The Lighthouse^®

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The Lighthouse^® is the weekly email newsletter of the Independent Institute.
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Volume 14, Issue 51: December 18, 2012

1. A Christmas List for the American Family
2. Reform Medicare Now!
3. The Fed and the Fiscal Cliff
4. U.S. Designation of Syrian Terrorist Group Could Backfire
5. New Blog Posts
6. Selected News Alerts

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Young people without fathers face an uphill battle in American society. For a small segment, the struggle is particularly difficult: 85 percent of imprisoned youth, 72 percent of high school dropouts, 80 percent of rapists, and 63 percent of teenagers who committed suicide were reared in fatherless homes, according to David J. Theroux, president and founder of the Independent Institute. In a new op-ed, Theroux calls for revitalizing the two-parent household by reforming the public policies that have helped undermine it, including welfare programs that subsidize single women who raise children independently from the father.

“The welfare state rewards teenage girls with subsidies for raising children without fathers, and the breakup of family structures among the poor has been the result,” Theroux writes at WorldNetDaily. “As the welfare state has expanded, the family has declined and serious social problems have proliferated.”

Theroux proposes a three-item “grown-up Christmas list” to help shore up the American family. He calls for (1) marriage and marriage law to be privatized and depoliticized so that churches and other non-government institutions would play a greater role in preparing couples and their families to better meet life’s challenges; (2) an end to welfare programs that subsidize family breakups, and the elimination of tax policies that penalize marriage and undermine intergenerational wealth transfers, such as the estate tax; and (3) the promotion of private institutions that foster marriage, worship, and the family, including private reconciliation programs to help restore broken families. This wish list, Theroux argues, merits the highest priority. “In the United States, the American family has never before been confronted with such powerful threats to its standing and stability,” he writes.

Help the Family: Privatize and Depoliticize, by David J. Theroux (WorldNetDaily, 12/7/12)

More Commentary by David J. Theroux

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Meaningful deficit reduction requires getting entitlement spending under control, especially for Medicare. As Independent Institute Research Fellow Craig Eyermann explains in a new report, Medicare spending in 2035 could reach nearly double the amount of today’s spending level. In a recent piece for National Review, Independent Institute Research Fellow John C. Goodman offers several proposals for Medicare reform. The first is for Medicare to pay market prices, never more.

“Medicare should immediately allow enrollees to obtain care at almost all [healthcare clinics]—paying the posted, market prices, not Medicare’s fee schedule,” Goodman writes. “This reform would lower Medicare’s costs even as it makes primary care more accessible.” Under the current system, Medicare typically pays hospitals two to three times what it pays for the same service at a doctor’s office. Medicare should contract with low-cost, high-quality facilities; patients who wish to go to more expensive hospitals for care could pay the extra cost out of their own pockets.

Goodman emphasizes the need for reformers to get the incentives right. Doctors should be financially encouraged to allow nurses and other paramedical personnel to perform care, thereby saving taxpayers money. Medicare should encourage packaged prices for bundled services. For example, Medicare would pay the packaged price for the services of the surgeon, the anesthesiologist, and the hospital whenever it is cheaper than what taxpayers would have otherwise paid. In his report on the history of Medicare spending, Eyermann offers proposals that complement Goodman’s. He concludes: “Overall, these market-oriented reforms, which provide a direct economic stake to individual beneficiaries for controlling spending, may provide the key needed to bring the growth of the Medicare program’s spending to sustainable levels well into the future.”

Reforming Medicare, by John C. Goodman (National Review, 11/29/12)

The Medicare Spending Program, by Craig Eyermann (MyGovCost.org/The Independent Institute, 2012)

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

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Will Washington’s impasse on deficit reduction push the economy over a fiscal cliff, causing the economy to crash? The risk has been exaggerated, in part because too many pundits have focused only on the actions of elected politicians and not at all on the Federal Reserve. In reality, under current conditions the Fed has the power to keep the economy from backsliding significantly, according to Independent Institute Research Fellow David Beckworth, editor of Boom and Bust Banking: The Causes and Cures of the Great Recession. In a new piece in The Atlantic, Beckworth and co-author Ramesh Ponnuru argue that the fiscal cliff hangs on the Fed: If the economy does lapse into another recession, it will be because Ben Bernanke and company failed to use monetary policy to stabilize total spending.

Although some economists worry that increases in the growth rate of monetary aggregates would raise the risk of higher price inflation, Beckworth and Ponnuru argue that historically this is not always the case. Moreover, they maintain that an accommodative monetary policy can help the economy when government spending slows down. In 1981, for example, the Bank of England eased monetary policy as the Thatcher government cut spending in order to reduce England’s deficit during a recession. Similarly, the Bank of Canada in the mid-1990s eased monetary policy to offset the significant spending reductions of the national government. The result? “The economy performed nicely,” Beckworth and Ponnuru write.

By setting a credible target for nominal spending—and hitting it—the Federal Reserve would counteract the contractionary effects of the fiscal cliff and foster an economic climate more conducive to private investment, Beckworth and Ponnuru argue. “The Fed cannot undo the effects of any bad policy Congress enacts: It can’t, for example, restore incentives to work, save, and invest if legislators stifle them,” they write. “What the Fed does have the power to do is to keep the Keynesian nightmare from taking place. We might fall off the fiscal cliff and then go into a recession. But if we do, it will be because the Fed failed to do its duty.”

The Cliff Hangs on the Fed: Why Ben Bernanke Controls the Economy’s Fate, by Ramesh Ponnuru and David Beckworth (The Atlantic, 12/12/12)

Historic Times for Monetary Policy, by David Beckworth (Seeking Alpha, 12/13/12)

Boom and Bust Banking: The Causes and Cures of the Great Recession, edited by David Beckworth

Video: David Beckworth and Scott Sumner on the Federal Reserve (11/12/12)

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The U.S. government has named a new terrorist enemy in the Middle East: Jabhat al-Nusra Front, a Syrian opposition group that is an offshoot of al-Qaeda in Iraq. Although the intent of the designation is to encourage other nations to avoid aiding these Islamist militants, the policy may well backfire.

According to Ivan Eland, director of the Independent Institute’s Center on Peace & Liberty, no matter what the official policy, sending arms to other Syrian opposition groups may well lead to more weapons for the Nusra Front—either intentionally, because other governments wish to help it, or unintentionally, because the civil war has created so much chaos that the foreign weapons would still end up in the hands of the Nusra Front. This chaos—and the possibility that an official embargo against the Nusra Front would create another enemy eager to attack the United States—are additional reasons that U.S. policymakers should avoid aiding Syrian rebels altogether.

Writes Eland: “Given the very real possibility of inadvertent adverse consequences from any U.S. intervention in Syria, the U.S. should not ship arms or money to the Syrian rebels, should not have deemed the Nusra Front a terrorist organization, and should not have imposed financial sanctions on the group, which is no enemy of the United States. The United States already has enough enemies and doesn’t need more.”

America’s Wars: The Gifts That Keep on Giving, by Ivan Eland (12/12/12)

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

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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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Selected News Alerts:

Alex Tabarrok Quoted on Gun Buybacks

John Goodman on Repairing Obamacare

Randall Holcombe Quoted on the Fiscal Cliff

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