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The Lighthouse®

The Lighthouse® is the weekly email newsletter of the Independent Institute.
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Volume 15, Issue 2: January 8, 2013

  1. The Fiscal Cliff
  2. Cronyism and the Car Maker
  3. Counterterrorism Budget Should Reflect Real Risks
  4. The Independent Review—Winter Issue Now Available
  5. New Blog Posts
  6. Selected News Alerts

1) The Fiscal Cliff

The day after Christmas, Independent Institute Research Fellow Randall Holcombe wrote: “Isn’t it interesting that President Bush’s tax policies are the thing that the Democrats are fighting the hardest to keep as they negotiate the federal budget?” Many of those lawmakers, he noted, had fought tooth and nail against the Bush tax policies in the first place, and for the past several years they’ve blamed them for contributing to larger federal budget deficits and the mounting national debt. In an op-ed published last Friday, Independent Institute Research Fellow John C. Goodman develops this theme.

“This was not a victory for the president or for the Democrats in Congress,” Goodman writes. “It would be an incredible PR coup for the Democrats if they now appeared to be the champions of the very tax cuts they opposed all these many years.”

But Goodman also has strong words for the Republicans in Congress. In addition to failing to appreciate that the deal to avert the so-called fiscal cliff saves about 80 percent of the so-called Bush tax cuts, GOP lawmakers have failed to deal with a major problem with the tax code: Job-creating entrepreneurs with pass-through income are taxed at much higher rates than billionaires like Warren Buffett. Moreover, the congressional Republicans failed—along with the mainstream news media—to take note of the five new taxes from Obamacare that went into effect on New Year’s Day. These shortcomings, however, are not Goodman’s only gripes. Also, Goodman proposes a “revenue neutral” plan that would help the private economy, which still hasn’t recovered from the recession, and the state governments, most of which won’t be ready to start enrolling people in state healthcare exchanges this October. His plan: “Push back the start date of the five new Obamacare taxes and pay for that by pushing back the start date of Obamacare.”

Mark Your Calendars!, by Craig Eyermann (MyGovCost Blog, 1/5/13)

Fiscal Cliff: Who Won? Who Lost?, by John C. Goodman (Right Side News, 1/4/13)

The Amazingly Popular Bush Tax Cuts, by Randall Holcombe (The Beacon, 12/26/12)

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


2) Cronyism and the Car Maker

Entrepreneur Elon Musk donated more than a hundred grand to Obama’s reelection campaign, and his company Tesla Motors is now the proud recipient of a $465 million federal loan. A quid pro quo? Maybe, maybe not. But whatever the reason for the loan, the scheme hardly sounds like the egalitarian redistributionism that many Obama supporters favor.

One reason is the type of customer that Tesla has in mind: the very well off. As Independent Institute Communications Counsel K. Lloyd Billingsley notes at the MyGovCost Blog, “The lowest price for Tesla’s Model S is $52,400—after the $7500 tax credit. The high-end model is $72,400, and even if buyers have the money not many are available.”

Critics of “crony capitalism” (more accurately called cronyism) might somehow attempt to justify the loan because Telsa Motors favors electric cars over those that run on fossil fuels. But Billingsley recommends that environmentalists think twice before they endorse taxpayer subsidies for Musk’s car company. The U.S. Environmental Protection Agency, he writes, “does not require electric cars to quantify the environmental costs of the charging source. Neither does the EPA require electric cars to quantify the distance drivers get from charging the vehicle.” Cronyism—bad for taxpayers, bad for the environment.

Fed Energy Plan Good Car-ma for Tesla Boss, by K. Lloyd Billingsley (MyGovCost Blog, 1/7/13)

Re-Thinking Green: Alternatives to Environmental Bureaucracy, edited by Robert Higgs and Carl P. Close



3) Counterterrorism Budget Should Reflect Real Risks

President Obama has named his next picks for Defense Secretary and CIA Director—which brings us to our next subject: the need to reform—and cut—the bloated counterterrorism budget. Recent issues of The Lighthouse have highlighted the case for serious cuts in military spending. At root, the case centers on a crucial distinction—military spending is not synonymous with genuine defense preparedness. Independent Institute Senior Fellow Ivan Eland makes a similar point about counterterrorism spending: throwing money at a perceived problem doesn’t automatically make it go away; sometimes it makes problems worse.

It’s time to get real about the terrorism risk. For Americans on U.S. soil, the risk of getting killed by an international terrorist is slight. Even the risk for average people worldwide is very minor—about one in 80,000, according to Prof. John Mueller of Ohio State University. “These odds are about the same as those of being hit by an asteroid or comet,” Eland writes.

Fortunately, with Osama bin Laden dead, spending on counterterrorism will probably decline, Eland predicts. “Some money should be spent on counterterrorism,” he writes, “but no one should lament the budget pressure that will likely restrain the extravagant and unnecessary spending that has been based on government fearmongering.”

Sumptuous Counterterrorism Spending Must End, by Ivan Eland (10/31/12)

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


4) The Independent Review—Winter Issue Now Available

The winter 2013 issue of The Independent Review, our quarterly journal edited by Robert Higgs, raises a host of interesting questions:

  • What’s some of the evidence for the argument that World War II is not responsible for ending the Great Depression? Read the article.
  • Which two dubious ideas have given rise to bank regulations and taxes purported to reduce the risk of a financial meltdown?
  • Which African city deserves praise for the impressive record of its privately provided fire-safety services?
  • Why was legal theorist Carl Schmitt wrong to claim that only the state could save society from an existential threat? Read the article.
  • How did the military draft in America change from colonial times to World War I?
  • What fundamental conceptual confusion prevents Amartya Sen’s treatise, The Idea of Justice, from providing a solid underpinning for a just political-legal order?
  • Which widely held myth has greatly enabled the secular state to perpetrate large-scale violence? Read the review essay.
  • Why do economists and policy makers often make errors that undermine the pursuit of truth and freedom? Read the editor’s commentary.

The Independent Review (Winter 2013)

Special offer: Subscribe or renew now and receive a free copy of Crisis and Leviathan: Critical Episodes in the Growth of American Government (25th Anniversary Edition), by Robert Higgs!


5) New Blog Posts

From The Beacon:

From MyGovCost News & Blog:

Fed Energy Plan Good Car-ma for Tesla Boss
K. Lloyd Billingsley (1/7/13)

Mark Your Calendars!
Craig Eyermann (1/5/13)

Voters Believe Federal Spending Cuts Unlikely
K. Lloyd Billingsley (1/4/13)

You can find the Independent Institute’s Spanish-language website here and blog here.


6) Selected News Alerts


  • Catalyst
  • Beyond Homeless