The Lighthouse^®

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The Lighthouse^® is the weekly email newsletter of the Independent Institute.
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Volume 17, Issue 13: March 31, 2015

1. Basic-Income Guarantees: A Debate
2. Gun Prohibitions Kill
3. How Big Is Government in the United States?
4. Lessons for the U.S. from Great Britain
5. The Challenge of Liberty Summer Seminars
6. New Blog Posts
7. Selected News Alerts

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Should the current system of government programs for the poor be replaced with a uniform, annual cash grant for all? The Spring 2015 of The Independent Review features a symposium on this proposal, known as a basic-income guarantee (BIG). Journal co-editor Michael C. Munger and Matt Zwolinksi argue in favor of it, but David R. Henderson and journal managing editor and co-editor Robert M. Whaples take the opposing side. To whet your appetite, we’ve posted Munger’s introduction to the symposium.

To implement a basic-income guarantee in the United States, federal spending would need to rise by 30 percent and the size of the welfare bureaucracy would need to double, according to Henderson. If that weren’t sufficient reason to drop the idea, the moral argument against it puts the final nail in the coffin, he claims. Munger, who argues in favor of BIG, describes his case as “one and one-half cheers”; while the proposal falls short of a perfect ideal, he argues, using it in place of the existing array of government subsidies, transfers, in-kind payments, and set-asides would save tax dollars, put more money in people’s hands, and increase the recipients’ liberty and autonomy. Zwolinski takes a different approach, arguing that a government-guaranteed basic income is morally justified. Because the initial owners of land seized it, he claims, Lockean libertarian principles necessitate some form of compensation, and a basic-income guarantee is the alternative best suited to fill that role and can do so without violating individual property rights.

Whaples wraps up the symposium by countering both Munger’s practical arguments and Zwolinski’s moral claims. The intellectual underpinning of a government-guaranteed basic income, he argues, fails to overcome several objections on historical, economic, and moral grounds. Moreover, if it ever did, the adoption of a BIG would deserve only cautious consideration, he continues, because major policy changes always have numerous unknown and often irreversible consequences.

Who won the debate? Read The Independent Review (Spring 2015) and tell us who you think makes the best case.

Editor’s Introduction: The Basic-Income Debate, by Michael C. Munger (The Independent Review, Spring 2015)

Get your e-subscription or print subscription to The Independent Review today! (Print subscription includes FREE book.)

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Days after terrorists killed eleven workers at the satirical magazine Charlie Hebdo and four shoppers at a kosher market in Paris on January 7, the head of the Rabbinical Centre of Europe and the European Jewish Association wrote to officials in each country of the European Union, urging them to authorize the arming of guards at Jewish sites across the continent. Sadly, Rabbi Menachim Margolin’s clarion call went unheeded, and on February 15 an unarmed security guard at a Copenhagen synagogue was murdered.

“The recent atrocities remind of us of a time in Europe when Jews were prohibited from mere possession of a firearm,” writes Independent Institute Research Fellow Stephen P. Halbrook, whose latest book examines German gun control policies in the lead up to Kristallnacht. “In response to street fighting in Germany in the 1920s, the Weimar Republic enacted stringent gun laws that gave the government discretion to deny permits to ‘untrustworthy’ persons and to register and confiscate guns for ‘public safety.’ ”

It’s an episode from history whose lessons have yet to fully sink in. “This year marks the seventieth anniversary of the end of the nightmare years of World War II,” Halbrook continues. “Fortunately, the recent atrocities against European Jews pale in comparison to the genocide that Hitler inflicted. But make no mistake: Anti-Semitism is alive and well in Europe. Its chief source is Islamic extremism. Every person, every community, has a basic human right to defend life. Rabbi Margolin is absolutely right.”

Rabbi’s Demand: Let Jews Defend Themselves from Terrorism, by Stephen P. Halbrook (InsideSources, 3/23/2015)

Gun Control in the Third Reich: Disarming Jews and “Enemies of the State,” by Stephen P. Halbrook

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Government spending at all levels has exploded over the past 100 years—but by how much? And how do we get an accurate measure of government’s role in the economy today? Economists often answer the latter question by providing calculations of government spending as a share of gross domestic product (GDP). From 2010 through 2014, for example, spending by federal, state, and local governments combined (G) amounted to about 35.8 percent of U.S. GDP, according to Independent Institute Senior Fellow Robert Higgs. But even that whopping sum underestimates the role of government in the economy, Higgs argues.

