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The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 14, Issue 50: December 11, 2012

  1. Spending Cuts, Not Tax Increases!
  2. Pentagon’s Spy Ring Poses New Risks
  3. Will the Federal Drug War Go to Pot?
  4. Fixing Voter Fraud
  5. New Blog Posts
  6. Selected News Alerts

1) Spending Cuts, Not Tax Increases!

Should Uncle Sam try to get the nation’s fiscal house in order by reining in spending and increasing taxes—a balanced approach to balancing the budget and shrinking the national debt? On the surface, it sounds reasonable: a different policy might sound “unbalanced” and “extremist.” In reality, however, the notion of a “balanced” fiscal recipe, one made with equal measures of revenue enhancement and spending reductions, is deeply flawed: Taxes and government spending should be cut because both are a drag on the private sector. Therefore, if the goal is to prime the economy for sustainable growth, policymakers must focus on cutting government spending and not succumb to pressures to raise tax rates, according to economist and Independent Institute Research Fellow William F. Shughart II.

“How government finances its spending—through current taxes or by borrowing—is of second-order importance,” Shughart writes in an op-ed for Newsday. “What is important is the huge size and cost of the federal government.... No matter how public spending is financed, higher taxes just kick the can down the road.” This truth, Shughart argues, is the economic justification for anti-tax activist Grover Norquist’s “No Tax Pledge.”

High marginal income taxes are counterproductive: they’re bad for wealth creation and job growth, as John F. Kennedy and Ronald Reagan knew when they pushed to cut marginal tax rates. But their efforts were insufficient. Federal deficits grew because government spending was not reined in. But this doesn’t mean that a balanced budget should be considered an end in itself. “Nobel laureate economist Milton Friedman once said that he preferred a small, unbalanced federal budget to a large, balanced one,” Shughart continues. “His preference recognized that, while taxes and federal government borrowing impose significant burdens on the economy, their negative effects are swamped by the impacts of the spending programs they finance.”

Grover Norquist May Be Mocked in D.C., but He’s a Hero to Taxpayers, by William F. Shughart II (Newsday, 12/6/12)

Taxing Choice: The Predatory Politics of Fiscal Discrimination, edited by William F. Shughart II

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2) Pentagon’s Spy Ring Poses New Risks

The spy business is about to become more risky—risky for ordinary American citizens and their foreign counterparts, that is. The Defense Intelligence Agency is expanding its clandestine operations, including the kind of human-intelligence gathering for which the CIA is known. Is more better? No, not in the “wilderness of mirrors” of the intelligence world. More spies under direct control of the Defense Department means more bureaucratic redundancy, more waste of taxpayer dollars, and more coordination snafus that can lead to intelligence failures of the sort that made the 9/11 terrorist attacks possible, according to Ivan Eland, director of the Independent Institute’s Center on Peace & Liberty.

“To fight small, agile terrorist groups, the last thing that should have been done was what was done—adding more ponderous competing intelligence bureaucracies to make coordination problems even worse,” Eland writes in his latest op-ed. “Instead, the number of already redundant agencies should have been pared and remaining organizations streamlined.”

There’s also another problem: the expansion of human intelligence under the Defense Department will reduce accountability. “Under the current legal framework, the military is not subject to the same requirements to notify Congress of [targeted killings] as is the CIA,” Eland writes. “Under the current laws, the U.S. government, through the DoD, could dramatically increase its secret drone strikes around the world even past the level of the current robust campaign.”

US Intelligence: Redundancy Increases as Budget Pressure Mounts, by Ivan Eland (12/7/12)

Sumptuous Counterterrorism Spending Must End, by Ivan Eland (10/31/12)

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

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3) Will the Federal Drug War Go to Pot?

Marijuana legalization in Colorado and Washington—outcomes of November’s elections—raises an interesting question about Barack Obama: Will he permit those states to ignore the federal ban on Schedule 1 drugs, as he advocated for medical marijuana during the 2008 presidential campaign? Or will he continue his drug-war policies of the past four years—years that saw more raids on medical marijuana than happened during the two terms of his predecessor? No matter which course the White House takes, marijuana policy is likely to become an increasingly contested front in the perennial “war” between the federal government and the states, Independent Institute Research Fellow Anthony Gregory argues in his latest op-ed for the Huffington Post.

“The tension between national drug warriors and states seeking liberalization raises interesting questions about the discourse of federalism,” Gregory writes. “Typically conservatives talk about a restrained federal government, while liberals stress national policy cohesion.” Yet when it comes to marijuana policy, Gregory explains, the political divide in Congress is reversed: Only two Republicans, including Ron Paul, supported a bill this year that would have allowed states to make pot legal.

Aside from the unusual political dynamic, the marijuana controversy is noteworthy because it reminds us that state and local governments have long pushed back against the feds. Sanctuary cities, non-compliance with the Patriot Act, obstruction of the Real ID Act, defiance of the authority of the Transportation Security Administration, and state opposition to the president’s indefinite-detention powers—these examples show that state governments are willing to challenge the feds when they believe that vital moral principles are at stake. Thus, if state governments believe that pot prohibition is wrong and follow their convictions, then federal drug warriors who call for state law enforcement to implement raids will only be blowing smoke. “Thank goodness,” Gregory concludes, “for it is about time someone took a stand against this nightmare.”

States Thumb Their Noses at the Drug War, by Anthony Gregory (The Huffington Post, 12/5/12)

More by Anthony Gregory

Drug War Crimes: The Consequences of Prohibition, by Jeffrey A. Miron

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4) Fixing Voter Fraud

The problem of fraudulent or invalid voting is more serious than many pundits recognize, but it’s one that Democrats and Republicans should be willing to work together to fix. One reason is that the perception of voter fraud discourages voter turnout and reduces the public’s confidence in the U.S. political system. That’s the theme of a recent op-ed by former Independent Institute intern Colby Pines (now a James Madison Fellow at Princeton University) and Independent Institute Marketing and Communications Director Lindsay M. Boyd.

How big is the problem? “A 2012 study by the Pew Center on the States found that one out of every eight active registrations were inaccurate or invalid, 1.8 million voters listed as ‘inactive’ were actually deceased, and 2.8 million voters had active registrations in more than one state,” Pines and Boyd write. “Another nationwide report released in August by the University of Arizona’s investigative reporting project, News21, pointed to some 900 cases of alleged voter registration and absentee voter fraud.”

Some have proposed that photo IDs would help reduce the problem, but Pines and Boyd note than this approach would probably have limited benefits. “We need creative solutions from those who really care about making our democratic republic work the way it should,” they continue. “The first step, as usual, is admitting we have a problem. That is obvious. With the next federal election two years away, we have plenty of time to fix it.”

Voter ID Laws Are Crucial to Voter Confidence, by Lindsay M. Boyd and Colby Pines (The Washington Times, 11/28/12)

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5) New Blog Posts

From The Beacon:

From MyGovCost News & Blog:

Spies and Leviathan
K. Lloyd Billingsley (12/10/12)

Power Play Is Feds’ Oyster
K. Lloyd Billingsley (12/6/12)

What Will Your Paycheck Look Like After the Fiscal Cliff?
Craig Eyermann (12/5/12)

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

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6) Selected News Alerts

Robert Higgs Quoted at Reason.com

John Goodman Castigates Paul Krugman

David Theroux on Helping the Family

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