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The Lighthouse®

The Lighthouse® is the weekly email newsletter of the Independent Institute.
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Volume 18, Issue 37: September 13, 2016

  1. Legacies of 9/11
  2. Forest Service Mustn’t Neglect Fire Prevention
  3. TPP versus Trade Protectionism
  4. IRS’s Morally Inverted Inversion Proposals
  5. Independent Updates

1) Legacies of 9/11

The ashes and rubble of the World Trade Center have long since been swept away, the Pentagon has been restored (and its budget doubled), and U.S. airline passengers are flying in record numbers (despite their annoyances with the Transportation Security Administration). The September 11, 2001, terrorist attacks are history—and yet none would deny that aftershocks continue. The world after 9/11, as Independent Institute Senior Fellow Alvaro Vargas Llosa notes, has become more nationalistic, more protectionist, and more xenophobic. In many respects, mutual suspicion has triumphed over mutual trust.

In the Land of the Free, privacy and civil liberties have been sacrificed on the altar of national security. So have various economic liberties. As Independent Institute Senior Fellow William F. Shughart II explains, post-9/11 “know-your-customer” regulations, a provision of the USA PATRIOT Act, have advantaged larger financial institutions at the expense of smaller rivals, contributing to consolidation in the banking industry. Indeed, swarms of special interests have exploited the fear of terrorism in order to enrich themselves at the expense of consumers and/or the public purse (meaning taxpayers), yet another sordid episode in America’s endless drama of what Independent Institute Research Fellow Robert P. Murphy calls “the political uses of crisis.” Counting only the (more or less) direct spending on the U.S. military and related diplomacy and financial aid, the so-called War on Terror has cost Americans an estimated $1.75 trillion, according to Independent Institute Research Fellow Craig Eyermann. (Check out his cumulative-cost graph and timeline.) With the Taliban still under pursuit and new anti-U.S. militant groups such as ISIS having emerged, the cost continues to mount.

Has the cost delivered the desired benefit? If the focus is on preserving American lives, the answer is not at all encouraging. In an op-ed that ran in the San Diego Tribune-Review and elsewhere, Independent Institute Research Fellow Abigail R. Hall Blanco states that since the mid-1990s, the overall incidence of deadly terrorism in the United States has been relatively stable. “Lucky for me and other Americans, the chance of being killed (or even injured) in an act of terror is remarkably low—about one in 20 million,” she writes. And yet, she argues, tools and techniques developed for the War on Terror, reportedly including black-site interrogation compounds, have been used against U.S. citizens on the American homeland. But despite these and other encroachments, the government’s counterterrorism net has gaping holes, due in large part to the clumsy nature of the bureaucracies that handle it, as Independent Institute Policy Fellow K. Lloyd Billingsley explains in his latest piece for The Daily Caller. Moreover, even in terms of combatting terrorism that originates from abroad, American policymakers have pursued counterproductive strategies. “The U.S. government should quit making people take off their shoes at the airport and focus instead on reducing its footprint in the Muslim world,” writes Independent Institute Senior Fellow Ivan Eland in the Minneapolis Star Tribune. “Doing so will make the chances of blowback terrorism occurring even more remote.”

15 Years After: Are We Safer?, by Ivan Eland (Star Tribune, 9/12/16)

The Cost of the War on Terror, by Craig Eyermann (MyGovCost News & Blog, 9/11/16)

5 Years After 9/11 We’re Less Safe, Less Free, by Abigail R. Hall Blanco (San Diego Union-Tribune, 9/9/16)

9/11 and the Political Uses of Crisis, by Robert Murphy (The Beacon, 9/9/16)

The World after 9/11, by Alvaro Vargas Llosa (The Beacon, 9/9/16)

9/11’s Legacies: Fewer Civil Liberties and Bigger Banks, by William F. Shughart II (The Beacon, 9/8/16)

Fifteen Years After 9/11, the Bureaucratic Bull’s-Eye Remains, by K. Lloyd Billingsley (The Daily Caller, 9/6/16)


2) Forest Service Mustn’t Neglect Fire Prevention

Massive wildfires are burning across huge swaths of California, Idaho, and other western states. Given the magnitude of danger to life and property that catastrophic fires represent, the reasons the U.S. Forest Service spends more than half of its $4 billion budget on firefighting may seem obvious. Closer inspection, however, reveals that the nation’s public-forest managers have neglected efforts that might prevent such fires from growing to epic proportions, according to Independent Institute Research Fellow Ryan M. Yonk, co-author of Nature Unbound: Bureaucracy vs. the Environment. The reason is partly one of bad incentives.

