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The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 19, Issue 7: February 14, 2017

  1. New Flaws in Trump’s Refugee Plans?
  2. Voodoo Economics on Obamacare Jobs
  3. Who Should Guide the Federal Reserve?
  4. Scandal Exposes Government Bribes in Thirteen Countries
  5. Independent Updates


1) New Flaws in Trump’s Refugee Plans?

Donald Trump may have a plan his supporters hope will dampen the criticism that his executive order on entry into the United States is particularly callous toward Syrian refugees. The president is reportedly trying to enlist Arab allies in the creation of “safe zones” that would stem the exodus of Syrians under fire from both the Assad regime (and its Russian ally) and ISIS. Such a plan, however, could prove disastrous for the United States, according to Independent Institute Senior Fellow Ivan Eland.

“Setting up a safe zone could very well require the insertion of U.S. ground forces and the tangle of American air forces with those of nuclear-armed Russia,” Eland writes in the Huffington Post. The possibility of getting stuck in a self-created quagmire in Syria is, of course, not the only avoidable problem with the Trump administration’s plans for refugees.

According to Independent Institute Research Fellow William J. Watkins, Jr., the White House might have avoided the legal setback it suffered last week, when the 9th Circuit Court of Appeals ruled against the travel ban. Had Executive Order 13769 targeted only noncitizens not already in the United States, rather than also affecting legal permanent residents and noncitizens already here, it might well have succeeded. That’s because, Watkins argues, the president can lawfully restrict entry of that first category of travelers, under the authority of section 1182 of the Immigration and Nationality Act. “One can easily dislike or disagree with this statute for giving a president too much power; however, it is on the books and seems to clearly govern Mr. Trump’s travel ban,” Watkins writes.

Trump’s Entry Ban Is Unneeded and Wrong, by Ivan Eland (Huffington Post, 2/7/17)

Ninth Circuit and the Immigration Order: One Thing Missing, by William J. Watkins, Jr. (The Beacon, 2/9/17)

The Economics of Immigration: Market-Based Approaches, Social Science, and Public Policy, edited by Benjamin Powell

Crossroads for Liberty: Recovering the Anti-Federalist Values of America's First Constitution, by William J. Watkins, Jr.

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

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2) Voodoo Economics on Obamacare Jobs

A recent study, published by George Washington University’s Milken Institute School of Public Health, claims that repealing the Affordable Care Act would eliminate a whopping 2.6 million jobs in five years. The study may be a novel defense of Obamacare, but it is hardly sensible, according to Independent Institute Senior Fellow John R. Graham. The study, or at least a common interpretation of it, commits at least two economic fallacies.

The first is a misplaced emphasis on Obamacare’s “multiplier effect.” Yes, it’s true; government spending on Obamacare stimulates the economy, as its dollars are spent directly and indirectly on hospitals, doctors, insurance, construction, retail, and miscellaneous support services. This spending does indeed contribute to employment in the affected industries. However, the same is true of private spending. To focus on the current volume of government spending (and related employment), while ignoring the effects of private spending and related job creation that would otherwise occur—this is a classic example of the myopia that Frederic Bastiat diagnosed in his essay, “What Is Seen and What Is Not Seen.”

The second flaw is the implicit assumption that the current level of employment in health services is somehow optimal. Such a claim is without basis. It’s impossible even to conceive of what an “optimal employment level” in a particular sector would be, except perhaps for the abstract notion of whatever employment level (or changing patterns) would be established in the absence of government intervention. “Republican politicians need to accept the fact that some industries can have too many workers and that health services is surely one of them,” Graham writes. “Health reform that focuses on patients’ needs, not preserving health service jobs fattened by Obamacare, will also help the rest of the economy.”

Voodoo Employment Econ Threatens Health Reform, by John R. Graham (American Thinker, 1/26/17)

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

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

The Sessions-Cassidy Health Plan, by John C. Goodman (8/25/16)

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3) Who Should Guide the Federal Reserve?

The Federal Reserve Board could undergo a profound shift away from the thinking that has guided monetary policymakers and bank regulators ever since the financial crisis of 2008. That’s because Donald Trump is expected to fill several vacancies on the body that directs the nation’s central bank. While the topic is famous for sounding dry, the consequences of a president’s picks for the Fed’s Board of Governors can be monumental for the nation’s economy.

An obvious replacement for Chair of the Board, a position currently filled by Obama pick Janet Yellen, is Stanford professor John B. Taylor. “He is a prominent hawk on inflation and budget deficits, generally opposes the Bernanke-Yellen policy of Federal Reserve aggrandizement known as ‘Quantitative Easing,’ and is wary of out-of-control ‘entitlement’ spending,” noted economist J. Huston McCulloch writes at The Beacon. “Taylor may come close to 99% name recognition among economists, and is highly respected even by those who disagree with his free-market policies.”

Yellen won’t be up for reconfirmation as Fed Board Chair for another year, but McCulloch urges that Trump nominate Taylor to the Board immediately, to fill an existing vacancy and so he can have input on Fed policies as soon as he would be confirmed by the Senate. McCulloch also recommends the appointments of former FDIC Chair Sheila Bair and Richmond Fed President Jeffrey Lacker, and rails against the likely nomination of financial executive David Nason, a favorite of Wall Street. “Nason was a mastermind of the bailouts, and as such, putting him in charge of bank supervision would be like placing the fox in charge of the henhouse,” McCulloch writes. “It is small wonder that Wall Street loves him.”

Filling the Federal Reserve Board Vacancies?, by J. Huston McCulloch (The Beacon, 2/11/17)

Boom and Bust Banking: The Causes and Cures of the Great Recession, edited by David Beckworth

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

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4) Scandal Exposes Government Bribes in Thirteen Countries

In a corruption scandal of epic proportions, a Brazilian construction firm has been assessed with a $3.5 billion fine. The firm, Odebrecht, was found to have “paid $788 million in bribes to obtain government contracts and/or ensure the passage of friendly legislation in 12 countries,” writes Independent Institute Research Fellow Alvaro Vargas Llosa. “It’s a colossal case of old-style cronyism that has sent business tycoons and some politicians to jail, and has former president Lula da Silva in serious trouble.”

What’s particularly interesting is that Brazil’s state-run development bank at the heart of the scandal was created partly in order to reduce corruption. At least that has been the official line. “The propaganda maintained that this was the only way to reverse oligarchic rule,” Vargas Llosa continues. Because the corruption ran so deep, the scandal came to light “only when the United States and Switzerland intervened,” according to Vargas Llosa.

Fortunately, although Latin America’s democratic and populist reforms were insufficient to prevent the scandal, its exposure gives renewed hope for meaningful reform. “The moral, political, and judicial purgatory in which the institutions of many countries find themselves could be the beginning of a much-needed cleansing process,” Vargas Llosa concludes.

Lessons from Odebrecht, by Alvaro Vargas Llosa (InsideSources.com, 2/7/17)

Global Crossings: Immigration, Civilization, and America, Alvaro Vargas Llosa

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

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5) Independent Updates

The Beacon: New Blog Posts

MyGovCost: New Blog Posts
Featured Video
News Alert

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