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The Lighthouse®

The Lighthouse® is the weekly email newsletter of the Independent Institute.
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Volume 19, Issue 13: March 28, 2017

  1. Obamacare Replacement: What Went Wrong?
  2. New Bridges
  3. Ryan’s Next Project? Tax Reform
  4. Central Planning for Immigrant Skills?
  5. Will America and North Korea Live in Peace?
  6. Independent Updates

1) Obamacare Replacement: What Went Wrong?

The American Health Care Act—an Obamacare replacement bill so hastily stitched together that even late-night modifications were insufficient for House Speaker Paul Ryan to garner enough support for it from his fellow Republicans—was pulled last Friday from consideration. Its withdrawal was a major setback for the Trump administration and the congressional Republicans, who now have a higher mountain to climb if they decide to revisit healthcare reform. But had Ryan’s proposal become the law of the land, American healthcare would have ended up in worse shape than under the law it was meant to replace, according to Independent Institute Senior Fellow John C. Goodman.

“Donald Trump promised a health reform that would make insurance cheaper and better, and leave no one behind,” Goodman writes. “What the House Republican leadership offered was the exact opposite of that promise.”

The disconnect between the president’s promises and the Ryan reality was not the only reason for the bill’s failure. In his Forbes autopsy (which is highly recommended, even if you’ve been closely watching the health reform drama), Goodman identifies additional reasons. Particularly important were the GOP’s failure to reach a shared vision on healthcare policy—even after seven years of chanting “repeal and replace”—and most especially, the bill’s failure to persuade ordinary people that it would solve their healthcare problems. “Small wonder that only 17 percent of the voters actually liked the Republican alternative,” Goodman writes. Whether or not they learn anything of substance from this legislative defeat will determine not only the Republicans’ political futures in the next two to four years, but also the healthcare futures of Americans for decades to come.

Republican Health Care Fiasco, by John C. Goodman (Forbes, 3/27/17)

Video: Goodman on why the American Health Care Act was pulled (Fox Business, 3/24/17)

Video: Goodman on the withdrawal of the Republican healthcare bill (MSNBC, 3/24/17)

A Better Choice: Healthcare Solutions for America, by John C. Goodman

Priceless: Curing the Healthcare Crisis, by John C. Goodman


2) New Bridges

You are invited to a very special symposium and luncheon on the post-election prospects for liberty and prosperity in a divided America, and how we can advance freedom, opportunity, prosperity, and security for all.

Featuring speakers Patrick Byrne, William J. Watkins, Jr., Robert P. Murphy, and Lawrence J. McQuillan

Purchase tickets


3) Ryan’s Next Project? Tax Reform

If House Speaker Paul Ryan survives his defeat on healthcare reform, he may yet live to see victory on tax reform. The Wisconsin Republican has long been known for his passionate discourses on revenue and spending, and President Trump has announced that tax reform is a major priority. Ryan’s tax reform proposal with Kevin Brady of Texas is a very promising remedy for lackluster corporate investment and disappointing GDP growth, according to Independent Institute Senior Fellow William F. Shughart II.

“Called ‘A Better Way,’ this plan would, among many other things, lower the corporate income tax rate to 20 percent, cap the small business rate at 25 percent, and eliminate and streamline various exclusions, deductions, and special-interest provisions,” Shughart writes. “Allowing for full and immediate expensing of investments, it would encourage capital formation by lowering the tax rate on long-term gains and qualified dividends from 23.8 percent to 16.5 percent.”

Bringing U.S. tax rates closer in alignment with global averages would discourage American companies from moving overseas. So too would another provision in the Ryan-Brady plan—its shift from a worldwide tax system, in which profits by American companies are taxed by the IRS even when they’re earned abroad, to a territorial system, in which Uncle Sam would tax only a share of profits on goods and services sold in the United States. Perhaps best of all, from the perspective of a typical middle-income family, the Ryan-Brady plan would boost household after-tax income by up to $4,600, according to the non-partisan Tax Foundation. As Shughart writes, “It’s hard to argue with a comprehensive, pro-growth tax reform plan that would fix our broken system, boost American competitiveness, incentivize U.S. businesses to remain within our borders, and allow American workers to keep more of their hard-earned paychecks.”

Serious Tax Reform Is the Key to Restoring Economic Prosperity, by William F. Shughart II (The Hill, 3/17/17)

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


4) Central Planning for Immigrant Skills?

U.S. immigration policy is in flux—some might say chaos—with no clear indication of what the terrain will look like after the dust settles. If President Trump pushes for policies that favor high-skilled workers, an approach he has said he might pursue, such an approach may appease less dogmatic immigration opponents. Whether this would adequately serve the needs of the U.S. labor markets—and the economy more broadly—is a much different matter, according to Independent Institute Senior Fellow Alvaro Vargas Llosa.

Taking in high-skilled immigrants, via a point-system that assigns priority to those who possess certain identifiable job abilities, may be more politically acceptable than welcoming low-skilled workers. But it’s also a form a central planning based on the notion that politicians and bureaucrats are better than markets are at discerning winners (i.e., “desirable” labor) from losers (i.e., “undesirable” labor), an instance of what Nobel laureate economist F. A. Hayek famously called the “fatal conceit.”

“An economy needs highly trained workers but also people willing to perform other activities,” writes Vargas Llosa. “The job market has an ability to adjust itself that no government has.” Any point-based merit system that tries to usurp the labor market’s ability to hire workers for unfilled jobs would create blockages that hamper the smooth operation of the economy. It wouldn’t totally eliminate the flow of undocumented workers pulled by the allure of higher U.S. wages, but it would make the wheels of labor turn less productively, ultimately to the detriment of American consumers and almost all workers.

Will a Merit-Based Immigration System Work?, by Alvaro Vargas Llosa (The San Francisco Chronicle, 3/17/17)

Global Crossing: Immigration, Civilization, and America, by Alvaro Vargas Llosa


5) Will America and North Korea Live in Peace?

North Korea, whose recent missile tests have raised concerns throughout the international community, is looking like it may become the first major adversary to put President Trump’s title of Commander-in-Chief to the test. Trump has called Kim Jong Un’s regime the leading military threat to the United States. But Trump has also talked forcefully about his eagerness to allow America’s East Asian allies take a stronger, bolder stance for security in the region, including against any predations by North Korea. Is Trump showing inconsistencies?

It wouldn’t be the first time that an American president has done so. George W. Bush famously walked back his campaign promises of a “more humble” foreign policy after the 9/11 terrorist attacks—taking the nation to war against a country having nothing to do with al-Qaeda—but this did nothing to harm his reelection prospects. Perhaps Trump will seek to do the same. But even if a bellicose foreign policy entails little or no direct political cost to the new president, it would still take a horrific financial toll on the United States, according to Independent Institute Senior Fellow Ivan Eland.

Judging by his proposed $54 billion defense budget, a 10 percent increase over recent spending levels, Trump appears to be willing to take such a gamble. “That proposed increase is roughly equivalent to the entire Russian annual defense budget,” Eland writes. In this context—with the new administration proposing to spend more on the military than was spent in the last year of Obama’s tenure, and with Trump striking a more warlike tone—recent news stories reporting that Trump is considering preemptive military action against North Korea suggest that the prospects for peace and financial security look increasingly slim.

Inconsistencies in Trump’s National Security Policies, by Ivan Eland (Huffington Post, 3/21/17)

Video: Ivan Eland on whether President Trump will keep his promise of a more restrained foreign policy (2/18/17)

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


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