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The Lighthouse


The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 17, Issue 15: April 14, 2015

  1. Will Federal Spending and the Tax Code Ever Stop Growing?
  2. Proposed ‘Doc Fix’ for Medicare Physicians Would Raise Deficit
  3. Solve Water Shortages with Market Pricing
  4. Compassion and the Free Society
  5. New Blog Posts
  6. Selected News Alerts



1) Will Federal Spending and the Tax Code Ever Stop Growing?

Thanks to year after year of binge spending, and the self-deception and duplicity that accompany such chronic excesses, the U.S. government owes creditors more than $18 trillion. This is an astronomical sum that slows down private investment and wealth creation. However, it’s not so large as to be mathematically impossible to pay off. Moreover, the federal government could pay down the national debt relatively painlessly if it limited its spending increases to the growth rate of gross domestic product, according to Independent Institute Research Fellow Craig Eyermann, the creator of the Government Cost Calculator at MyGovCost.org.

Had Uncle Sam kept the annual growth of federal spending to no more than 5 percent since the end of World War II, Americans would probably have no need to worry about enduring U.S. fiscal shortfalls. Instead, Washington has been spending “over three times the rate it can actually afford to spend,” Eyermann writes.

The result has been the federal government’s obsessive search for more and more tax revenue. And given the way a mixed economy operates, this has meant a huge increase in the size and complexity of the federal tax code. According to the publishers of the CCH Standard Federal Tax, the leading publication for tax professionals, in 1945 it took 8,200 pages in administrative guidelines and court decisions to explain the tax code to accountants and attorneys, whereas in 2014 it took 74,608 pages—“about 10 feet of shelf space for the printed version,” Eyermann writes. “It’s now growing at an average rate of about 1 foot every 6 to 7 years!”

The Tax Code Grows Bigger, by Craig Eyermann (MyGovCost News and Blog, 4/10/15)

A Simple Model for U.S. Spending Restraint, by Craig Eyermann (MyGovCost News and Blog, 3/31/15)

How to Rack Up $18 Trillion in Debt and How to Pay It Down, by Craig Eyermann (MyGovCost News and Blog, 3/27/15)

How much will the federal government cost you for the rest of your life? Visit the Government Cost Calculator at MyGovCost.org.

Download the free MyGovCost app for your iOS mobile device.

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2) Proposed ‘Doc Fix’ for Medicare Physicians Would Raise Deficit

This week the U.S. Senate will consider a bill to increase the federal government’s compensation for doctors who treat Medicare patients—so-called “doc fix” legislation. In their latest op-eds on healthcare policy for Forbes, Independent Institute Senior Fellows John C. Goodman and John R. Graham weigh in on this bill and the problems it is supposed to address.

Passage of so-called “doc fix” legislation has long been a periodic ritual in Washington. The problem these bills deal with goes back almost two decades. The Balanced Budget Act of 1997 mandated that federal compensation for doctors who see Medicare patients would increase at a rate roughly equal to the growth of national income. The physician lobby, however, has long argued that this is inadequate because medical costs have grown about twice as fast as national income. Consequently, Congress has routinely passed measures to make up the shortfall between medical costs and official Medicare reimbursement schedules. Had Congress not passed prior “doc fixes,” doctors today would be paid about 21 percent less than they’re getting to treat Medicare patients, which would have prompted many doctors to stop seeing Medicare patients altogether, John C. Goodman explains.

The latest “doc fix” legislation shows one reason why Obamacare is not likely to make good on its promise of genuine spending reductions. The president’s overhaul of American healthcare is supposed to cut Medicare spending by $716 billion over the next decade, but it can’t really do that if Congress authorizes higher reimbursement rates for Medicare doctors without enacting spending cuts elsewhere in the system. The latest legislative proposal falls far short of making such offsets: It would cost $175 billion over ten years and add $141 billion to the federal deficit. If it passes, this will mean that Congress has been more fiscally irresponsible than the Obama administration in dealing with the physician-compensation shortfall. If Congress passes the bill, John R. Graham writes, “it should not be trusted to make Medicare fiscally solvent down the road.”

