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The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 12, Issue 46: November 16, 2010

  1. Fed Policy Risks Severe Devaluation and Retaliation
  2. New EPA Regulations Would Kill Jobs
  3. Abolish the Transportation Security Administration
  4. The Legacy of George W. Bush
  5. This Week in The Beacon

1) Fed Policy Risks Severe Devaluation and Retaliation

Will the Federal Reserve’s $600 billion bond-buying binge spur economic growth and restore employment to pre-recession levels? In a post for The Beacon, Independent Institute Senior Fellow Robert Higgs critiques Fed Chairman Ben Bernanke’s recent Washington Post op-ed in favor of a second round of “quantitative easing” (QE2)—i.e., artificial credit expansion. Bernanke, Higgs argues, makes a host of empirically unfounded claims and dubious inferences aimed to absolve the central bank of past wrongdoing and assure the public that it is doing what Congress has mandated that it do: keep employment high and keep inflation low and steady.

Here’s how Higgs characterizes Bernanke’s apologia: “In short, do not worry. Even though our record is replete with policy mistakes great and small, including those that played a central role in bringing about the present dire situation, we have complete confidence in our ability to micromanage the macroeconomy and, via our central planning of credit flows, the microeconomy, as well. The conditions that kept hyperinflation from breaking out during the past two years may be expected to persist indefinitely, allowing us to keep the inflationary Sword of Damocles from breaking its thread and destroying the economy.”

Independent Institute Senior Fellow Alvaro Vargas Llosa likens QE2 to economic nationalism, the monetary-policy equivalent of the protectionism that other countries (including China and Canada) have quietly enacted recently. “The United States is doing what every protectionist government does—trying to make its economy competitive by devaluing the currency, a perverse mechanism for making what comes in artificially expensive and what goes out artificially cheap,” he writes. “The many protests heard around the world on the eve of the G-20 meeting in South Korea this week signal the strong possibility that other major powers will eventually respond in kind.”

“Notes on Bernanke’s Apologia for QE2,” by Robert Higgs (The Beacon, 11/9/10)

“Stealth Protectionism,” by Alvaro Vargas Llosa (11/10/10) Spanish Translation

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

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

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2) New EPA Regulations Would Kill Jobs

The Environmental Protection Agency last week gave power companies and state governments new guidelines for ground-level ozone, a precursor of smog. Critics say the effect of the imposed reductions of ozone will be to halt new construction and eliminate an estimated 7.3 million jobs when the regulations go into effect.

The new regulations would cut the national ambient air-quality standard for ground-level ozone by up to 20 percent, but they would not improve public health appreciably, according to Independent Institute Senior Fellow William F. Shughart II.

“If we’ve learned anything from clean-air regulation to date, it is that there is no low-cost way of substantially curtailing ground-level ozone or greenhouse-gas emissions within a relatively short time frame which the EPA insists in necessary,” writes Shughart. “The EPA’s proposed ozone standard exemplifies arbitrary over-regulation that will destroy jobs and harm our economy without any offsetting benefit. Congress should block the EPA move.”

“EPA Could Destroy 7.3 Million Jobs,” by William F. Shughart II (Washington Examiner, 11/12/10)

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

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3) Abolish the Transportation Security Administration

Two recent articles written by Independent Institute scholars take aim at the Transportation Security Administration (TSA). In a piece on Forbes.com, Adjunct Fellow Art Carden advises Congress to abolish the agency before it becomes embroiled in partisan battles about health care or other issues. “For fiscal conservatives, it’s hard to come up with a more wasteful agency than the TSA,” writes Carden. “For privacy advocates, eliminating an organization that requires you to choose between a nude body scan or genital groping in order to board a plane should be a no-brainer.”

Senior Fellow Charles Peña stresses that the TSA is more about appearances than about making airlines safe from terrorist attacks. The agency is charged with screening all cargo destined for passenger planes, but it has failed in this task and it has hardly begun to screen cargo on cargo-only aircraft.

The agency, according to Peña, seems to focus on reducing the risk that a terrorist would duplicate the modus operandi of a previous attempt, such as that of the underwear bomber or the shoe bomber—as if people who have demonstrated craftiness are unable to adapt. “As long as we keep dealing with symptoms rather than the problem, much of what we do will be security theater,” writes Peña. “And perhaps the most important issue that we still refuse to acknowledge is an interventionist U.S. foreign policy—practiced by Democrats and Republicans alike—that breeds resentment and hatred in the Muslim world.”

“Full Frontal Nudity Doesn’t Make Us Safe: Abolish the TSA,” by Art Carden (Forbes.com, 11/14/10)

“TSA: Theater Security Administration,” by Charles Peña (11/5/10)

Winning the Un-War: A New Strategy for the War on Terrorism, by Charles Peña

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4) The Legacy of George W. Bush

Last week saw the release of Decision Points, a memoir by George W. Bush that focuses on key episodes during his presidency. Will history look more kindly toward the Bush years—or will Obama’s presidency overshadow that of his predecessor?

Independent Institute Senior Fellow Ivan Eland, author of Recarving Rushmore, a book that ranks the U.S. presidents, weighs in. “Right now, both Bush and Obama have had pathetic presidencies, but Obama has a slight edge, provided by a mildly less belligerent overall foreign policy,” writes Eland.

Although he gives Bush low marks for expanding Medicare by covering more prescription drugs for senior citizens (the first major expansion of entitlements since Lyndon Johnson) and for increasing federal spending in an effort to revive the economy (two policies surpassed by Obama’s passage of healthcare legislation and economic stimulus measures), Eland gives the former president even lower marks for his policies on Iraq and Afghanistan. Obama, in Eland’s assessment, is not quite as bad. “Obama has cut back on Bush’s torture of detainees but still allows a loophole for the CIA,” Eland writes. “[O]n civil liberties Obama is slightly better than Bush but not much, because he has continued most of the Bush administration’s unconstitutional policies.”

“Can W. Reinvent His Presidency?” by Ivan Eland (11/10/10)

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

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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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