose political grandstanding instead.”

“A Failure to Stimulate,” by William F. Shughart II (2/20/08)

Taxing Choice: The Predatory Politics of Fiscal Discrimination, edited by William F. Shughart II

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2) Gun Buyback Misfires

At the urging of California state Senator Don Perata, the Oakland Police Department recently purchased firearms from gun owners—“no questions asked, no i.d. required”—at locations throughout the city. Among the first sellers on buyback day—owners of a gun store in Reno, Nevada, who were more than happy to sell their guns for $250 each and thereby make themselves a nice profit. But the $250 purchase price was not the program’s main flaw, although the police must now find funding to pay $170,000 is IOUs that they had to issue.

Gun buyback programs, which have been implemented in cities as diverse as Seattle and Washington, DC, don’t work at reducing gun-related crime, according to an authoritative study by the National Academy of Sciences. The reason? “Gun buybacks attract low-quality guns from people who aren't likely to use them to commit crimes,” writes Independent Institute Research Fellow Alex Tabarrok, in a recent op-ed. “The Oakland police, for example, bought a dozen guns from seniors living in an assisted-living facility.”

Anyone determined to acquire a gun for illegal uses can easily replace a gun sold to a buyback program. In addition, buyback programs can function like a gun dealer’s money-back guarantee, reducing gun owners’ financial risks if they become dissatisfied with their purchase. “Thus the more common that gun buybacks become, the more likely they are to misfire,” Tabarrok concludes.

“Oakland’s Gun Buy-Back Misfires,” by Alex Tabarrok (Oakland Tribune, 2/23/08)

Changing the Guard: Private Prisons and the Control of Crime, ed. by Alex Tabarrok

Judge and Jury: American Tort Law on Trial, by Eric Helland and Alex Tabarrok

Fire and Smoke: Government, Lawsuits and the Rule of Law, by Michael Krauss

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3) Higgs on Illegal Immigration

What’s the difference between an illegal immigrant and Oklahoma-born scholar Robert Higgs? In a moving new essay, the Independent Institute Senior Fellow explains some similarities and differences in fascinating personal vignette about his childhood moves across the Southwest.

“From time to time, people of my acquaintance were rounded up and deported, as if they were criminals,” writes Higgs. “What was their crime? Picking cotton? If so, then I was guilty, too, because when I was growing up, many of the ranchers had yet to switch from Okies and Mexicans to mechanical pickers, and by the time I was eleven or twelve years old, I could fill a 12-foot sack and, having weighed my pickings, haul it up the ladder like a man to empty its contents into the cotton trailer.”

Recounted with insight, pathos, and dry wit, Higgs’s short memoir also contains villains: “So far as I was ever aware,” he continues, “the deportations pleased nobody: neither the unlucky individuals wrenched from their homes and places of employment; nor the ranchers and other business owners who readily hired these hardworking people; nor the rest of us, whose relations with the Mexicans were generally cooperative and cordial. La Migra—the immigration officers—was like a natural disaster. These obnoxious state functionaries descended on the community like a plague or a swarm of locusts, benefiting no one, yet collecting salaries at public expense for their mischief. I knew one young man who was deported several times, and each time he returned after a short while. He took special offense at these costly disruptions of his life because, in fact, he had been born in California, but he lacked official documentation of his birthplace.”

“The Difference Between an Illegal Immigrant and Me,” by Robert Higgs (2/20/09)

Neither Liberty nor Safety: Fear, Ideology, and the Growth of Government, by Robert Higgs

Depression, War, and Cold War: Studies in Political Economy, by Robert Higgs

Against Leviathan: Government and a Free Society, by Robert Higgs

About Robert Higgs

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4) Kosovo: The Way Forward

If nationalism had only one home, it might be in the Balkan peninsula. Both the Serbs and the Albanian Kosovars can cite historic ties to the land that is now the independent nation of Kosovo, and each group can cite injustices committed against them by the other, although Serbian oppression of the Kosovars has dominated, according to Independent Institute Senior Fellow Alvaro Vargas Llosa.

“It simply goes to say that conflicts between two forms of nationalism often conceal genocides, atrocities, and conquests perpetrated by both sides, even if the magnitude and the frequency are greater on one side,” writes Vargas Llosa in his latest column. “If the Kosovars end up replacing one form of nationalism with another, the recent declaration of independence will prove to be a betrayal of the wishes of ordinary Kosovars who aspire to be free and live in peace with themselves and the rest of Europe.”

How can the Kosovars best curb the excess of nationalism and the risk of a future military conflict that might arise from it? “The most stable long-term solution to the Kosovo problem is to adjust the new country’s border so Serbia can retain some – if not most – of the historical and religious sites considered central to Serbian nationhood,” writes Ivan Eland, director of the Independent Institute’s Center on Peace & Liberty. “Although the new state of Kosovo would be slightly smaller, it would be more secure and wouldn’t have to rely on the United States and NATO for protection. Such a settlement also might prevent a future Serbia-Kosovo war—a war that could escalate to a confrontation between the United States and Russia. But the Serbs might also have to compromise on which historical or religious sites would be reabsorbed into Serbia. Less important sites might have to be ceded to Kosovo.”

“Kosovo’s Independence,” by Alvaro Vargas Llosa (2/20/08) Spanish Translation

“Nested Partitions for Kosovo,” by Ivan Eland (2/20/08) Spanish Translation

“The Solution to the Kosovo Problem: Partition Within a Partition,” by Ivan Eland (12/19/07)

Books by Alvaro Vargas Llosa and Ivan Eland:

Liberty for Latin America: How to Undo Five Hundred Years of State Oppression, by Alvaro Vargas Llosa

The Che Guevara Myth, by Alvaro Vargas Llosa

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

Putting “Defense” Back into U.S. Defense Policy: Rethinking U.S. Security in the Post-Cold War World, by Ivan Eland

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