The Lighthouse^®

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The Lighthouse^® is the weekly email newsletter of the Independent Institute.
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Volume 15, Issue 44: October 29, 2013

1. Truly Affordable Housing: Institute Declares Victory and Calls for Greater Freedom for Home Builders
2. Obamacare Death Spiral
3. What the Federal Budget Impasse Shows
4. The Physicians Summit 2013—Prescription: Freedom (Nov. 1–2, Dallas, Texas)
5. New Blog Posts
6. Selected News Alerts

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The Independent Review: Subscribe or renew today and get a free copy of the 25th Anniversary Edition of Crisis and Levithan: Critical Episodes in the Growth of American Government, by Robert Higgs.

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Self-described “affordable housing” activists suffered a setback earlier this month when California Gov. Jerry Brown vetoed a bill that would have authorized city and county governments in the Golden State to require real-estate developers to devote a portion of their projects to below-market residential dwellings. As Independent Institute Senior Fellow Lawrence J. McQuillan explains in The Beacon, the governor was correct to note that such measures backfire: they discourage the construction of low- and middle-income housing and significantly raise the price of the non-targeted housing units.

Gov. Brown seems to have learned this lesson almost a decade ago when, as mayor of Oakland, he heard of studies by Independent Institute Research Fellow (and now Senior Fellow) Benjamin Powell, who served on the city’s Blue Ribbon Commission on Inclusionary Housing. Employing the methods he had used to examine the costs of affordable-housing mandates adopted by other cities in California, Powell estimated that similar measures in Oakland would result in an inclusionary tax “as high as $17,000 per unit in the initial years and $51,000 per unit in the later years,” McQuillan reports. Hats off to Gov. Brown for resisting political pressure to pass legislation that would have looked compassionate only on the surface, and which would have proven disastrous for many thousands of low- to middle-income renters and homebuyers.

Writing in the San Francisco Chronicle, Independent Institute Senior Vice President Mary L. G. Theroux adds that “California politicians promoting ‘affordable housing’ mandates today are perversely feeding housing shortages.” Theroux recalls the related experience of her father, the subject of the new book Willard Garvey: An Epic Life, whose company World Homes offered low-cost houses and affordable mortgages in Mexico, Colombia, Peru, Morocco, India, and Thailand. Unfortunately, policymakers in those countries often demonized his efforts and erected barriers that eventually drove him out. The larger point is that the problem of inadequate housing is not inherently insurmountable: entrepreneurs can solve it—if only politicians would get out of their way. “The simplest way to improve access to affordable housing is to let builders add to the supply of housing, regardless of the price they hope to charge,” Theroux writes in a separate op-ed in the Wichita Eagle. “It may not make an appealing political sound bite, but at the end of the day the poor, especially, would be better served.”

Willard Garvey: An Epic Life, by Maura McEnaney

Want Affordable Housing? Let Builders Build, by Mary L. G. Theroux (San Francisco Chronicle, 10/21/13)

“Affordable Housing” Rules Result in Opposite, by Mary L. G. Theroux (The Wichita Eagle, 10/24/13)

Victory! The Independent Institute’s Longtime Opposition to Inclusionary Housing Policies Lays Groundwork for Governor’s Veto, Lawrence J. McQuillan (The Beacon, 10/16/13)

Housing America: Building Out of a Crisis, edited by Randall G. Holcombe and Benjamin W. Powell

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Recent media attention and public criticism of President Obama’s healthcare reform law have focused on the glitches that have afflicted Healthcare.gov, the federal government’s porthole to the newly launched state-based health-insurance exchanges. A more fundamental problem—one that will become increasingly apparent in the months ahead—is that an influx of retirees and high-cost enrollees will doom the Obamacare exchanges, according to Independent Institute Senior Fellow John C. Goodman.

This problem, which has seldom been discussed in the news media, stems from three sources. First, the impending closure of state and federal high-risk pools will soon send hundreds of thousands of high-cost enrollees into the exchanges. For example, about 23,000 Texans will leave the Lone Star state’s high-risk pool and enter the state exchange, and the closure of the federal government’s high-risk pool will send 107,000 enrollees into the exchanges. Second, many public- and private-sector retirees who are not yet eligible for Medicare will head to the state exchanges. The City of Detroit, for example, will be sending 8,000; many more will come from the private sector. Third, the state exchanges will face an influx of high-cost enrollees who had been staying at their current jobs mainly because those jobs offered health insurance. “Millions of people will leave their employer plans and enroll in the exchange—paying premiums well below the expected cost of their care,” Goodman writes.

As these high-cost enrollees purchase insurance through the state exchanges, average premiums will need to rise in order to cover the costs of those enrollees. This rise in premiums will in turn discourage younger, healthier people from purchasing insurance, and this effect will exert additional upward pressures on premiums—premiums that will increasingly become too expensive for the insurers to collect. Goodman writes: “The ultimate end of a death spiral is the insurance pool equivalent of bankruptcy.” For suggestions on how Obamacare’s architects might have avoided this fate, please see his post in The Beacon and his authoritative book, Priceless: Curing the Healthcare Crisis.

Death Spirals, by John C. Goodman (The Beacon, 10/22/13)

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

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The U.S. Senate and House of Representatives have until January 15, 2014, to come to an agreement regarding their budget proposals. How different are their proposals? The House aims to balance the federal budget in 2023, and at a level of spending equal to 19 percent of GDP. The Senate, however, proposes to continue federal spending in excess of revenue ten years from now: outlays would equal approximately 22 percent of GDP, and revenues 20 percent. The difference in the two proposals illustrates the huge gap in how the two chambers of Congress view fiscal responsibility, according to Independent Institute Research Fellow Craig Eyermann.

Eyermann also shows the trajectories of the national debt before President Bush’s stimulus spending began in October 2008, immediately after Bush’s departure in 2009, and in the years since then. Especially helpful is his inclusion of an IMF timeline of U.S. fiscal packages based on data from the Congressional Budget Office and Office of Management and Budget. “If anyone asks why the national debt has grown so much,” Eyermann concludes, “just tell them that the U.S. politicians climbed a mountain of spending to get there.”

As yawning as the gap between the two proposals is, the situation would have been even worse if the White House’s plan were still politically relevant. “In case you’re wondering whatever happened to President Obama’s Fiscal Year 2014 budget proposal, it has pretty much fallen by the wayside,” Eyermann writes. “He wanted to spend even more money than what is in the Senate’s budget proposal.”

Where to Draw the Line on a Budget Compromise, by Craig Eyermann (MyGovCost.org, 10/27/13)

Climbing a Mountain of Spending, by Craig Eyermann (MyGovCost.org, 10/24/13)

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Co-sponsored by the Independent Institute, this year’s Physicians Summit has a lot to offer healthcare providers concerned with navigating the new health-care landscape altered by the Affordable Care Act. Here are some tidbits from the official promotional material:

Register before October 28, 9pm Pacific Time, and enjoy a significant discount: a fee of $99 for Friday’s events and workshops and an extended option to sign up for Saturday’s workshops for a reduced price of $249.

Conference Agenda

Speaker Spotlights

Registration

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From The Beacon:

From MyGovCost News & Blog:

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

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