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The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 14, Issue 31: July 31, 2012

  1. A Silver Lining in the Supreme Court Decision?
  2. Emergency Powers Corrode Liberty and Safety
  3. Stossel: ‘Why Free Individuals Succeed’
  4. Federal Financial Oversight Lacks Insight
  5. New Blog Posts



1) A Silver Lining in the Supreme Court Decision?

The most underreported story of the summer, according to Independent Institute Research Fellow John C. Goodman, is that at least three million Americans who would have been forced into Medicaid will now be spared this fate, thanks to the recent Supreme Court decision prohibiting the federal government from requiring the states to expand Medicaid at the risk of losing existing levels of federal funding.

“ObamaCare is still a Rube Goldberg contraption that desperately needs repealing and replacing,” Goodman writes in his latest op-ed. “But in the interim, the Supreme Court has done a lot of families a big favor.”

The Court’s ruling on the Medicaid expansion will allow more patients the opportunity to procure private insurance, which produces superior results. “With respect to cancer care,” Goodman writes, “outcomes are much better if you have private insurance, but there does not seem to be much difference between Medicaid and being uninsured.” Although the Congressional Budget Office suggests that about three million Americans will be diverted from Medicaid to the exchanges, Goodman believes that the number will increase as healthcare providers realize that reimbursement rates in the exchanges are much more generous—about 50 percent higher—than the rates from Medicaid.

Supreme Court Saved the Near Poor, by John C. Goodman (Townhall, 7/28/12)

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

How Much Do You Trust the Government? Politics, Patients, and Perverse Incentives, by John C. Goodman (The Beacon, 7/25/12)

Two Approaches to Regulation, John C. Goodman (The Beacon, 7/23/12)

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2) Emergency Powers Corrode Liberty and Safety

President Obama recently signed Executive Order 13618, which grants federal authorities broad powers over civilian telecommunications during emergencies. Although critics rightly note that it extends the powers of the federal government, they are wrong to treat it as a big step for Big Brother: its powers have been growing for decades. Recall the Defense Production Act, which has been reauthorized and broadened continuously since 1950. What’s new is the pace: Truman issued only seven executive orders; George W. Bush, 62 during his two terms; Obama, 61 (so far).

“Today, under the guise of the ‘War on Terror,’ civil liberties have been preemptively stripped at a galloping pace under the flimsiest of supposed threats,” writes Mary L. G. Theroux, Senior Vice President at the Independent Institute. “If a Nobel Peace Prize-winning president would sign—in the absence of an immediate threat—the National Defense Authorization Act for 2012 which provides for the indefinite detection of any American citizen without charge or trial, then it takes little imagination to assume that he or a future commander-in-chief would not hesitate to shut down civilian Internet access or private cell service in the name of preventing communications among terrorists, or against the threat of civil unrest.”

If the threat to our civil liberties were not enough, Theroux also notes some of the safety risks entailed by the new emergency powers. Had the feds possessed and exercised the authority to shut down all cell phones during 9/11, for example, Flight 93 would likely have hit its target. “Perhaps it’s thus time for a serious reconsideration for the entire trend to government by decree,” Theroux concludes.

Emergency Powers Spell Corrosion of Liberty and Safety, by Mary L. G. Theroux (Huffington Post, 7/30/12)

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3) Stossel: ‘Why Free Individuals Succeed’

On April 19, FoxBusiness television host and bestselling author John Stossel spoke to an overflow crowd at the Independent Policy Forum, “Why Government Fails—but Free Individuals Succeed,” held at the Institute’s headquarters in Oakland, Calif., and streamed live over YouTube. Drawing on his latest book, No They Can’t, Stossel argued that government is ill-suited to fix many problems that we ask it to fix and in fact creates many of those problems. (A video and transcript are available on the Institute’s website.)

Although government failure is common, Stossel noted that people persist in telling themselves, “There ought to be a law…” to address the problem du jure—as if good intentions are enough to ensure good results. After the 9/11 terrorist attacks, for example, Senator Tom Daschle said that the creation of the Transportation Safety Administration was essential because “you can’t professionalize unless you federalize.” But that argument has been proven false: Security experts found it easier to sneak fake contraband past TSA officers in Los Angeles’s airport than past private screeners in San Francisco’s. Why? Because a federal employee has weaker incentives to perform well than does a private-sector worker.

