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The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 14, Issue 18: May 1, 2012

  1. Medicare Liabilities Are Worse than They Look
  2. Withdraw Troops, Cut Alliances, Save Money, and Save Lives
  3. Natural Gas: The Future of Energy?
  4. Everyday Entrepreneurship
  5. New Blog Posts

1) Medicare Liabilities Are Worse than They Look

Sixty-three trillion dollars. That’s the sum of unfunded liabilities for both Social Security and Medicare, according to the latest trustees report. In fact, the shortfall is almost twice as large as that. This is because when the Affordable Care Act was signed, more than $50 trillion dollars of future Medicare spending was cut from that entitlement program. But this would result not in a reduction of future spending, but in a shift away from seniors and toward younger people. It’s difficult to believe that Congress would muster the political will to sustain reductions in Medicare spending, according to Independent Institute Research Fellow John C. Goodman.

“In fact, the possibility of ‘Obamacare’ policies cutting Medicare’s unfunded liability in half is so unlikely that Medicare’s chief actuary, Richard Foster, provides an ‘alternative’ report, in addition to the official trustees report, in which he projects much higher levels of Medicare spending,” Goodman writes in his latest op-ed for Politico.

Meaningful reform of Medicare, Goodman argues, would require changing it from a pay-as-you-go system into one in which workers pay their own way. Employees (and employers) would need to save 4 percent of payroll in order to reach a point at which each generation of retirees pays for most of their post-retirement healthcare without an increase in payroll taxes. The boost in private savings would bring significant additional benefits: it would support increases in physical capital and higher wages, as Independent Institute Research Fellow Burt Abrams explains on MyGovCost.org. In contrast, the pay-as-you-go Medicare system (like Social Security) reduces the incentive for people to save for their retirement years, robs young people of their own earnings, and slows the rise of the standard of living.

Social Security Going Broke, by John C. Goodman (Politico, 4/25/12)

Pay-As-You-Go Government: Inter-Generational Robbery, Burt Abrams (MyGovCost.org, 4/30/12)

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2) Withdraw Troops, Cut Alliances, Save Money, and Save Lives

With 3,021 civilians killed, 2011 was the fifth straight year of rising civilian casualties from the U.S. war effort in Afghanistan, according to the United Nations. The American people should keep that in mind when White House officials characterize wartime indecencies—images of American soldiers desecrating corpses, for example—as unrepresentive of the larger war effort. The war’s horrors—its moral lapses and economic wastefulness—should prompt Americans to rethink U.S. foreign policies, Ivan Eland and Anthony Gregory argue in recent op-eds.

America’s costly alliances—in Afghanistan and beyond—have drained the United States of scarce resources at a time when the nation is bleeding financially. They make no sense on economic grounds. “It is cheaper to simply pay episodically higher prices for such things as oil than to build even more expensive military forces to secure something that doesn’t need securing,” writes Eland, director of the Center on Peace & Liberty at the Independent Institute.

Moreover, if we value the moral goodness of a free society, it is counterproductive to blame the messenger—the press—as the White House has done with regard to photos of U.S. troops alongside Afghan corpses. The Fourth Estate should serve to keep the government accountable by publishing scandalous images that are consequences of U.S. policies, but the public must not allow itself to become so focused on scandalous atrocities that it losses sight of the everyday indecencies of war itself. Writes Anthony Gregory, research editor at the Independent Institute, in his latest piece for the Huffington Post: “Eventually, the U.S. military will withdraw from Afghanistan, and perhaps from its imperial presence throughout the world. Only then will we rid of the indecencies intrinsic to war.”

Only One Way to End the Indecencies of War, by Anthony Gregory (Huffington Post, 4/26/12)

Save Money by Ending Costly Alliances, by Ivan Eland (4/18/12)

No War for Oil: U.S. Dependency and the Middle East, by Ivan Eland

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3) Natural Gas: The Future of Energy?

The price of natural gas has plummeted since its peak in mid-2008. Now it’s almost as cheap as steam coal. Will this trend continue? Independent Institute Research Fellow S. Fred Singer investigates.

Natural-gas prices depend on scores of factors, including the supply of energy substitutes such as crude oil, but the regulatory and political environment is an important determinant, according to Singer. “The first step [to maintaining low prices] is to have a White House that strongly believes in the need for low-cost energy to promote economic growth, increase prosperity, and fight poverty,” he writes.

Private investment in gas extraction can be sensitive to political changes. November’s elections, Singer continues, “may bring about government leadership essential to assure the right business climate for a bright U.S. energy future.”

Cheap Natural Gas Heralds an Energy Revolution, by S. Fred Singer (American Thinker, 4/11/12)

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4) Everyday Entrepreneurship

One needn’t look to a Steve Jobs or a Bill Gates for examples of successful entrepreneurship. Opportunities to buy low and sell high or profitably meet a previously unmet consumer demand are all around us. At the recent conference of the Association for Private Enterprise Education in Las Vegas, Independent Institute Research Fellow Art Carden discovered a simple way to earn a buck—97 cents, actually—and it didn’t even require a license to operate a casino. What entrepreneurial activity occupied Carden?

He calls it “Starbucks arbitrage”: buying two Grande Dark Roast coffees at one location in Harrah’s for $7.03, and selling them to customers standing in a longer line at a different Starbucks counter elsewhere in the casino. It was a small profit for a small risk, but it demonstrates important economics lessons, he explains in the Washington Examiner.

“According to Deirdre McCloskey, this is the key to the wealth of the modern world,” Carden writes. “That we live in a world in which buying low and selling high is at least tolerated encourages economic growth. The great irony of this is that merchants tend to be scorned or otherwise not trusted. But who is the real public servant: the politician deciding he will take more of your money by force so that he can accomplish his goals, or the merchant who decides he wants more of your money and offers you a hot cup of tasty coffee in return?”

Sunday Reflection: Entrepreneurs Serve the Public Better than Politicians, Art Carden (The Washington Examiner, 4/21/12)

Entrepreneurial Economics: Bright Ideas from the Dismal Science, edited by Alexander Tabarrok

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5) New Blog Posts

From The Beacon:

From MyGovCost News & Blog:

You can find the Independent Institute’s Spanish-language blog here.

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