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Volume 11, Issue 37: September 14, 2009

  1. Bush-Obama Programs Will Distort the U.S. Economy for Years to Come
  2. Health Insurance Mandates and the Constitution
  3. Escalation in Afghanistan
  4. Property Owners Need Deregulated Insurance Markets, Report Explains
  5. This Week in The Beacon

1) Bush-Obama Programs Will Distort the U.S. Economy for Years to Come

The Bush-Obama “stimulus” programs—yes, both presidents bear responsibility—will permanently transform the American economy, and not for the better. Independent Institute Research Fellow Randall G. Holcombe, co-editor of the new book Housing America, explains why we can expect lasting repercussions from the bipartisan abandonment of market principles in the September 2009 issue of The Freeman, the venerable monthly published by the Foundation for Economic Education.

Not since the Great Depression have federal agencies taken on so many new, powerful, and lasting roles in the U.S. economy, argues Holcombe. The Federal Reserve, with its new policy of lending to non-financial firms and buying financial assets not issued by the Treasury, can now pick winners and losers in the economy. Via the Toxic Asset Relief Program, former Treasury Secretary Henry Paulson set the onerous precedent of forcing the nation’s largest banks to take government money (with strings attached).

Then there’s the Obama “stimulus” package, which, writes Holcombe, “was really just a big spending bill that did not offer much stimulus, but that will saddle the economy with bigger government from now on, hindering economic growth, slowing the recovery, and reducing prosperity.” Holcombe also names several undesirable and lasting consequences of the corporate and financial bailouts. “The precedent is set for employees to move ahead of secured-debt holders in bankruptcy proceedings,” he writes. “Debt finance will become much more difficult for firms with unionized labor forces.... We would have done better to let the market and the bankruptcy court determine the fate of Chrysler and GM.”

“Transforming America: The Bush-Obama Stimulus Programs,” by Randall G. Holcombe (The Freeman, 9/10/09)

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


2) Health Insurance Mandates and the Constitution

Would a federal requirement that individuals buy health insurance be unconstitutional? The Constitution created a federal government limited to its enumerated powers, and no words in it authorize the feds to mandate the purchase of health insurance, as Independent Institute Research Analyst Anthony Gregory notes in his latest op-ed.

Supporters of a mandate might appeal to the Constitution’s commerce clause: the courts now interpret the clause very broadly, especially since the Supreme Court’s 2005 medical marijuana decision, Gregory notes. On the other hand, because the commerce clause was created to prohibit interstate tariffs, a plain reading of it would give Congress the power to eliminate state regulations that prohibit individuals from buying health insurance across state lines. Also, opponents of a mandate might raise other constitutional concerns, such as that it may violate a right to privacy (à la 14th Amendment) or that its enforcement may violate the right against self-incrimination (à la the 5th Amendment).

“Those who find such constitutional arguments [against an individual mandate] unconvincing are often quick to invoke them against policies they oppose,” writes Gregory. “Similarly, some of today’s critics of President Obama and national healthcare brandish the Constitution as a holy document, but were silent when President George W. Bush tramped its many limitations on executive power, and even signed an expansion of Medicare.”

“Can Obama Force You to Buy Health Insurance?” by Anthony Gregory (9/14/09)

American Health Care, edited by Roger D. Feldman


3) Escalation in Afghanistan

Defense Secretary Robert Gates worries that sending more troops to Afghanistan would make the U.S. military appear to be an “occupation force,” but the Afghans’ loud and repeated protests regarding civilians killed by U.S. air strikes suggests that they already hold the negative assessment that Gates wishes to avoid, according to Ivan Eland, Director of the Independent Institute’s Center on Peace & Liberty.

Adding to the difficulties of the U.S. policy, Eland continues, President Obama will likely send additional troops, further fueling the Taliban resurgence in Afghanistan and the rise of militant Islamists in nuclear-armed Pakistan. If the goal is to contain al-Qaeda, then Obama should reconsider his counterproductive policies of troop escalation, Eland argues.

“Instead, the U.S. could use law enforcement, intelligence, drones, cruise missiles, and maybe an occasional Special Forces raid to neutralize al Qaeda, as well as pay off local chieftains to provide intelligence on al-Qaeda or prevent them from providing a haven for its operatives,” Eland writes. “Of course, on his first day in office, if Obama had been really astute, he would have declared that both Afghanistan and Iraq were Bush’s unnecessary wars and called for rapid U.S. troop withdrawals. He didn’t make that wise move, but there is still time to do an about-face before further escalating a lost cause, which is counterproductive to his stated goal of neutralizing al-Qaeda.”

“To Escalate the Escalation?” by Ivan Eland (9/9/09)

Video: Ivan Eland on Afghanistan’s Presidential Election (8/26/09)

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

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

The Empire Has No Clothes: U.S. Foreign Policy Exposed, by Ivan Eland


4) Property Owners Need Deregulated Insurance Markets, Report Explains

Property insurance regulations imposed after natural disasters often come at a price—high premiums. Policymakers do not intend for the regulations to increase insurance premiums—indeed, their immediate goal is to keep them from rising. But insurance regulations often have undesirable, unintended consequences, as a new report from the Independent Institute explains.

“Market regulation is intended to protect insurance consumers from unfair insurance prices,” write the study’s authors, economists Patricia H. Born and Barbara Klimaszewski-Blettner. “However, when regulators impose restrictions on premium adjustments intended to guarantee the affordability of insurance coverage, insurers may choose to exit the market if they cannot maintain solvency.”

Policymakers may respond by making it hard for insurers to exit, but ultimately such a regulatory “chain reaction” exposes taxpayers and consumers to greater risks when disasters hit again. Deregulating insurance markets, Born and Klimaszewski-Blettner explain, ultimately protects consumers against future losses, whereas restricting the flexibility of insurers to adjust premiums in light of changing conditions ultimately harms consumers.

Press Release: “Hurricane Season Sure to Devastate, Property Insurance Doesn’t Have To” (9/2/09)

“Catastrophes and Performance in Property in Insurance,” by Patricia H. Born and Barbara Klimaszewski-Blettner

“Out of the Storm: A Conference on Property Insurance Reform,” (New Orleans, 9/30/09)


5) This Week in The Beacon

Here are the past week’s offers from our blog, The Beacon.


  • Catalyst
  • Beyond Homeless