Just as government failures are all around us, examples of free markets solving problems are also ubiquitous. Stossel offered a wide range of examples, including the tendency for people to find products and sellers with a solid reputation; the superiority of automobiles made in Detroit, compared to the lemons that were made behind the Iron Curtain; and the steady reduction of workplace injuries before the Occupational Health and Safety Act was passed. “Government crowds out good things,” Stossel said. “It cuts the tendrils of civil society and sucks the life out of people. That’s why when politicians say, ‘yes we can,’ I want people to go to state capitals and hold up this sign.” The sign’s message: No They Can’t!

YouTube Video and Transcript: Why Government Fails—but Free Individuals Succeed, featuring John Stossel (Independent Policy Forum, 4/19/12)

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4) Federal Financial Oversight Lacks Insight

JPMorgan Chase’s gigantic trading losses have done little to raise public confidence in the financial company. Nor does the failure of the Financial Stability Oversight Council (FSOC) to detect the problem early on inspire hope. The agency, a creature of the Dodd-Frank Wall Street Reform and Consumer Protection Act, is tasked with identifying and addressing potentially disastrous problems of “systemically important” financial companies, but its failure was entirely predictable, according to Independent Institute Research Fellow Vern P. McKinley and Judicial Watch president Tom Fitton.

“The FSOC’s unwieldy bureaucracy and weak, politicized leadership—hapless in the face of crisis—are hallmarks of modern Washington governance,” McKinley and Fitton write. For example, the agency’s predecessor—the Working Group on Financial Markets, created in the aftermath of the 1987 stock-market crash—nixed a proposal to “stress test” Fannie Mae due to fears that this news would be discovered by the press. Had the test gone as proposed, the public purse would have been spared billions of dollars. The failures of the Federal Reserve illustrate the same point: although Sen. Claude Swanson argued in 1913 that the Fed’s sweeping powers would enable it to foster financial stability, the Great Depression and the Great Recession prove otherwise.

It doesn’t help that the agencies tasked with oversight and regulation of the financial-services industry are not forthcoming about how they make decisions. Under the Freedom of Information Act, McKinley and Fitton requested FSOC documents pertaining to last year’s meltdown of MF Global; they got back only two pages, and one of them was a meeting announcement. Write McKinley and Fitton: “At this point the Financial Stability Oversight Council clearly is incapable of providing either financial stability or oversight. It should be eliminated.”

The Financial Stability Oversight Council: Late to Crises Every Time, by Vern McKinley & Tom Fitton (Forbes, 7/25/12)

Financing Failure: A Century of Bailouts, by Vern McKinley

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5) New Blog Posts

From The Beacon:

Private Association Fines Government, and Government Will Pay!
Randall Holcombe (7/30/12)

Progressive Betrayals of Civil Liberties
Anthony Gregory (7/30/12)

The Drowning Lifeguard? 
Alvaro Vargas Llosa (7/30/12)

Cowboy Revisionist History
Mary Theroux (7/28/12)

The Problem of Unintended Consequences: How Good Intentions Often Lead to Perverse Effects
John C. Goodman (7/28/12)

Ten Fallacious Conclusions in the Dominant Ideology’s Political Economy
Robert Higgs (7/28/12)

Student Loan Forgiveness: Bread and Circuses for the 21st Century
Vicki Alger (7/26/12)

President Obama’s STEM Master Teacher Corps: Another Unconstitutional, Expensive Federal Foray into Education
Vicki Alger (7/25/12)

How Much Do You Trust the Government? Politics, Patients, and Perverse Incentives
John C. Goodman (7/25/12)

Two Approaches to Regulation
John C. Goodman (7/23/12)

From MyGovCost News & Blog:

Did Federal Grant Bankroll Colorado Gun Rampage?
Lloyd Billingsley (7/27/12)

The Crushing Burden of Old Debt
Craig Eyermann (7/27/12)

The Mandate Tax Burden of ObamaCare
Craig Eyermann (7/25/12)

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

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