The Lighthouse^®

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The Lighthouse^® is the weekly email newsletter of the Independent Institute.
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Volume 17, Issue 9: March 3, 2015

1. Education Innovation: The Case for ESAs
2. Janet Yellen and the Fed’s Spiked Punchbowl
3. Absent Real Reform, the EU Should Show Greece the Door
4. Fleecing Taxpayers in the Name of Mental Health
5. The 2015 Challenge of Liberty Seminars: Empowering Students to Promote Freedom
6. New Blog Posts
7. Selected News Alerts

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Educational savings accounts (ESAs) are among the brightest new stars on the K-12 horizon. Here’s how they work: For parents who promise not to enroll their child in a public school for the upcoming school year, the state sets aside 90 percent of the money it would have spent on the child and deposits it in his or her ESA; parents can then use those funds to pay for their child’s private-school tuition, homeschooling, textbooks, online courses, supplies, tutors, or other educational products and services. Nearly 2,600 kids in Arizona and Florida have their own ESAs, and studies show that their parents like the results, according to Vicki E. Alger, a research fellow at the Independent Institute who is writing a book on federal education policy.

“Fully 100 percent of participating Arizona parents reported being satisfied with the program, with 71 percent reporting they are ‘very satisfied,’” Alger writes in an op-ed for the Washington Times. It’s not surprising that parents would find satisfaction in controlling the educational purse strings. By doing so, their children can obtain more personalized instruction and resources than they typically can get in a public classroom.

Unfortunately, only a small segment of parents in Arizona and Florida are free to choose ESAs—the parents of children with special needs or circumstances. If legislators in those states, along with lawmakers in nine states considering adopting similar programs, wish to magnify the benefits of consumer-directed K-12 spending, they should make ESAs universal. “Every student, regardless of his or her circumstances, should have the opportunity for personalized learning,” Alger writes.

Personalizing Learning for All Students Through Education Savings Accounts, by Vicki E. Alger (The Washington Times, 2/26/15)

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Last Wednesday, Federal Reserve head Janet Yellen sat before the House Financial Services Committee, fielding questions from Republican congressmen suspicious of her relationship with the White House. The lawmakers have cause for concern. When central bankers act as servants of the Oval Office, the results may be good for the president’s short-term political ambitions but utterly horrendous for ordinary Americans, especially seniors who see the buying power of their fixed incomes and savings pummeled by price inflation. In his latest op-ed for Investor’s Business Daily, Independent Institute Research Fellow Burton A. Abrams explains how the Fed goes wrong.

Even if the Federal Reserve always acted independently and resisted political pressure to spice up the economy before the next election, the notion that a central bank’s decision-makers will “do the right thing” is wishful thinking. One problem, according to Abrams, is that the Federal Reserve Open Market Committee—the group that sets monetary policy by targeting the federal funds rate—often continues stimulating the economy even when it has already rebounded from the depths of a recession. Abrams warns that the Fed under Janet Yellen’s leadership is tempting fate by doing exactly this—like a bartender who spikes the punchbowl just as the party is getting noisy.

“The economy is gathering steam, output growth is strong and the unemployment rate is falling, but the Fed has decided to keep its foot on the accelerator and keep its benchmark interest rate, the federal funds rate, near zero until midyear,” Abrams writes. “The longer it waits to take away the punch bowl, the greater the odds that its policy of ‘free drinks’ is creating dangerous bubbles in financial and real estate markets, and intensifying inflationary pressures.”

How Do You Spell ‘Fed’? D-U-I, by Burton A. Abrams (Investor’s Business Daily, 2/25/15)

The Terrible 10: A Century of Economic Folly, by Burton A. Abrams

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The European Union is giving Greece a four-month credit extension in the hope that the financially troubled country will get its fiscal house in order. According to Independent Institute Research Director William F. Shughart II, this decision is just the latest in a series of bad moves by the EU—one that only encourages more reckless spending by Greece, as well as by Italy, Portugal, and Spain.

Greece itself has seen better days. In 2011, encouraging fiscal austerity measures prompted the European Central Bank to loan it a princely sum. (German taxpayers bore the brunt of the subsidy.) Today, however, Greeks are taking to the streets in opposition to more belt-tightening imposed by Brussels. The EU would be better off if Greece went its own way—or were pushed out. Moreover, it should have resisted lobbying (by Goldman Sachs, of all folks) to admit the shaky country into the Eurozone back in 2001.

In the short term, a Greek exit would come at great cost for Greeks, including higher unemployment and lots of business failures. In the long term, however, it might be just what Greece needs to overhaul its culture of lavish social spending and political patronage. “The key questions now,” Shughart writes, “are whether Greeks want [to begin afresh] enough to pay the piper and whether Greece’s socialist prime minister has the courage to forgo his campaign promises and become a free-market reformer.”

Time to Sever Fiscally Irresponsible Greece from Its EU Lifeline, by William F. Shughart II (The Fresno Bee, 2/26/2015; elsewhere on other dates)

More by William F. Shughart II

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In 2004, California voters passed Proposition 63, the Mental Health Services Act. At its core was a one-percent tax hike on millionaires, which to date has raised approximately $13.2 billion for the state’s dwindling number of psychiatric hospital beds and reduced mental health treatment in general. So, where have the funds gone? Just trying to follow the money might land the curious in a padded cell, assuming one could find a vacancy.

Yet despite the poor transparency and lack of accountability, the White House has proposed a similar program at the federal level, the $215 million “Precision Medicine Initiative.” Don’t expect Washington’s policies and procedures to result in better outcomes than California’s, advises Independent Institute Policy Fellow K. Lloyd Billingsley.

And don’t expect problems to appear immediately. In California’s case, questions of financial irregularity received too little attention before Prop 63 sponsor Darrell Steinberg left the state legislature. Fortunately, a recent report by the Little Hoover Commission has shed valuable light on the issue. Let’s hope this episode prompts concerned citizens to ask probing questions sooner rather than later.

Beware the White Coat Syndrome, by K. Lloyd Billingsley (The Daily Caller, 2/13/15)

MyGovCost.org – Home of the Government Cost Calculator

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What are you doing this summer for your mind and heart? If you’re a college student who wants to help bring about a free society, we hope you’ll consider putting the 2015 Challenge of Liberty Seminars at the top of your to-do list.

Not only will you become better equipped to do battle with the forces of darkness, you’ll have a great time hanging out with like-minded students and interacting with some of the best minds in the liberty movement today. Our distinguished faculty includes top scholars whose passion for free-market economics, freedom-friendly political philosophy, and the history of liberty is contagious.

Students are invited to join Robert Higgs, Steven Horwitz, Michael Huemer, Benjamin Powell, Tom Bell, Lawrence White and others in sunny California or scenic Colorado for a week of education, discussions and debates, and fun social events.

The application deadline to apply is Friday, May 1, 2015. Apply now to take advantage of our limited number of 100% tuition-waived scholarships.

The 2015 Challenge of Liberty Seminars

Videos from previous years

Student Internships

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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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