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The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 11, Issue 29: July 20, 2009

  1. Slash the Defense Budget
  2. The Feds Want You to Drive Less
  3. Taxation without Representation Unfair to Internet Retailers
  4. Aiding the World’s Worst Dictators
  5. This Week in The Beacon

1) Slash the Defense Budget

According to the New York Times, the Bush administration is responsible for 53 percent of the gargantuan $1.2 trillion annual budget deficits projected by the Congressional Budget Office, whereas the Obama administration is responsible for only 10 percent. (The economic recession gets blamed for 37 percent of the budget gap.) However, those percentages mask the fiscally disastrous consequences of the federal spending binge that is taking place under Obama and the new Congress, according to Independent Institute Senior Fellow Ivan Eland.

“Obama’s budget would double the projected deficit over the next 10 years,” Eland writes in his latest op-ed. “By 2019, federal spending is projected to be an eye-popping quarter of the nation’s GDP.” Unless the government gets its fiscal house in order, Eland continues, the consequences could be high inflation and economic stagnation to a degree that would make the stagflation of the 1970s “look like an economic picnic.”

Lawmakers must cut both entitlements and non-entitlements, the largest component of which is defense spending. That will require overcoming the vested interests that support wasteful weapons systems and the foreign-policy elites who push for grandiose interventionist goals across the globe. Scrapping outmoded weapons systems and excising total payroll are essential. “Thus, instead of expanding the Army,” Eland writes, “the nation needs to dismantle all forces stationed abroad on land and sea and some of those based at home.”

“To Mitigate Economic Armageddon: Slash the Defense Budget,” by Ivan Eland (7/13/09)

Partitioning for Peace: An Exit Strategy for Iraq, by Ivan Eland

Recarving Rushmore: Ranking the Presidents on Peace, Prosperity, and Liberty, by Ivan Eland

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

Putting “Defense” Back into U.S. Defense Policy, by Ivan Eland

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2) The Feds Want You to Drive Less

Should federal bureaucrats and lawmakers force Americans to reduce their automobile usage? Transportation Secretary Ray LaHood said recently he wants to “coerce people out of their cars,” and two pieces of legislation circulating through Congress would promote that goal, according to Independent Institute Research Fellow Gabriel Roth.

In an op-ed for the Wall Street Journal, Roth explains that these bills would pressure people to drive less by increasing the prices of cars and gasoline, and by increasing traffic congestion on the nation’s highways. The lawmakers sponsoring that legislation seem to think their bills would result in greater usage of public transportation, but that would be problematic for (at least) two reasons: public transportation requires heavy taxpayer subsidies, and it’s often too slow or too inconvenient to be a viable option for many commuters.

Instead of hampering road transportation, Congress should liberate it from federal control. One step in this direction, according to Roth, would be to “allow states to opt out of the federal financing system” for highways. Local preferences would then supplant the dictates of federal bureaucrats. “The vast majority of road users would benefit from such a change,” Roth writes.

“Pay More, Drive Less, Save the Planet,” by Gabriel Roth (Wall Street Journal, 7/6/09)

Street Smart: Competition, Entrepreneurship, and the Future of Roads, edited by Gabriel Roth

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3) Taxation without Representation Unfair to Internet Retailers

“Unwilling to cut spending in the face of shrinking revenues, state governments nationwide are getting creative about taxing purchases over the Internet,” writes William F. Shughart II, Senior Fellow at the Independent Institute, in a new op-ed. North Carolina, for example is considering legislation that would require companies with local “market affiliates” to collect state sales taxes purchased from remote retailers. Consequently, Amazon.com has dropped its North Carolina affiliates, and other Internet retailers are threatening to leave too.

Sales taxes on out-of-state Internet retailers would level the playing field, its supporters claim. In fact, local bricks-and-mortar retailers have competitive advantages that “e-tailers” lack, such as the ability to offer customers the opportunity to “touch and feel” their products and to accept immediate delivery. Moreover, Shughart notes, taxing Internet sales imposes an unfair political burden on sellers from other states: taxation without representation.

Writes Shughart: “When the playing field is leveled by forcing Internet companies to raise their prices by collecting sales taxes and remitting them to the treasury of the state where the purchaser resides, the inter-jurisdictional tax-rate competition is short-circuited and taxpayers become more vulnerable to exploitation by big government.” The power to tax is the power to destroy. Thus, as Shughart concludes, “The Internet is one critical constraint on that power.”

“Taxing Internet Sales Is a Recipe for Big Government,” by William F. Shughart II (Daily Sun News, 7/13/09)

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

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4) Aiding the World’s Worst Dictators

The road to hell, someone once said, is paved with good intentions. This person could have been talking about government-to-government development assistance. By 2007, the wealthiest countries had given the world’s worst dictators $105 billion in development aid, but that “investment” had yielded zero return in terms of meaningful economic, social, or political progress. Worse, development assistance has solidified dictators in their position of power, according to Christopher J. Coyne and Matt E. Ryan, authors of “With Friends Like These, Who Needs Enemies? Aiding the World’s Worst Dictators” (The Independent Review, Summer 2009).

Take the case of Sudan. Its government, ruled by dictator Omar al-Bashir, is infamous for its corruption, violence, and violations of basic rights, especially in Darfur. Nevertheless, the developed countries gave al-Bashir nearly $7 billion in development assistance from 1989 to 2006, including about $2.7 billion from the U.S. government, according to Coyne and Ryan. Moreover, although Sudan remains on the U.S. State Department’s list of countries that sponsor international terrorism, donor governments have pledged an additional $7 billion.

“It is difficult to argue that the significant aid provided to the Sudanese government has had any positive impact,” write Coyne and Ryan. “The country is still ruled by a brutal dictator, and its political institutions remain unreformed.... The bottom line is that if developed countries’ goal is to foster liberal economic, political and social institutions abroad, they should stop providing aid to the world’s worst dictators.”

“With Friends Like These, Who Needs Enemies? Aiding the World’s Worst Dictators,” by Christopher J. Coyne and Matt E. Ryan (The Independent Review, Summer 2009).

Subscribe to The Independent Review. (Scroll down webpage for Special Internet Offer.)

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5) This Week in The Beacon

If you haven’t done so yet, please consider connecting with the Independent Institute by becoming a Fan via Facebook and by following us on Twitter.

Here, now, are the past week’s offerings from the Independent Institute’s blog, The Beacon:

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