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The Lighthouse is the weekly email newsletter of the Independent Institute.
Subscribe now, or browse Back Issues.

Volume 14, Issue 19: May 8, 2012

  1. Water and Markets Flow Together in Aquanomics
  2. Healthcare Costs and Obamacare
  3. The Real Threat: Pressures to Engage U.S. Military
  4. Next Stop on the Highway of Political Pork
  5. New Blog Posts

1) Water and Markets Flow Together in Aquanomics

Water shortages and poor water quality are looming threats in many developing countries. By contrast, water supplies and water quality have increased in much of the United States due to a specific policy innovation: water markets and market-like exchanges. The growing participation of wildlife agencies and conservationists in water markets and exchanges is especially fascinating, considering that many hardcore environmentalists disdain markets. This trend is examined in detail in the new Independent Institute book, Aquanomics: Water Markets and the Environment, edited by B. Delworth Gardner and Randy T. Simmons.

How big a deal are water markets for wildlife agencies and conservationists? From 1987 to 2007, more than 2,500 transactions involving so-called “instream rights” were completed in Arizona, Colorado, Idaho, Nevada, Oregon, and Wyoming, with total expenditures exceeding $530 million. Clearly, these groups see benefits to buying rights to ensure water flows that support healthy ecosystems. And yet although these trends are encouraging, the contributors to Aquanomics explain that water markets face serious challenges: changes to federal and state laws, the expanding public-trust doctrine in the courts, and the assertions of new stakeholder rights—these are weakening the enforcement of contracts and property rights in water. For water markets to live up to their full potential, more regulators and conservationists must learn how a market-based system of water rights can reduce waste and pollution, and enhance water flow, water quality, and ecosystem management.

Aquanomics also examines other emerging topics in water policy, such as dam removal. It offers a framework to rationally evaluate proposals to decommission the estimated 79,000 dams in the United States deemed to pose “high” or “significant” risks in the event of failure. It also offers several valuable lessons regarding California water issues, such as the conflict over the Sacramento–San Joaquin River Delta and the encouraging history of groundwater management in the Los Angeles Basin; these are lessons applicable outside the Golden State. Aquanomics offers both descriptive and prescriptive analyses that support the case for water markets and property rights. Filled with fresh insights, it will quench the thirst of readers interested in the world’s most vital natural resource.

Aquanomics: Water Markets and the Environment, edited by Randy T. Simmons and B. Delworth Gardner

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2) Healthcare Costs and Obamacare

Several new reports from the Congressional Budget Office and the RAND Corporation shed light on healthcare costs, and one report—from the White House—sheds light on government propaganda, according to Independent Institute Research Fellow John C. Goodman.

Starting with the bad first, the Obama administration released a report—on the eve of the Medicare Trustees report—that paints a rosy picture of costs under the Affordable Care Act. The administration claims that the healthcare overhaul will save taxpayers $200 billion. However, it fails to mention that its demonstration projects have produced no serious savings and are unlikely to do so in the future (according to CBO), and that payment reductions to Medicare Advantage plans will push 7.5 million enrollees into more expensive Medigap insurance (according to Medicare’s Actuary). And there are other material omissions from the White House report, which Goodman characterizes as an exercise in political “spin”—and he believes he’s being charitable.

Meanwhile, a recent study from RAND found that private employers are lowering costs by up to 30 percent. They are doing that by making employees responsible for more of their own healthcare bills, such as via high-deductible policies offered in conjunction with Health Savings Accounts. Critics have argued that HSAs result in poorer health outcomes. The RAND study found otherwise. “Not only did spending go down by as much as 30 percent,” Goodman writes, “there was no noticeable decrease in quality and no discernible difference in outcomes among various income groups. This was true even for high-risk families (those including a family member with a chronic condition such as heart disease, cancer, diabetes, or kidney disease).” Goodman also lays to rest another criticism of HSAs—the idea that individuals have little bargaining power in healthcare markets. Writes Goodman: “Individuals with HSAs typically pay the same rates their employers have negotiated, regardless of whether the employee or the employer pays the bill.”