Paying for the Medicare Doc Fix Is Easy, by John R. Graham (Forbes, 4/8/15)

The Doc Fix Is Small Change Compared to What Will Be Needed to Fix Obamacare, by John C. Goodman (Forbes, 4/7/15)

Needles of Panic? White House Fears Rejection of Boehner-Pelosi-Obama Medicare ‘Doc Fix’, by John R. Graham (The Beacon, 4/6/15)

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

A Better Choice: Healthcare Solutions for America, by John C. Goodman

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3) Solve Water Shortages with Market Pricing

Prolonged drought in parts of the United States have reduced water reservoirs to mere puddles. In California, which is suffering one of its worst dry spells on record, rainfall and snowfall have been so low that hydroelectric plants are generating only one-third of their usual power output. Many policymakers in parched states have called for reduced water consumption by households, but few have advocated the most effective approach to conservation: market pricing for water, including for agricultural uses.

“The basic problem is almost absurdly simple: water is underpriced,” Independent Institute Research Director William F. Shughart II writes in his latest op-ed. “Consumers and businesses thus have no incentive to use it wisely.”

Overall, agriculture accounts for 80 percent of the nation’s freshwater use, which is one reason we would benefit from efficient water usage on farms. Unfortunately, farmers often employ inefficient methods such as flood irrigation, a process that exposes vast quantities of water to evaporation. Also, many farmers enjoy subsidized water prices, which encourages them to grow water-insensitive crops, often in naturally dry environments. Allowing water prices to rise to market levels would encourage conservation and help to allocate water supplies to their highest-valued use. Unless these steps are taken, Shughart writes, “shortages will become even more widespread and more politically contentious as special-interest groups lobby for priority.”

Market Pricing vs. Water ‘Shortages’, by William F. Shughart II (American Thinker, 4/4/15)

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

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4) Compassion and the Free Society

Is a free society also a sympathetic and charitable society? Yes, if it is to remain free, according to Independent Institute Senior Fellow Robert Higgs and Adjunct Fellow Elizabeth Bernard Higgs. Moreover, the husband-and-wife team hold, a free society may not even be attainable unless a large segment of the population practices the virtue of compassion, including heartfelt personal engagement with the down and out. This idea, which is more radical than it might at first seem, runs counter to the notion that a free society can be achieved “merely” by getting almost everyone to abide by the so-called nonaggression principle (NAP), a moral injunction against the initiation of force or fraud.

“We have no doubt that such an embrace would transform the world for the better in countless ways,” Higgs and Higgs write in the Spring 2015 issue of The Independent Review. “Yet, as we see the matter, even a world in which everyone observes the NAP might still lack some essential features required for people’s flourishing and for the preservation of that rights-respecting wonderland.”

Some of these essentials, which contemporary advocates of individual liberty often neglect, are moral and psychological predispositions. “One such missing feature,” Higgs and Higgs continue, “is compassion for others—compassion not only as a feeling of empathy but also as a personal engagement in voluntary efforts to relieve others’ suffering and to act out our fellow feeling with all persons, not simply with those who are, either by their own efforts or by virtue of their good fortunate, already flourishing or at least getting along fairly well.”

Compassion—a Critical Factor for Attaining and Maintaining a Free Society, by Robert Higgs and Elizabeth Bernard Higgs (The Independent Review, Spring 2015)

Get your e-subscription or print subscription to The Independent Review today! (Print subscription includes FREE book.)

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5) New Blog Posts

From The Beacon:

From MyGovCost News & Blog:

State Employee Scam Burns Taxpayers
K. Lloyd Billingsley (4/13/15)

The Tax Code Grows Bigger
Craig Eyermann (4/10/15)

Bureaucrats Cheating Uncle Sam
Craig Eyermann (4/7/15)

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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  • MyGovCost.org
  • FDAReview.org
  • OnPower.org
  • elindependent.org