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The Lighthouse®

The Lighthouse® is the weekly email newsletter of the Independent Institute.
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Volume 11, Issue 12: March 23, 2009

  1. A Modest Proposal to Recoup Homeowner-Bailout Money
  2. Iraq and the Lessons of Bosnia
  3. Graft versus Growth: Peruvian Edition
  4. What President Obama Should Learn from His Predecessors—Eland & Rutten to Speak in Oakland, April 7
  5. This Week in The Beacon

1) A Modest Proposal to Recoup Homeowner-Bailout Money

President Obama proposes bailing out select homeowners by lowering their interest payments, cutting their rates to as low as 2 percent for at least five years, with the federal government helping lenders absorb some of the loss. To keep the homeowner bailout from becoming an outright giveaway, Independent Institute Research Fellow Stan J. Liebowitz offers a novel idea: make homeowners repay any bailout money they receive.

“Specifically, I propose that bailed-out homeowners, for the rest of their lives, give up 80 percent of future capital gains from the sale of their homes until the government gift is paid back,” Liebowitz writes in Investor’s Business Daily. “They would be required to pay back only 80 percent of each capital gain to give them an incentive to keep their homes in good shape and sell them at the highest price.... The money [from the capital gain] would be split by the original lenders and the Treasury, based on their share of the [mortgage] modification reduction.”

Liebowitz states that his plan is not perfect but argues that it would discourage speculators and non-needy homeowners from seeking a bailout. It would also prevent homeowner assistance from becoming a giveaway. “No-strings-attached gifts are a bad idea for the economy and should not be given to homeowners any more than to corporations,” he concludes.

“Should Bailed-Out Homeowners be Required to Pay Restitution?” by Stan J. Liebowitz (Investor’s Business Daily, 3/17/09)

Anatomy of a Train Wreck: Causes of the Mortgage Crisis, by Stan J. Liebowitz

Housing America: Building Out of a Crisis, edited by Randall G. Holcombe and Benjamin Powell


2) Iraq and the Lessons of Bosnia

The land of Bosnia-Herzegovina, a confederation at peace since the 1995 Dayton accords, may again see war, if the Bosnian Serbs make good on their threat to declare their independence. Some blame Bosnia-Herzegovina’s confederation style of government for widening the region’s ethno-sectarian divide, but the best solution to preventing renewed violence may be to take a confederation concept one step further by weakening the power of its central government even more, according to Ivan Eland, director of the Independent Institute’s Center on Peace & Liberty. Similarly, Eland has long argued that weakening the central government of Iraq, through creating a confederation or a partition, would offer the best hope for securing peace in that divided country.

“To prevent the Iraqi civil war from reigniting and ensnaring the smaller, more vulnerable remaining U.S. force, which will probably not leave Iraq by 2011, Obama must threaten a complete and rapid U.S. pullout to shock the Iraqi groups into reaching agreement to further decentralize the Iraq government,” writes Eland in a new op-ed. “Like the decentralized government in Bosnia-Herzegovina, the somewhat devolved Iraqi government will likely need further decentralization to survive.”

Eland warns that the reduced violence produced by General David Petraeus’s Iraq strategy—essentially paying the Sunni insurgents to stop fighting—may lull Obama into an unrealistic expectation of peace in Iraq.

“Warning from Bosnia for Iraq,” by Ivan Eland (3/21/09)

Partitioning for Peace: An Exit Strategy for Iraq, by Ivan Eland

Recarving Rushmore: Ranking the Presidents on Peace, Prosperity, and Liberty, by Ivan Eland

EVENT: “What President Obama Should Learn from His Predecessors,” featuring Ivan Eland and Andrew Rutten (Oakland, Calif., 4/7/09)


3) Graft versus Growth: Peruvian Edition

The citizens of Peru have been besieged by corruption for as long as anyone can remember. Unfortunately, too few care to remember—which is why Independent Institute Senior Fellow Alvaro Vargas Llosa recommended the creation of a “museum of graft” after the collapse of Alberto Fujimori’s administration in 2001. Museums and books that remind Latin Americans of the details of their past “can be a powerful antidote against history repeating itself,” Vargas Llosa writes in his latest column.

As Vargas Llosa notes, Alfonso Quiroz’s new book, Corrupt Circles: A History of Unbound Graft in Peru, argues that graft during the Fujimori years equaled half of government expenditures and 4.5 percent of gross domestic product. Government corruption, according to Quiroz, has cost Peru half of its development possibilities.

More striking than Quiroz’s statistics, however, is his analysis. Systematic corruption, he argues, occurs most often where constitutional rules and legal protection for property rights are weak, and it occurs less often where they are strong. Writes Vargas Llosa, “Only in those countries where civil society was somewhat stronger and institutions less intrusive was corruption less pervasive—Costa Rica, Uruguay, and Chile.”

“Peru’s Legacy of Graft,” by Alvaro Vargas Llosa (3/18/09) Spanish Translation

Lessons from the Poor: Triumph of the Entrepreneurial Spirit, by Alvaro Vargas Llosa

Liberty for Latin America: How to Undo Five Hundred Years of State Oppression, by Alvaro Vargas Llosa

The Che Guevara Myth and the Future of Liberty, by Alvaro Vargas Llosa


4) What President Obama Should Learn from His Predecessors—Eland & Rutten to Speak in Oakland, April 7

During his bid for the presidency, Barack Obama promised to bring “change” to the United States by implementing a bold, new agenda in both domestic and foreign policy. Will he succeed? Will President Obama learn from past presidents how to effectively advance the goals of peace, prosperity, and liberty for all? How bad can things get if he fails to heed history’s lessons?

We are delighted to invite you to a timely Independent Policy Forum to address these and related questions, “What President Obama Should Learn from His Predecessors,” featuring Independent Institute Senior Fellow Ivan Eland and Stanford University political scientist Andrew Rutten, on the evening of Tuesday, April 7, at the Institute’s Conference Center in Oakland, Calif.

Ivan Eland directs the Center on Peace & Liberty at the Independent Institute. His latest book is Recarving Rushmore: Ranking the Presidents on Peace, Prosperity, and Liberty. Andrew Rutten lectures on political science at Stanford University and is an Associate Editor of The Independent Review.

Because space is limited, we recommend that you reserve space as soon a possible.

Register online.

More on Recarving Rushmore: Ranking the Presidents on Peace, Prosperity, and Liberty, by Ivan Eland

Praise for Recarving Rushmore:

“In the intriguing book, Recarving Rushmore, Ivan Eland reassesses the record of all U.S. Presidents based on the constitutional principles that each swore to uphold. While conventional accounts glorify the flagrant misdeeds of the ‘Imperial Presidency,’ this insightful and crucial book provides an inspiring vision for both conservatives and liberals on the crucial need to rein in White House power and restore peace, prosperity and liberty.”
—Ron Paul, U.S. Congressman

“Eland engagingly shows why the conventional wisdom on the American presidency is all wrong and why presidents like Van Buren, Arthur, and Harding in fact ably advanced the nation’s interest, while iconic names like Lincoln, the two Roosevelts, and Wilson caused serious harm. Recarving Rushmore is must reading.”
—Richard K. Vedder, Distinguished Professor of Economics and Faculty Associate, Contemporary History Institute, Ohio University


5) This Week in The Beacon

Here are the past week’s offerings from The Beacon, the web log of the Independent Institute:


  • Catalyst
  • Beyond Homeless