Honing in on a truer measure requires that we go deeper into technical concepts of aggregate economic accounting, so please bear with us as we explain why G/GDP underestimates government’s role in the economy. GDP is supposed to measure the dollar amount spent on final goods and services (as opposed to intermediate goods used in the production process, such as steel sold to make industrial machines and wheat sold to flour mills). Unfortunately, GDP doesn’t achieve this goal perfectly because it includes something called “capital consumption allowance”—that is, the amount spent to maintain the existing capital stock in the face of continuing wear and tear and obsolescence. If we jettison GDP and instead use national income (NI) in the denominator, then from 2010 through 2014, government spending accounted for 41.4 percent, according to Higgs.

Using national income (or its close relative, personal income) gets us closer to what we’re looking for, but we can do better still. Suppose we compare government spending to personal consumption outlays for the same five-year period, 2010 through 2014. Here we find that government’s relative size is 52.2 percent, according to Higgs. This represents a significant increase compared to G/GDP, but even so, it underestimates government’s role because it doesn’t count the costs that government imposes on private parties, in the form of various regulations and fines. Yet, even if we could somehow add up these costs and include them in G, we would still underestimate government’s role if we kept using GDP in our denominator. That’s because government spending—which is included in GDP—doesn’t necessarily create a final product with a measurable economic value, a fact that many economists who studied aggregate economic accounting acknowledged in the years before World War II. Writes Higgs: “Government spending either is completely wasteful, merely transfers income, purchases an intermediate rather than a final good, or purchases valuable final services whose value cannot be ascertained because the transaction is not made by private parties exchanging their own resources in a market setting.”

How Big Is Government in the United States?, by Robert Higgs (The Beacon, 3/20/15)

Crisis and Leviathan: Critical Episodes in the Growth of American Government (25th Anniversary Edition), by Robert Higgs

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Since his inauguration as Great Britain’s prime minister in 2010, David Cameron has pursued a radically different fiscal policy for coping with the aftermath of the Great Recession compared to that of his American counterparts. He has tightened government expenditures, cutting defense spending by 4.3 percent, and the British economy responded with a robust 3 percent growth rate in national output last year. The United States would do well to emulate Britain, according to Independent Institute Senior Fellow Ivan Eland.

Cameron has even defied NATO, by reducing defense spending to below the minimum threshold the alliance requires member nations to spend—2 percent of GDP. And despite an upcoming national election, and the temptation this creates to increase government spending, he has pledged to double down on austerity. If the next U.S. president possessed such vision and courage, the United States would reap considerable benefits in terms of economic progress and national security, according to Eland. To promote that end, one project the 45th president of the United States should initiate is the closure of numerous overseas military bases established during the Cold War.

“The next president, whether Republican or Democrat, should plan to substantially reduce such foreign overstretch over a period of four years, so that it could be completed in one presidential term and thus not be reversed,” Eland writes. “Unfortunately, with the hawkish Hillary Clinton the probable Democratic nominee for 2016 and a big-government Republican Party (Tea Party veneer aside) that has already forgotten the lessons of Afghanistan and Iraq and has become more bellicose by the day, a Cameron-style austerity program for defense (and everything else) is extremely unlikely.”

The United States Could Learn from Its British Ally, by Ivan Eland (The Huffington Post, 3/23/15)

Recarving Rushmore: Ranking the Presidents on Peace, Prosperity, and Liberty (Updated Edition), by Ivan Eland

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Attention, College Students:

Do you like traveling to new places, making new friends, and learning about how to make the world a better place? So do we, which is why we think you would love our 2015 Challenge of Liberty Summer Seminars.

 Our seminars are your one-stop summer experience to:

• Learn from leading scholars and economists
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Applications are still open for the 2015 Challenge of Liberty Summer Seminars in California and Colorado. Spaces are limited and scholarships are granted on a limited basis.

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From MyGovCost News & Blog:

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

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