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

Volume 14, Issue 44: October 30, 2012

  1. Occupy Wall Street: No Match for Cronyism
  2. Medicare Reform and Perverse Incentives
  3. Avoiding a Mideast Quagmire
  4. New Blog Posts
  5. Selected News Alerts


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1) Occupy Wall Street: No Match for Cronyism

One year after the birth of Occupy Wall Street and its misguided protests against “crony capitalism,” real cronyism is on the rise while free-market capitalism is waning. Both Mitt Romney and Barack Obama, for example, talk about “getting tough” with China by passing protectionist regulations that would benefit American firms that compete with cheap imports from China. Such political favoritism acts against the public interest—the 99%, if you will—but it’s likely that a sizable chunk of the Occupy movement supports trade restrictions.

Whether cronyism takes the form of trade protectionism or subsidies to big oil, big banks, or green energy, the results are the same: distortions of market competition and the promotion of reckless behavior, according to Independent Institute Senior Fellow Benjamin Powell.

One reason that political favoritism is so common in public policy, Powell explains, is the sheer volume of federal regulations. At the rate of 100 pages per day, it would take more than two years for someone to read all 81,000 pages in the directory of federal regulations. No voter can know who benefits from all of the regulations, but it probably wouldn’t be worth a voter’s time to learn this even if he could. However, the special interests that do benefit from specific subsidies and protectionist regulations have strong incentives to ensure the continuation of political cronyism.

Occupy Wall Street: A One Year Retrospective, by Benjamin Powell (The Huffington Post, 10/29/12)

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2) Medicare Reform and Perverse Incentives

Politics is filled with perverse incentives that give rise to shortsighted policies that lead to bad outcomes. The tendency is so common that it can seem like a law with no exceptions. In dealing with the problem of huge budget deficits, for example, many politicians prefer to advocate spending cuts that would go into effect only years after they’ve left office, when a new group of lawmakers will be around to rescind the cuts or suffer the political consequences. In a new op-ed for Townhall, Independent Institute Research Fellow John C. Goodman explains how this tendency operates in regard to Medicare.

New Medicare payroll taxes, he explains, go into effect in 2013, but the scheduled spending reductions are supposed to be phased in slowly, over time. Moreover, the spending reductions are alleged to come at the expense of doctors, hospitals, and insurers, but not at expense of patients.

“Of course, when the doctors stop seeing senior patients (or start converting to concierge care), when the hospitals leave the market (as one in seven will in the next eight years, according to the Medicare Actuary) and when the insurance plans cut back on the benefits they are providing, there will be enormous pressure on Congress to reverse all of this,” Goodman writes. For details on an approach to fundamental reform of Medicare, as opposed to mere tinkering around the edges, please consult Goodman’s latest book, Priceless: Curing the Healthcare Crisis.

Beware the ‘Grand Bargain,’ by John C. Goodman (Townhall, 10/27/12)

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

Is Medicare Spending the Biggest Driver of the Deficit?, by Craig Eyermann (MyGovCost Blog, 10/26/12)

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3) Avoiding a Mideast Quagmire

Ever since Jimmy Carter brokered the Camp David Accords between Israel and Egypt in 1978, the 39th President of the United States has campaigned tirelessly to ensure that he will be remembered for his contribution to the cause of peace in the Middle East. Carter has recently criticized Barack Obama and Israeli Prime Minister Benjamin Netanyahu for virtually abandoning the two-state solution in the Israeli-Palestinian conflict. But contrary to Carter, Obama has been wise to distance himself from the Israeli-Palestinian peace process, according to Independent Institute Senior Fellow Ivan Eland.

The United States, Eland suggests, would be better served by cutting aid to both Israel and the Palestinians than by brokering a “peace process” that neither side can commit to. Unfortunately, whether American voters return Obama to the Oval Office or elect Romney instead, the next U.S. president is likely to get dragged back into the affair.

“Either man,” Eland writes, “should resist because the Israeli-Palestinian peace issue doesn’t really affect U.S. vital interests (and if you believe Middle East oil is strategic, which is dubious economics, slavish support for Israel makes even less sense), and neither the Israelis nor the Palestinians are yet ready to solve the problems.”

Middle East Peace Remains Elusive, by Ivan Eland (10/24/12)

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

No War for Oil reviewed in The Freeman

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4) New Blog Posts

From The Beacon:

How Much Do You Trust Your Insurer?
John C. Goodman (10/29/12)

It's Official: No Global Warming Since 1997
David J. Theroux (10/27/12)

Obama’s Trifecta: The 3 Biggest Lies
Mary Theroux (10/26/12)

Modeling Disasters
Mary Theroux (10/26/12)

Extraordinary Demand to Hold Cash—The Mystery Persists
Robert Higgs (10/24/12)

From MyGovCost News & Blog:

Government Funds Gimmickry
Lloyd Billingsley (10/29/12)

Is Medicare Spending the Biggest Driver of the Deficit?
Craig Eyermann (10/26/12)

UN-good Waste for U.S.
Lloyd Billingsley (10/23/12)

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

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5) Selected News Alerts

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