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The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 10, Issue 12: March 24, 2008

  1. White House Splits on Second Amendment in Heller Case
  2. Long-term Focus Should Calm Housing Market Jitters
  3. Time to Abolish the Federal Reserve?
  4. Iraq: Moving Forward and Getting Out

1) White House Splits on Second Amendment in Heller Case

An interesting rift has appeared in the Bush administration in connection with District of Columbia v. Heller, the Second Amendment case whose oral arguments the Supreme Court heard last week. In opposition to President Bush’s Justice Department, which issued an amicus curiae (“friend of the court”) brief supporting the Washington, D.C., gun ban at issue in the case, Vice President Dick Cheney—acting in his capacity not as vice president, but as president of the Senate—joined the 55 senators and 250 members of the House of Representatives who have lent their names to Independent Institute Research Fellow Stephen P. Halbrook’s amicus brief in support of Mr. Heller’s individual right to own a handgun.

The Justice Department’s brief in favor of the District, Halbrook notes, expresses some ambivalence on the matter: it affirms that the Second Amendment supports an individual right but expresses uncertainty about whether the D.C. gun ban is unconstitutional. In stark contrast, America’s Founders were clear on where they stood, according to Halbrook, whose forthcoming book, The Founders’ Second Amendment, uses the Founders’ writings to argue that they intended for the Amendment to protect the right of law-abiding individuals to keep and bear arms, including for the purpose of self-defense in their homes.

“For almost two centuries, the understanding was that law-abiding individuals had a right to possess rifles, pistols, and shotguns,” Halbrook writes. “This would promote a militia of all able-bodied citizens, which, unlike a standing army, was seen as securing a free country.... Hopefully the justices will be mindful of the Founders’ intent and will recognize that the Second Amendment is every bit a part of the Bill of Rights as is the First.”

“Executive Branch Divided over Gun Rights,” by Stephen P. Halbrook (3/17/08)

Amici Curiae Brief in D.C. v. Heller for 55 Senators, the Senate President, and 250 Members of the House of Representatives, by Stephen P. Halbrook 

The Founders’ Second Amendment: Origins of the Right to Bear Arms, by Stephen P. Halbrook (forthcoming)

That Every Man Be Armed: The Evolution of a Constitutional Right, by Stephen P. Halbrook

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2) Long-term Focus Should Calm Housing Market Jitters

Housing prices may continue to fall somewhat, but they probably won’t fall to the levels of 1997, the last year that inflation-adjusted house prices were about the same as the average for the previous 50 years. They won’t fall that low, according to Independent Institute Research Director Alex Tabarrok, because low interest rates and a limited supply of houses, two fundamental factors that drove up house prices from 1997 to 2004, are still with us today.

The credit crunch and slower economic growth are cause for concern, but they need not usher in a severe and long-lasting slump, Tabarrok argued last week in a New York Times op-ed. If financial markets correctly predict when and where housing prices will land, then lenders will resume their lending and economic growth can return to normal. On the other hand, if uncertainties in financial markets persist, then the credit crunch will continue and house prices will fall much lower.

Fortunately, homeowners and financial markets can alleviate their fears by focusing on the long run. “The typical homebuyer keeps a home for 10 years or more, so there is time for those who bought in 2005 and 2006 to weather the current decline in prices,” Tabarrok writes. “Those who bought at the top are unlikely to see any windfalls from house appreciation, but they will not necessarily suffer from buyers’ remorse.... The collapse of housing prices certainly feels painful, and for some homeowners, it will be. But the houses are still there, as good as ever. Most of the gains going up were paper gains, and most of the losses going down are paper losses.”

“Home Sweet Investment,” by Alexander Tabarrok (New York Times, 3/18/08)

Below-Market Housing Mandates as Takings: Measuring their Impact, by Edward J. Lopez, Edward P. Stringham, and Tom Means

Money and the Nation State: The Financial Revolution, Government and the World Monetary System, edited by Ken Down & Richard H. Timberlake, Jr.

Entrepreneurial Economics: Bright Ideas from the Dismal Science, edited by Alexander Tabarrok

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3) Time to Abolish the Federal Reserve?

Is the Federal Reserve System to be praised for its role in “saving” the economy by injecting liquidity into ailing financial markets? How does its reputation fare if one factors in its role in creating the problem in the first place? The Federal Reserve bears ultimate responsibility for the sub-prime mortgage mess and the ensuing credit crunch because it was the Fed’s loose monetary policy that made those bad investments possible, according to Alvaro Vargas Llosa, Senior Fellow at the Independent Institute and Director of its Center on Global Prosperity.

Through its loose monetary policy, the Federal Reserve’s Open Market Committee hoped to shore up markets in the wake of the dot-com and telecom bubble burst at the end of the 1990s. However, rather than stabilize markets, the Fed has created much instability. Taking credit for saving the economy from disasters of its own making is nothing new for the Fed—which is why Nobel laureate economists Milton Friedman and F. A. Hayek frequently criticized it harshly. Following Hayek, Vargas Llosa says it’s time to consider dismantling the central bank.

“If abolishing the Fed is politically inconceivable right now, there are less dramatic measures that can be taken on the road toward a definitive solution,” writes Vargas Llosa. “The most obvious one is to simply stop using the Federal Reserve to inflate the currency. If a crisis in which at least $400 billion has already been lost and millions of people have been badly hurt is not enough to set minds thinking audaciously, nothing will.”

“Should the Federal Reserve Be Abolished?” by Alvaro Vargas Llosa (3/19/08) Spanish Translation

“Gold Standards and the Real Bills Doctrine in U.S. Monetary Policy,” by Richard H. Timberlake (The Independent Review, Winter 2007)

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

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4) Iraq: Moving Forward and Getting Out

In an op-ed commemorating the five-year anniversary of the start of the Iraq war, Independent Institute Senior Fellow Ivan Eland argues that the decrease in violence in Iraq has less to do with the U.S. troop surge per se and more to do with prior ethnic cleansing and, especially, the fissure between Sunni insurgents and the group known as al-Qaeda in Iraq. Arming the Sunnis has brought the U.S. some short-term success, but in the long-term this will likely lead to a full-blown civil war, but perhaps not until President Bush leaves the White House.

Eland also restates his case for announcing the deadline for a U.S. troop withdrawal. Doing so is the best way to get Iraq’s hostile factions to negotiate a meaningful agreement for sharing power and oil revenues. An essential part of such an agreement, according to Eland, would partition Iraq and decentralize the government, which would reduce fears that a strong central government dominated by one ethnic group will repress others.

Eland closes with a list of lessons learned from past partitions. “First, regional boundaries don’t have to exactly mirror ethno-sectarian areas, but they should come as close as possible,” he writes. “The case of Northern Ireland shows that a large minority (Catholics), which could be perceived as a threat by the majority (Protestants), should not be stranded on the other side of the borderline. A small minority on the other side of the line will probably experience little violence (Protestants in Ireland). Second, the case of Kosovo demonstrates that boundaries must consider ethno-sectarian or tribal shrines and sites. Third, although drawing borders along ethno-sectarian divides should minimize population movements, some migration will likely be necessary. Such movements must be voluntary, can be encouraged through incentives and must be protected (as the violence in Indian-Pakistan in 1947 showed).”

"Five Years of War: Let the Country Divide, and Get Out," by Ivan Eland (San Diego Union-Tribune, 3/16/08) Spanish Translation

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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