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The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 19, Issue 21: May 23, 2017

  1. Exposing Obamacare’s Big Lie
  2. Tax Reform Now!
  3. Financial Meltdown Ahead?
  4. France Must Reform or Risk Le Pen’s Comeback


1) Exposing Obamacare’s Big Lie

In a recent op-ed at Forbes, Independent Institute Senior Fellow John C. Goodman and co-author Linda Gorman take on the latest Big Lie put forth by advocates of Obamacare: the notion that repealing the 2010 health law would kill 24,000 to 43,000 people a year. The claim has been made by various pundits, but it comes from a few studies that have repeated a mistake first made in a medical journal article published almost 25 years ago, Goodman and Gorman explain.

The false equation of health coverage and health outcomes has a long pedigree. In 1993, the Journal of the American Medical Association published an article that compared results from a survey in 1987 with those of a survey of the same people conducted in the early 1970s, and came to an ominous conclusion about the relationship between health coverage and death. The authors concluded that being uninsured raises the likelihood of death by 25 percent. But their inference was erroneous; they carelessly assumed that auto fatalities, suicides, and gun deaths resulted from the coverage status of the deceased. A 2002 report from the Institute of Medicine took the erroneous 25 percent rate and used it to calculate a new estimate of deaths-by-absence-of-coverage. A 2008 study by the Urban League made the same mistake, and so on.

In contrast, a careful estimate from the respected economists June and David O’Neill “concluded that uninsured people with lower incomes were only 3 percent more likely to die over a 14-year period than those with health insurance,” Goodman and Gorman writes. The uninsured in other income groups had no statistically significant greater chance of dying than the insured. “Later studies support this finding,” Goodman and Gorman write. The 2008 Oregon Health Experiment, for example, found no differences in common clinical health outcomes between low-income people who won access to Medicaid through a state lottery and those who did not.

Does Lack of Health Insurance Kill?, by John C. Goodman and Linda Gorman (Forbes, 5/11/17)

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

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

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2) Tax Reform Now!

Tax reform is supposed to be a top priority for Congress and the Trump administration—and with good reason. Americans spend an estimated 6 billion to 9 billion hours per year dealing with taxes. Also, U.S. corporate tax rates are the highest in the developed world: 39 percent when state and federal taxes are combined. “Fortunately, several tax reform plans are now on the table that address many of the issues that plague the current tax system,” writes Independent Institute Research Director William F. Shughart II.

A plan in the House of Representatives would drop the corporate tax rate to 20 percent, and the Trump plan would lower the top rate even further—to 15 percent. This would raise wages by 7.7 percent and boost employment by 1.7 million jobs, according to the Tax Foundation. Although there is no guarantee that the final legislation will yield such benefits, Shughart is encouraged that Texas Representative Kevin Brady, who chairs the House Ways and Means Committee, says his group will focus on a pro-growth approach to tax reform.

“That’s welcome news as no comprehensive tax reform has happened in the United States since the Ronald Reagan era,” Shughart writes. “But we now have a promising opportunity for Congress and the White House to come together on a consensus plan that brings real change to the tax code. It’s time to put the nation’s economy back on a winning streak.”

An Economic Winning Streak Through Tax Reform, by William F. Shughart II (Inside Sources, 5/17/17)

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

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3) Financial Meltdown Ahead?

The U.S. stock market has mostly recovered from last week’s drop, but to many observers the writing on the wall is clear: We are in a financial bubble that is becoming more prone to bursting with each passing day. In a recent piece for The Beacon, Independent Institute Senior Fellow Alvaro Vargas Llosa explains why he concurs.

The following, he argues, are some of the warning signs. Due in large part to the low-interest-rate policies of the world’s central banks, U.S. corporations have issued a staggering $7 trillion in debt over the past 5 years. Total credit card debt now exceeds its 2009 peak. Student loan debt is $1.4 trillion and auto loans are close behind. If those are signs of a bubble, the following may be signs of an imminent collapse. Auto loans are defaulting in growing numbers. One leading credit card issuer, Capital One, has written off an exceptionally high 5 percent of its outstanding loans. Banks are cutting back on corporate loans. And Wall Street analysts are predicting a wave of high-yield bond defaults.

“One can never tell exactly when a bubble will burst or which corner of the financial system will be the epicenter of the earthquake,” Vargas Llosa writes. “But if and when these looming bubbles explode, the main culprit will be the irresponsible policies that were supposed to prevent future bubbles and that created the perfect storm of moral hazard, easy money, and cheap credit once again.”

Another Bubble in the Making?, by Alvaro Vargas Llosa (The Beacon, 5/18/17)

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

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4) France Must Reform or Risk Le Pen’s Comeback

Earlier this month, French “centrist” presidential candidate Emmanuel Macron trounced his “populist” rival Marine Le Pen with a decisive 66 percent to 34 percent victory. But Macron’s electoral win doesn’t guarantee the end of Le Pen’s political career. Indeed, Le Pen and her National Front platform could return with a vengeance unless the new president enacts major reforms that revive the economy, according to Independent Institute Senior Fellow Ivan Eland.

Economic revival requires slaying the government beast. Excessive government spending has made the private sector a secondary player in the French economy, Eland explains in an op-ed for the Huffington Post. Taxes are high and youth unemployment is a staggering 24 percent. Macron’s predecessor, socialist Francois Holland, tried to spur employment with temporary payroll tax credits to encourage hiring. Macron will need to make them permanent—and go even further to improve the labor market. He will also need rethink his $55 billion stimulus plan so he can reduce taxes without sending the country to debtor’s prison. Anything less than what Eland calls a “wholesale slaughter of the state sector” will perpetuate France’s economic malaise and keep Le Pen’s political future alive.

“The bottom line: To permanently nail the coffin of the Le Pen proto-fascist vampire, Macron must first drive in the stake of radical economic reforms to enable a much freer economy in France to flourish,” Eland concludes.

Did the Outcome of the French Election Merely Postpone Le Pen?, by Ivan Eland (Huffington Post, 5/15/17)

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

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