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The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 12, Issue 38: September 21, 2010

  1. What Is Washington’s Spending Costing You?
  2. It’s the Economic Rules of the Game, Stupid!
  3. Whatever Happened to the Fourth Amendment?
  4. Liberty at Stake in Venezuelan Elections
  5. This Week in The Beacon

1) What Is Washington’s Spending Costing You?

A new website created by the Independent Institute—located at www.MyGovCost.org—enables U.S. taxpayers to calculate the cost to themselves of major federal programs, such as Social Security, Medicare, and the economic stimulus package.

After a visitor to MyGovCost.org enters his or her age, income, and level of education, the website’s Government Cost Calculator estimates the person’s monthly and lifetime federal tax liability (in total or by federal program), along with the amount of money that he or she might have earned had those funds been invested in the stock market instead of going to pay for Uncle Sam’s spending habits. For example, the Calculator estimates that a recent college graduate earning $35,000 a year can expect a lifetime federal tax burden of approximately $610,000, averaging $886 in monthly taxes. If those dollars were invested and earned the same rate of return that the stock market has averaged since 1871, that young grad eventually would accumulate more than $4.2 million.

“Knowing the true cost of federal programs allows taxpayers to judge whether Congress is spending their money effectively,” says economist and Independent Institute Research Fellow Emily Skarbek, the director of the Government Cost Calculator. “Moreover, taxpayer awareness of federal spending creates a more transparent environment for new and existing legislation.”

MyGovCost.org

“Curbing Over-Indulgent Government,” by Emily Schaeffer Skarbek (Human Events, 8/30/10)

MyGovCost Facebook Page

MyGovCost Twitter Page

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2) It’s the Economic Rules of the Game, Stupid!

Business firms put lots of money at stake when they invest in the construction of a new factory, sink money into R&D, and hire swarms of new employees. In order to determine whether and when to undertake large risks, they need a stable political environment; they need to know that the rules of the game will not be changed. But when the political climate in Washington, D.C., creates an unusually high degree of political uncertainty about the profitability of new investment—for example, by raising the prospect of an array of new taxes and regulations in the midst of economic malaise—businesses get cold feet, and recovery stalls.

Independent Institute Senior Fellow Robert Higgs calls the phenomenon “regime uncertainty,” and he argues that its presence is reflected in today’s low numbers of business investment and hiring. Most mainstream economists resist acknowledging the existence of regime uncertainty because the concept is essentially qualitative and hence very difficult to squeeze into their quantitative models of the economy. They aren’t looking diligently for evidence because it would be too inconvenient to find any.

But the concept of regime uncertainty is rich in its empirical implications, as Higgs suggests in a recent post on The Beacon: “In my study of regime uncertainty over the past fifteen years, I have given weight to three independent forms of evidence: (1) specific legislative, executive, judicial, and regulatory actions the government is taking, the ideology embraced by major government actors and advisors, and, in light of basic economic logic, what investors might reasonably infer about the future security of their private property rights from the government’s actions and the ideology of its leading figures; (2) direct testimony by investors themselves, as well as relevant opinion surveys of businessmen, when available; and (3) changes in risk premiums demanded by investors in the corporate bond markets, as shown by changes in the slope of yield curves.” The economic mainstream should relish the opportunity to investigate a multifaceted concept with potentially profound implications for economic growth.

“Regime Uncertainty: Reports Keep Coming In,” by Robert Higgs (The Beacon, 9/12/10)

“Do the Post-Panic Changes in Corporate Bond Yield Curves Indicate Regime Uncertainty or Only Expectations of Increased Inflation?” by Robert Higgs (The Beacon, 9/1/10)

Depression, War, and Cold War: Challenging the Myths of Conflict and Prosperity, by Robert Higgs

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3) Whatever Happened to the Fourth Amendment?

The original meaning of the Fourth Amendment—the U.S. Constitution’s guarantee against unreasonable searches and seizures and its requirements for warrants—has been forgotten. Even legal scholars who seek to interpret the Constitution the way the Framers understood it have succumbed to this collective amnesia, according to Independent Institute Research Fellow Joseph R. Stromberg.

The decline of the Fourth Amendment did not begin with George W. Bush’s warrantless wiretaps or with the “drive-by” warrants issued by FISA courts, Stromberg explains in the September issue of The Freeman. Instead, it began in the mid-nineteenth century with the rise of modern policing. That development slowly altered the relationship between citizens and the courts that had been established by the common law tradition begun in England long before the American Revolution.

For decades after the ratification of the Fourth Amendment, private citizens and representatives of the court possessed the power to arrest criminal suspects—but only under very narrowly prescribed circumstances. Warrantless arrests and seizures, unlike today, were uncommon. A warrant specified the time, place, and items that could be searched or seized, and one could be obtained usually only if a crime had been witnessed or the warrant-seeker had personal knowledge that a crime had been committed. Interestingly, citizens retained the right to resist false arrest—which kept down the number of frivolous warrants!

“The Fourth Amendment and Faulty Originalism,” by Joseph R. Stromberg (The Freeman, 9/14/10)

The Pursuit of Justice: Law and Economics of Legal Institutions, edited by Edward J. López

To Serve and Protect: Privatization and Community in Criminal Justice, by Bruce L. Benson

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4) Liberty at Stake in Venezuelan Elections

Venezuelans will go to the ballot box on September 26 to vote on the composition of their National Assembly. Polls indicate that the opposition is slightly more popular than the government, though two-thirds of Venezuelans surveyed want Hugo Chavez not to seek another term next year.

Their disapproval is well-founded, and opposition groups are smart to participate in next week’s elections, rather than stage a boycott as they did in 2005. Simply put, the stakes in this year’s parliamentary elections are too high; opposition voters must turn out in large numbers if they want to expose, and thereby help curb, Chavez’s authoritarianism, according to Independent Institute Senior Fellow Alvaro Vargas Llosa.

“Given the shady electoral body, the campaign of violence and intimidation against critics, and various restrictions imposed on the news media and other organizations, there is scant chance that the official tally will match the number of real votes commanded by the coalition,” writes Vargas Llosa. “If the opposition gets a third of the Assembly, Chavez will have to disqualify, throw in jail, beat up or expel a very significant number of elected parliamentarians belonging to a high-profile body based in Caracas—as opposed to a governor here or a few mayors there.”

“The Stakes in Venezuela’s Vote,” by Alvaro Vargas Llosa (9/15/10) Spanish Translation

Lessons from the Poor: Triumph of the Entrepreneurial Spirit, edited by Alvaro Vargas Llosa

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

The Che Guevara Myth and the Future of Liberty, by Alvaro Vargas Llosa

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5) This Week in The Beacon

Stay informed. Get heard. Read and comment on the Independent Institute blog.

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