In his latest op-ed, penned with Strata Policy Research Associate Devin Stein, Yonk tears into a government bureaucracy that discourages forest managers from carrying out proactive efforts to rid forest floors of massive amounts of dry kindling well before they can serve as fuel for catastrophic wildfires.

“To avoid large wildfires capable of destroying entire forests, neighborhoods, lives and budgets, we need to reform the constraints under which fire managers operate,” Yonk and Stein write. “When it is easier for one person to mobilize firefighters, aircraft, and the taxpayers’ wallets than it is for him to burn a parcel of forest before it burns the nearest town, it’s no wonder we fight well but we never win. Rather than constantly approving larger suppression budgets, it’s time to change the game our fire managers are playing.”

We’re Winning Fire Fights, but Losing the War, by Ryan M. Yonk and Devin Stein (The Modesto Bee, 9/6/16)

Nature Unbound: Bureaucracy vs. the Environment, by Randy T Simmons, Ryan M. Yonk, and Kenneth J. Sim


3) TPP versus Trade Protectionism

Barack Obama and George W. Bush wanted it, but Donald Trump and Hillary Clinton detest it. The Trans-Pacific Partnership is the once-popular trade agreement that’s lost its good looks and no longer gets asked to the dance. While the reason that presidential hopefuls disdain TPP has much to do with current perceptions of the cause and cure for lagging real wages, the context is one of enduring economic ignorance: For many Americans, the logic of free trade isn’t nearly as compelling as the ad hoc stories about how trade restrictions might help various favored groups. (For some reason, however, the overall harm that import tariffs impose on both trading partners gets neglected.)

Part of the reason may be the term “protectionism” itself. As Independent Institute Research Fellow Gary M. Galles explains in the Orange County Register, “protectionism” sounds like a good thing, almost like an all-natural preservative.

The reality, of course, is much different. “Being anti-free trade is no way to ‘stand up for the little guy,’” Galles writes. “Protectionism restricts choices and competition, crowding out mutually beneficial arrangements for the vast majority of Americans. It cannot benefit us all. Only by drawing attention to the alleged benefits and away from the far larger costs can it even appear to do so.”

Protectionism for Some vs. Protection for All, by Gary M. Galles (Orange County Register, 9/4/16)


4) IRS’s Morally Inverted Inversion Proposals

“America imposes the highest combined federal, state, and local corporate tax rates on the planet,” writes Independent Institute Senior Fellow William F. Shughart II. To deal with this problem, some U.S. companies have relocated abroad and merged with foreign companies. Such “inversions” have been met with scorn among some pundits and politicians. In response, last April the Internal Revenue Service proposed new provisions in the tax code meant to help recoup some of the revenue lost from offshore corporate tax avoidance.

However, as Shughart explains, the IRS proposals are blunt instruments that are both economically harmful and morally objectionable. They go far beyond their originally envisioned scope, catching routine financial transactions in their net and penalizing even firms that have stayed in the United States and weathered the U.S. tax code.

They are also grossly unfair. In fact, corporate income taxes as such—and not just the IRS’s new provisions—are unfair, and for multiple reasons. Ultimately their burden falls on individuals, not corporations, which are mere conduits, and the burden falls more on some individuals than on others, depending on the nature of a given industry and other subtle particulars. “Moreover, corporate income is taxed twice,” Shughart writes, “once at the level of the firm and then again at the level of individual shareholders when distributed to them as dividends.” A moral case can be made for abolishing the corporate income tax altogether. Given today’s political realities, even bringing U.S. corporate tax rates into closer alignment with those of other nations would constitute a vast improvement.

Treasury’s Regulatory Overstep Attempts to Fix the Wrong Problem, by William F. Shughart II (RealClearMarkets, 8/25/16)

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


5) Independent Updates
The Beacon: New Blog Posts
MyGovCost: New Blog Posts
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