The Lighthouse^®

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The Lighthouse^® is the weekly email newsletter of the Independent Institute.
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Volume 14, Issue 14: April 3, 2012

1. ObamaCare Roundup
2. Cold-War Rhetoric on Russia Harms American Interests
3. The Politics of Gas Prices
4. How the Tax System Fosters Big Government
5. New Blog Posts

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Last week, the U.S. Supreme Court heard oral arguments on the constitutionality of the 2010 healthcare overhaul law. Based on the Justices’ questioning and comments, Melancton Smith believes that the Court will strike down its most controversial provision, the individual mandate. “The real question left after the argument is not whether the Court will oppose ObamaCare, but whether the Court will strike the entire law or just certain parts of it,” he writes in The Beacon. Other Independent Institute analysts also weigh in on the case.

Research Fellow Jonathan Bean wonders what would happen if the logic of the individual mandate were applied to other issues. If the federal government can levy fines on individuals who choose not to purchase health insurance, because their choice indirectly raises the insurance costs of other people, what else can it do? Can it impose a tax on young married couples who have fewer than two children, on the grounds that a low birthrate impairs the solvency of Social Security and Medicare and compels some couples to search overseas to adopt a child? The notion sounds absurd, but Bean, editor of Race and Liberty in America, has noted that the feds have engaged in worse abuses of individual rights.

In the Huffington Post, Research Editor Anthony Gregory points out numerous instances of political hypocrisy related to ObamaCare. Barack Obama, he argues, got it right when he opposed an individual mandate during his first presidential campaign. And former Massachuesetts governor Mitt Romney, Gregory notes, is not the only GOP presidential hopeful who favored an individual mandate before he opposed it in the Affordable Care Act. Newt Gingrich, in 2006, supported the mandates of Romney’s healthcare plan for the Bay State; he also supported a federal mandate. Rick Santorum “also favored individual mandates back in the 1990s as an alternative to Hillary Clinton’s health care plan, and ten years ago voted for George W. Bush’s Medicare D plan—the largest expansion of the entitlement state since the Great Society,” Gregory writes. “A more honest debate might entail progressives pushing a full-blown socialized system pit against a true free-market alternative.”

Ubiquitous Hypocrisy on Health Care and the Individual Mandate, by Anthony Gregory (Huffington Post, 4/2/12)

Reproduce or Pay a Tax: The Next ObamaCare, by Jonathan Bean (The Beacon, 3/28/12)

ObamaCare on the Ropes?, by Melancton Smith (The Beacon, 3/28/12)

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In a recent interview on CNN, Mitt Romney called Russia the “number one geopolitical foe” of the United States. The former Massachusetts governor was responding to President Obama’s unintentionally broadcast confession to Dimitri Medvedev that he would have more flexibility to negotiate an arms deal with Russia after the November election. But Romney’s remark was reckless and merits correction. For despite their differences, the United States and Russia have many common interests, and recognition of this fact is reflected in the recent warming of relations between Washington and Moscow, according to Independent Institute Senior Fellow Ivan Eland.

Eland characterizes U.S.-Russian cooperation as “the most important bilateral relationship the United States has in the world.” Both countries have agreed to cut their long-range strategic warheads. In addition, Russia has supported the White House’s stance against Iran’s nuclear program and has provided supply routes for U.S. military equipment headed to Afghanistan. Moscow and Washington still disagree on many issues—including Syria—but there is enough common ground to warrant greater cooperation, Eland argues. For example, both countries would benefit if the United States were to scrap the Jackson-Vanik law, a Cold War-era measure that prevents the normalization of trade relations with Russia. They would also benefit from further reductions in their nuclear weapons arsenals.

Rather than spout provocative rhetoric, American politicians such as Romney “should look on Russia as an important country with its own interests and security needs, which might not always coincide with those of the United States,” Eland writes. “This is why we have negotiations. They are superior to irresponsible campaign rhetoric.”

Russia Is Not Public Enemy Number One, by Ivan Eland (3/28/12)

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

A New ‘Cold War’?, by Casimir Dadak (The Independent Review, Summer 2010)

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The Politics of Gas Prices

A recent opinion poll conducted by the Washington Post/ABC News found that nearly two-thirds of those surveyed don’t like the way President Obama has reacted to rising gasoline prices. How might gas prices enter into November’s election? Is it possible for a president to bring down gas prices to $2.50 per gallon, as Newt Gingrich promised he would do if he were elected? In his latest op-ed, Independent Institute Research Fellow S. Fred Singer looks at some of the issues related to these questions.

Some factors that affect prices are directly attributable to domestic public policies, Singer explains. About 50 cents per gallon of gas covers the costs of transportation, distribution, and refining, including meeting complex EPA mandates and congressional mandates for ethanol additives. Another 50 cents covers federal and, especially, state taxes. Some of that tax money is earmarked for the repair of highways and bridges, but often it is diverted to political pet projects, Singer notes. But the largest factor in gas prices is the world market for crude oil. Even increases in U.S. oil production (or increases in energy conservation) would have only a small effect on prices, in comparison to expected increases in the global demand for oil, particularly from East and South Asian countries, according to Singer.

However, Singer believes that one scenario could significantly reduce world oil prices and reduce gas prices at the pump: increased production by Saudi Arabia. “Put more colloquially,” Singer writes, “if Saudis fear loss of control over oil revenues in the near future (for a variety of political reasons), they will be tempted to increase their production to a maximum (even though it would lower the world price)—in order to maximize immediate prices.” President Obama may not favor increased production and importation of fossil fuels, but voters are likely to put greater pressure on him to change his mind.

The Gas Price Kerfuffle: Obama’s Achilles Heel?, by S. Fred Singer (American Thinker, 3/28/12)

Hot Talk, Cold Science: Global Warming’s Unfinished Debate, by S. Fred Singer

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

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When goods and services are free, people tend to consume more of them. Does this maxim apply to government spending and taxation? In other words, when people can receive federal benefits without paying taxes, do they demand more of them even if they’re funded by deficits? That possibility troubled John C. Calhoun. In 1810, the American politician and political theorist wrote that an “unequal fiscal action of the government” divides a community into two classes: taxpayers and tax spenders. James Madison also worried that the wrong type of fiscal system could create a profound conflict in the political culture and create irresistible pressures for the government to spend more and grow more.

Economists call this phenomenon the problem of the fiscal commons, and its consequences can be seen in trends in the distribution of federal tax liabilities, Jody W. Lipford and Bruce Yandle explain in the Spring 2012 issue of The Independent Review. Examining data from 1979 to 2007 provided by the Congressional Budget Office, Lipford and Yandle found that the top 10 percent of taxpayers paid a growing share of federal tax revenue collected, whereas the bottom 40 percent paid a diminishing share—all while government spending as a percentage of GDP has changed hardly at all. The change in the distribution of tax liability is strongly correlated with growing federal deficits and debt.

To prevent the fiscal system from creating two antagonistic classes, Calhoun had urged policymakers to keep the tax base broad, but as Lipford and Yandle note, Calhoun’s recommendation was abandoned with one constitutional change: the ratification of the federal income tax amendment, which set the stage for the population to divide into taxpayers and tax spenders.

Taxpayers and Tax Spenders: Does a Zero Tax Price Matter?, by Jody W. Lipford and Bruce Yandle (The Independent Review, Spring 2012)

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From The Beacon:

From MyGovCost News & Blog:

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

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