The Lighthouse^®

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The Lighthouse^® is the weekly email newsletter of the Independent Institute.
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Volume 16, Issue 17: April 29, 2014

1. Sweatshops: A Ladder Out of Poverty?
2. Senate GOP Healthcare Bill: Back to the Drawing Board
3. U.S. Drone Attacks in Yemen Create More Enemies
4. Download the MyGovCost Mobile App—and Write a Review!
5. New Blog Posts
6. Selected News Alerts

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The tragic collapse of the Rana Plaza garment factory in Bangladesh one year ago killed more than 1,100 workers and revitalized calls for increased government regulation of sweatshops. No one will question the good intentions of Westerners concerned with worker safety in the developing world. Unfortunately, the consequences of government regulation would be harmful to the economic interests of many of the nearly 4 million workers employed in Bangladesh’s estimated 4,500 garment factories, according to Independent Institute Senior Fellow Benjamin Powell, author of Out of Poverty: Sweatshops in the Global Economy.

“Passing new safety laws, or more vigorously enforcing existing laws, will jeopardize the jobs that provide opportunities to escape extreme poverty,” Powell writes in the Huffington Post. “The shift ends up throwing garment workers back into the lower-paid segments of their economies as their factory jobs disappear.”

In a country where more than three-fourths of the population live on $2 per day, Bangladesh’s garment factory workers tend to earn above-average incomes. Working in a sweatshop can mean the difference between making a modest living, with reasonable expectations of economic advancement, and a life of extreme, hopeless poverty. Government-imposed safety regulations would harm workers directly, by reducing the demand for their labor, and also indirectly, by reducing the profits that enable capital accumulation and rising worker productivity. Where markets operate relatively free of government interference, rising productivity leads to higher worker compensation—including a safer workplace and other benefits that workers seek after they’ve attained some level of economic security. “This process occurred in the United States and can eventually happen in Bangladesh if costly regulations don’t get in the way,” Powell writes. Incidentally, as economic historian Price Fishback has noted, most of the occupational safety regulations of industrialized countries appear to have codified exiting practices in a given industry. Many Bangladesh industries can’t yet afford Western standards of safety.

Bangladesh’s Factory Collapse: A One-Year Retrospective, by Benjamin Powell (The Huffington Post, 4/23/14)

Making Poor Nation’s Rich: Entrepreneurship and the Process of Economic Development, edited by Benjamin Powell

Out of Poverty: Sweatshops in the Global Economy, by Benjamin Powell

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Three Republican senators have written a bill to replace Obamacare, but how well does it address the problems plaguing the nation’s healthcare system? Not well enough, according to Independent Institute Senior Fellow John R. Graham. The authors of the Patient CARE Act—Orrin Hatch, Tom Coburn, and Richard Burr—realize that many of the problems stem from the federal tax code’s bias in favor of employer-based health benefits, but their proposal only reduces, rather than eliminates, that bias.

Ever since World War II, employer-provided health insurance has enjoyed a tax exclusion for the employers who offer it—which is mostly a blessing for workers with jobs that come with such benefits, but a curse for anyone who must purchase health insurance in the individual market using after-tax dollars. The Patient CARE Act would reduce this tax advantage but not eliminate it: it would make 35 percent of the value of employer-provided health benefits taxable, resulting in a higher taxable income. (If it had been in effect last year, the legislation would have increased taxes for a household of four by about $5,773.) To compensate for higher taxes, the Patient CARE Act would offer tax credits—but only to a small segment of American society. And the bill’s schedule of tax credits would result in higher effective marginal tax rates for many, resulting in disincentives to earning more income.

The Senate Republicans’ proposal also has other flaws. For example, the bill includes continuous-coverage provisions that would, in Graham’s words, “encourage people to choose inexpensive bare-bones plans when they’re healthy and comprehensive plans when they’re sick.” Insurers would try to counter such opportunistic switching by devising ways to avoid enrolling people more likely to switch plans, such as by offering narrow networks of medical specialists. “Although the Patient CARE Act is better than Obamacare, that’s too low a bar,” Graham writes. “Its authors will have to address these flaws before their proposal can be accepted as a credible alternative.”

Flaws in the Senate GOP’s Obamacare Replacement, by John R. Graham (The Daily Caller, 3/19/14)

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

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CIA-operated drones reportedly killed more than 40 Islamic militants in Yemen earlier this month. The spy agency’s mission is to assist the Yemeni government by decapitating the regional al Qaeda affiliate group, but its method is counterproductive, according to Independent Institute Senior Fellow Ivan Eland.

“This self-perpetuating drone war is creating more enemies than it is killing,” Eland writes in the Huffington Post. “Western and Yemeni journalists on the ground have documented this counterproductive outcome, cataloging the rise in membership of al Qaeda in the Arabian Peninsula (AQAP) even as U.S. drones are killing substantial numbers of militants.”

Several factors have contributed to the blowback, Eland argues. Foremost among them are the civilian casualties, including 15 peaceful Yeminis killed by CIA drones at a wedding last December. Why do such misdeeds continue? For starters, officials in Washington and Sana’a tend to underestimate the casualties of the bloody anti-insurgency campaign. As for the CIA, the agency has incentives to continue the drone attacks because this allows it to claim “ownership” of the technology and tactics—and thereby achieve some measure of bureaucratic victory against another competitor for U.S. tax dollars: the Pentagon. “Also, killing militants is tempting,” Eland writes, “because it gives a sense, in the short to medium term, of accomplishment—never mind the long-term downside.”

United States Accelerates a Counterproductive Drone War in Yemen, by Ivan Eland (The Huffington Post, 4/24/14)

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

EVENT: “Whither America: A Foreign Policy Debate Among Realists, Nationalists, and Internationalists,” with Ivan Eland, Michael Lind, and Henry Nau (George Washington University, Washington, D.C., 5/6/14)

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With the April 15 tax deadline behind us, many of us would like to forget about the taxman. Unfortunately, federal spending is growing and growing—which means you will be on the hook for more and more taxes. Get an estimate of your lifetime federal tax liability. Download the MyGovCost Mobile App, now available for free in the Apple App Store for both iPhone and iPad.

And while you’re there, please help other taxpayers become better informed by writing a review of the MyGovCost Mobile App.

Here are some of the features of the App:

• Your personal Government Cost Calculator: Enter your age, education, and income, and instantly see how much you’re paying for the entire federal government budget. A customized chart breaks down how much you’re paying for each federal program, for both the current fiscal year and for your lifetime.
  
  
• Blogs: Read our latest blogs, including The Beacon and the MyGovCost News and Blog, with insightful writing from veteran policy analysts.
  
  
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• Videos: View the latest video blogs or events featuring the most independent thinkers on the web.

MyGovCost Mobile App

MyGovCost Online Government Cost Calculator

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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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