The Lighthouse is the weekly email newsletter of the Independent Institute. Subscribe
now, or browse Back Issues
Volume 14, Issue 43: October 23, 2012
- Should Congress Avert the Fiscal Cliff?
- The Real Solution to Pre-Existing Conditions
- FDICs Sheila Bair: Bank Bailout Baroness
- Arming the Enemy
- New Blog Posts
- Selected News Alerts
1) Should Congress Avert the Fiscal Cliff?
Warnings about the so-called fiscal cliffthe danger that the U.S. economy will fall into a recession again unless Congress quickly enacts stop-gap measures to prevent spending cuts and tax increases from going into effect automatically in Januarymisconstrue the nature of U.S. fiscal crisis. The long-term problem is worse than most people realize. Federal spending is so far out of control, according to Burton A. Abrams, director of MyGovCost.org, that no legislative “quick fix” can save usor rather, no real solution with a likelihood of getting enacted is waiting on the horizon.
What may be politically feasible is a bill to increase federal indebtedness to manage a short-term deficit shortfall. That may sound viable in part because interest rates are currently very low. But when rates rise, as they are bound to do, federal budget makers would face even greater pressures to deal with an economy with too much debt and not enough private investment to maintain healthy economic growth.
“Despite the dire warnings of impending doom,” Abrams writes in The Washington Times, “it just might be that the Budget Control Act's fiscal cliff will better serve the long-run interests of the United States than a short-term congressional compromise that fails to get to the core of the problem. It's not a perfect solution, and it doesn't solve the long-term budget problem, but it's a start.”
Falling Off the Fiscal Cliff, by Burton A. Abrams (The Washington Times, 10/15/12)
What is Washington’s spending costing you? Find out at MyGovCost.org.
Back to Top
2) The Real Solution to Pre-Existing Conditions
The problem of pre-existing conditions was prominent in arguments for the Affordable Care Act. However, as of July 31, 2012, only about 82,000 people have enrolled in the federal Pre-Existing Condition Insurance Plan, an interim program that will be dissolved in 2014, when insurance companies will be prohibited from charging premiums based on the health conditions of applicants. Like his rival, presidential contender Mitt Romney would also require insurers to ignore pre-existing conditions, at least for applicants who have been continuously insured for a certain period of time.
Both Obamas and Romneys policies on pre-existing conditions would create perverse incentives, according to Independent Institute Research Fellow John C. Goodman, writing in the Wall Street Journal. Healthy buyers would tend to underinsure. Many with expensive health problems would overinsure. And insurers would try to favor inexpensive healthy customers over costly unhealthy applicants. Romneys plan differs somewhat it creates risk pools, which must be structured carefully or encourage the healthy to remain uninsured. But Goodman argues that theres a much better way to deal with the problem of pre-existing conditions: insure yourself against the possibility of becoming uninsurable.
Under this approach, Goodman writes, policies would be guaranteed to be renewable and include the right to buy another policy in the future. If your health condition worsens, a new insurer would be free to charge you a higher premium. But the old insurer would pay the extra premium caused by the change in your health status.
The Better Solution for Pre-Existing Conditions, by John C. Goodman (The Wall Street Journal, 10/17/12)
Priceless: Curing the Healthcare Crisis, by John C. Goodman
Back to Top
3) FDICs Sheila Bair: Bank Bailout Baroness
Sheila Bair, former chairman of the Federal Deposit Insurance Corp., has just published a memoir of her years in the trenches, trying heroically to maintain the safety and soundness of the American financial system while minimizing losses to taxpayers. Bair laments the wave of huge bank bailouts that began in 2008, but in fact she understates her complicity in the federally funded giveaways to bank shareholders and managers. Banking expert and Independent Institute Research Fellow Vern P. McKinley, author of Financing Failure, found more than one case of rewriting history in Bairs memoir.
Bair voted with the FDIC board to bail out Wachovia, Citigroup, and Bank of America. Regarding the first of these, her book fails to explain why she didnt allow the two leading regulatory agenciesthe Federal Reserve and the Office of the Comptroller of the Currencyto resolve Wachovias dilemma without recourse to bailout money. Citigroup even seemed eager and able to acquire it. In this case and in others, Bairs agency undertook almost no analysis of how bank insolvencies would play out. Ultimately, Bair wasnt an impediment to bailoutsshe was an enabler that allowed bailouts to move forward.
The result wasnt only that powerful banks raided the taxpayer cookie jar with the aid and blessing of bank regulators: Bairs failings have made big banks even more dominant in the banking industry than they used to be. As a result, the big banks are even bigger and just as vulnerable to the next crisis, McKinley writes. We will suffer from the long-term consequences of these snap decisions for decades to come.
Sheila Bairs Bailout Blame Game, by Vern P. McKinley (The Daily Caller, 10/19/12)
Financial Failure: A Century of Bailouts, by Vern P. McKinley
Back to Top
4) Arming the Enemy
Afghanistans fledgling military has been infiltrated. How significant is this development? Brace yourself for an alarming statistic: 15 percent of the foreign troops killed this year in Afghanistan are casualties of so-called green-on-blue attacksTaliban infiltrators. A suicide bomber who killed two Americans and several Afghans has penetrated even the Afghan intelligence community.
The problem of infiltration, according to Independent Institute Senior Fellow Ivan Eland, should give pause to U.S. policymakers who would send more weapons to our ostensive allies in Afghanistanor to supposedly anti-authoritarian opposition groups in Syria.
Syrian Islamists are receiving the lions share of the small arms already sent, Eland writes in his latest op-ed. So much for U.S. intelligences ability to vet arms recipients during an anarchic civil war. All we need is radical Islamists with an ability to shoot down civilian airliners or use hand-held anti-tank weapons on buildings, energy facilities, or other key infrastructure.
The Enemy Is Among Us, by Ivan Eland (10/16/12)
No War for Oil: U.S. Dependency and the Middle East, by Ivan Eland
Back to Top
5) New Blog Posts
From The Beacon:
From MyGovCost News & Blog:
You can find the Independent Institutes Spanish-language website here and blog here.
Back to Top
6) Selected News Alerts
Vern McKinley on ‘District of Corruption: The Movie’
Robert Higgs cited on federal waste
Stephen Halbrook on the right to bear arms
Alex Tabarrok on Marriage, Kidneys, and the Nobel Prize
John C. Goodman on why healthcare is not free
Back to Top