Power to the Patient, by John C. Goodman (The Daily Caller, 5/1/12)

Is Obama Cooking the Medicare Books?, by John C. Goodman (Townhall.com, 5/3/12)

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3) The Real Threat: Pressures to Engage U.S. Military

When George W. Bush succumbed to pressure from neoconservatives and authorized the invasion of Iraq, he inadvertently strengthened the strategic position of its powerful neighbor. “The war increased the influence of America’s greatest nemesis in the Middle East—Iran—and has left an Iraq that is moving back to dictatorship and maybe even a return to civil war,” writes Ivan Eland, director of the Independent Institute’s Center on Peace & Liberty. Unfortunately, this is a pattern in U.S. foreign policy: policymakers repeatedly cave in to pressure groups that agitate for armed intervention in a region of no strategic importance to vital U.S. interests. The latest example? The recent dispatching of 100 U.S. special forces to central Africa to pursue Joseph Kony and the Lord’s Resistance Army.

We are already seeing this mission backfire. According to the United Nations, Kony’s small militia (approximately 300 fighters) has broken into smaller bands and launched more attacks since the arrival of U.S. troops. Even if the United States were to limit its role to merely advising and assisting local governments’ efforts to neutralize Kony, this could have disastrous results: the U.S.-trained forces could create even worse havoc in the region, as when a Mali national trained by the American military overthrew the democratically elected regime in that beleaguered nation.

Getting back to Iran, in a piece published last week in the Huffington Post, Independent Institute Research Editor Anthony Gregory assesses the risk to the United States posed by that country. Although he finds much to despise about the regime in Tehran, Gregory argues that it poses no threat to the United States. A “bomb Iran” coalition advocates direct attacks against Iran’s nuclear facilities, but the evidence of a nuclear weapons program is lacking, according to Gregory. “Just as 70 percent of Americans polled once thought Saddam was behind 9/11, though Bush never made this claim, a strikingly similar percentage of Americans believe Iran has nuclear weapons even though neither Bush nor Obama ever said so,” he writes.

American Foreign Policy: Have Gun, Will Travel, by Ivan Eland (5/2/12)

Is Iran Really a Threat?, by Anthony Gregory (5/1/12)

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

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4) Next Stop on the Highway of Political Pork

Will Congress get its act together and pass a highway bill that will steer us away from political pork? New legislation pending in the U.S. Senate and House of Representatives doesn’t offer us much hope, according to Independent Institute Research Fellow Gabriel Roth, in a symposium on transportation policy published by the National Journal.

The bills would make it easy for highway funds to be mismanaged because they abandon the “user pays” principle for financing transportation, notes Roth, editor of the award-winning book Street Smart: Competition, Entrepreneurship, and the Future of Roads. Moreover, the sheer volume of the legislation—more than 1,600 pages—ensures that few if any members of Congress will have read it before it goes to a vote. This virtually guarantees the absence of economic rationality and the presence of special-interest influences. The bills also discourage toll roads and private financing.

“These deficiencies strengthen the suspicion that transport is too important to be left to the vicissitudes of politics, and would be better provided by private markets, as are food, water, and other necessities,” Roth writes. But such reform is unlikely to come anytime soon. “But might it be reasonable to hope that no deal will be made this year, and that a future congress will legislate a path to turn back transport financing to the states, some of which would require travelers to pay for what they use? Might not the private sector then be able to provide the facilities that users were prepared to pay for, even without having to read 1,600 plus pages of federal legislation?”

But Is the System Really Worth Keeping?, by Gabriel Roth (National Journal, 4/23/12)

Street Smart: Competition, Entrepreneurship, and the Future of Roads, edited by Gabriel Roth

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5) New Blog Posts

From The Beacon:

From MyGovCost News & Blog:

Changing the Rules of Welfare
Craig Eyermann (5/7/12)

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

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