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Volume 18, Issue 16: April 19, 2016

  1. California’s “Bullet Train” Bureaucracy Wins Golden Fleece Award
  2. Obama’s Attack on Oil and Gas
  3. Trump: Rethink Outdated Alliances
  4. Will Cryptocurrencies Replace the Dollar?
  5. New Blog Posts
  6. Selected News Alerts

1) California’s “Bullet Train” Bureaucracy Wins Golden Fleece Award

California’s “bullet train” is nowhere near completion, but already the high-speed rail system is taking the state’s voters and taxpayers for a ride. The gulf between the glowing promise and the gloomy reality is gargantuan. For this reason, the agency that manages the voter-approved project, which lacks transparency but not arrogance, has just won the California Golden Fleece Award, a prize Independent Institute gives each quarter to a state or local agency, official, or program guilty of egregiously fleecing taxpayers, consumers, and/or businesses.

“The California High-Speed Rail Authority is much deserving of the California Golden Fleece Award because of its long history of ‘bait-and-switch’ tactics to deceive the public into supporting this train to nowhere,” said Independent Institute Senior Fellow Lawrence J. McQuillan, the economist who heads the Award program.

When voters approved a $9.95 billion bond measure in 2008 to help fund a high-speed bullet train connecting the San Francisco Bay Area with Southern California, they were promised nonstop service from S.F. to L.A. in 2 hours and 40 minutes, at a total cost of $45 billion—all without taxpayer subsidies. Since then the California High-Speed Rail Authority has planned on dropping nonstop service, changing to non-dedicated tracks, and raising the travel time to almost four hours—changes that would cut ridership and revenue while raising total costs, now estimated at $64 billion. Killing the high-speed rail boondoggle, a move favored by a majority of Californians in an opinion poll released in January, would get voter intent back on track.

California’s High-Speed Rail Authority Wins Dishonor of the California Golden Fleece Award, by Lawrence J. McQuillan and Hayeon Carol Park (The Beacon, 4/13/16)

Submit your nomination for the California Golden Fleece Award

California Dreaming: Lessons on How to Resolve America’s Public Pension Crisis, by Lawrence J. McQuillan


2) Obama’s Attack on Oil and Gas

How do you cap an oil gusher? If you were a wildcatter in East Texas during the 1930s, you would fashion a rig using any manner of tools available to contain the gooey liquid until you could profitably deliver it to energy-thirsty consumers. If you were President Obama, however, you might focus on one particular method: plugging up the wild well with the latest edition of the Federal Code of Regulation and hope that consumers didn’t notice at the gas pump. According to Independent Institute Senior Fellow William F. Shughart II, this is pretty much what the White House has done by enacting regulations that erode the benefits consumers would otherwise derive from the recent energy boom.

“The administration has zeroed in on the [oil and gas] industry with new rules on hydraulic fracturing, natural gas flaring, and methane emissions, to name but a few,” Shughart writes in American Thinker. Toss in the president’s nixing of the Keystone XL pipeline and moratorium on energy exploration in the Arctic and Atlantic coastal waters, and you have ample evidence that President Obama dislikes fossil fuels so much that he’s willing to inflict significant harm on the industry. Now the president is proposing to raise taxes on crude oil by $10 per barrel—a move that would push up gas prices about 24 cents per gallon, according to one industry analyst.

The administration sees the tax hike as an opportunity—to bolster his environmental street cred and to fund resource-wasting mass transit projects and subsidies to R&D on self-driving cars—as if Google, Ford and the other corporate behemoths currently pursuing that technology need the money. Doubtless his proposed tax hike will please special interests but not the economy as a whole. “Cronyism, whether to benefit renewables or fossil fuels, is a serious problem,” Shughart continues. “Robust economic growth will return if and only if Washington gets out of the way.”

Obama’s Energy Doctrine Is Proving Disastrous, by William F. Shughart II (American Thinker, 4/2/16)

Obama Gas Tax Is Poorly Timed, by William F. Shughart II and Jacob Fishbeck (Morning Consult, 4/5/16)

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


3) Trump: Rethink Outdated Alliances

Love him or hate him, Donald Trump has proven himself to be the most unorthodox presidential contender at this stage of the election cycle in recent memory. The term “unorthodox” is value-neutral, of course, a designation neither good nor bad, but rather simply indicating a great divergence from the norm. On one policy issue, however, Trump’s unusual stance is a strong positive, according to Independent Institute Senior Fellow Ivan Eland: The call for rethinking U.S. participation in NATO and the American security commitment to Japan and South Korea is long overdue.

Two facts make an American military pullback especially worthy of serious consideration: The end of the Cold War removed the original rationale for NATO, and the $19 billion U.S. national debt justifies slashing all non-essential federal expenditures. If the next president instead chooses to “stay the course” by maintaining our military alliances with wealthy partners in Northern Europe and East Asia, he or she will be keeping Americans at grave risk while providing them with little if any reward.

“Thus, upon deeper analysis, even Trump’s seemingly extreme notion of allowing prosperous allies to take over more of their own defense by getting nuclear weapons doesn’t seem so irrational,” Eland writes. “The United States simply can no longer afford to provide security for countries that don’t even fully open their markets to U.S. exports.”

U.S. Alliances: Trump Is Not So Stupid, by Ivan Eland (The Huffington Post, 4/11/16)

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

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


4) Will Cryptocurrencies Replace the Dollar?

Bitcoin—and decentralized cryptocurrenies more generally—may be the most important innovation in monetary economics since the invention of...well, money. Their biggest cheerleaders point to them as evidence that the era of monies issued by nation-states is coming to an end—along with boom and bust cycles caused by central bank mischief. But will cryptocurrencies take over?

To do this, they must overcome major economic, legal, and technical challenges, explains Cameron Harwick in the latest issue of The Independent Review. The biggest immediate hurdle may be their extreme volatility: The value of Bitcoin, for example, has been known to rise or fall 20 percent or more in a single day. But even if their value were relatively stable, other hurdles would likely prevent it (and other cryptocurrencies) from supplanting a national currency—at least not under normal circumstances.

“Although stability is certainly necessary to support a modern industrial economy, it is hardly sufficient: to achieve demand elasticity for a currency outside of a market of financial intermediaries is no foundation for economic growth and efficiency,” Harwick writes. “Without such a market, Bitcoin remains in a sense ‘dependent’ on other currencies such as the dollar.”

Cryptocurrencies and the Problem of Intermediation, by Cameron Harwick (The Independent Review, Spring 2016)

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6) Selected News Alerts

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