The Lighthouse^®

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The Lighthouse^® is the weekly email newsletter of the Independent Institute.
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Volume 15, Issue 12: March 19, 2013

1. Reform Immigration Now—the Right Way
2. Uncle Sam’s Ethanol Push Is Harmful and Unnecessary
3. Federal Disaster Fund Might Spell Disaster for California
4. Student Summer Seminars Bring the Challenge of Liberty to Light
5. New Blog Posts

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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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Immigration reform merits Congress’s immediate attention. Its importance is second only to that of the fiscal mess, and the failure to address it will have significant and lasting economic and political consequences. Fortunately, the prospects for meaningful reform are the best they’ve been in years. One reason is that a sluggish U.S. economy has effectively halted the net flow of illegal immigration from Mexico; in fact, more immigrants are heading south across the U.S.-Mexico border than north. Waiting to secure the border before addressing immigration reform, as some politicians and pundits have proposed, is senseless. Proponents of immigration reform should seize this rare and fortuitous opportunity while they have it. And they should take special care to avoid the flaws that plagued previous immigration reforms, according to Independent Institute Senior Fellow Alvaro Vargas Llosa.

“Previous reforms failed because they created inflexible quota systems,” Vargas Llosa writes in USA Today. “Needed instead is flexibility: a system that response to the needs of the economy, rather than the whims of bureaucrats and politicians.”

The net economic benefits of immigration—legal and illegal—to the U.S. economy are significant—an estimated $36 billion dollars per year. The benefits would be far greater if immigrant workers could respond to the needs of a dynamic American labor market without the legal impediments they currently face. The political costs of opposing immigration reform are also significant, especially for Republicans, who last November lost much of the 40 percent of the Latino vote that Ronald Reagan and George W. Bush had enjoyed. “The cause of the disproportionate Democratic support is not party loyalty, but fear that Republicans are against immigrants,” Vargas Llosa writes. “Postponing reform will deepen it.”

Seize Opportunity to Reform Immigration, by Alvaro Vargas Llosa (USA Today, 3/16/13)

Forthcoming Book: Global Crossings: Immigration, Civilization, and America, by Alvaro Vargas Llosa

Lessons from the Poor: Triumph of the Entrepreneurial Spirit, edited by Alvaro Vargas Llosa

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The United States is losing its prairies at the fastest rate since the 1930s, due to the federal government’s handouts for the ethanol lobby. From 2006 to 2011, more than 1.3 million acres of grassland were converted into cropland for corn and soybeans to be made into ethanol. The switch—a product of mandates required by the 2005 Renewable Fuel Standard—has led to higher beef and dairy prices and raised legitimate concerns about pesticides and fertilizers seeping into groundwater systems, according to Independent Institute Senior Fellow William F. Shughart II.

Washington politicians said that more ethanol production would help make the United States more “energy independent” by reducing reliance on oil imports from the Persian Gulf and Venezuela. But this goal is wrong-headed, Shughart explains in an op-ed published in McClatchy newspapers across the country. One reason is that the United States has been importing much less oil than it used to. Only 40 percent of oil used in the United States last year came from imports, compared to 60 percent when the Renewable Fuel Standard was passed, thanks in part to technological advances and discoveries that have enabled the United States to tap abundant domestic reserves of oil and natural gas.

“With every year that passes, with every new ethanol plant built, and with every increase in the ethanol mandate, the wrongheadedness of the Renewable Fuel Standard becomes more apparent,” Shughart writes. “We can only hope that the light bulb will turn on for Congress and the White House before the ethanol mandate destroys the American prairie and drives food costs even higher.”

Think Ethanol Is Environmentally Friendly? Think Again, by William F. Shughart II (Miami Herald, 3/12/13; Sacramento Bee, 3/12/13; Kansas City Star, 3/12/13; and many others)

Taxing Choice: The Predatory Politics of Fiscal Discrimination, edited by William F. Shughart II

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California’s finances are on shaky ground, but at least the state agency that offers earthquake insurance is in good shape. But this may not last long if Congress passes legislation that would put the agency—and ultimately California taxpayers—on the hook for natural disasters in states with insolvent disaster funds. Sponsored by U.S. Representative Frederica Wilson of Florida, the Homeowners’ Defense Act of 2013 is supposed to dilute the financial impact of natural disasters. But according to Independent Institute Research Fellow Eli Lehrer, the measure might help the Sunshine State, but it would impose new financial risks on the Golden State.

“Wilson’s bill might theoretically benefit her constituents in Florida, but it’s a bad deal for California taxpayers, already the most burdened in the nation,” Lehrer writes in the San Jose Mercury News. “Congress has good grounds to reject the measure, and California representatives should not sign on to similar legislation.”

To see why this legislation is bad news, it’s helpful to remember that the insurance industry is based on the principle of risk management through the pooling of risk: by spreading risk across a variety of sectors and geographical areas, an insurer can remain financially viable by collecting premiums from one set of customers while it is paying out claims to another set of customers. Private insurance companies help the California Earthquake Authority remain solvent by spreading risk all around the world, through their participation in global financial markets. In contrast, a federal risk pool might sound like it would offer risk diversification, but such “diversification” would be a step backward for California, according to Lehrer, because the costs would be spread to taxpayers nationally, rather than to private markets globally. Moreover, most state disaster funds rely on their authority to impose special taxes to cover major losses—an unpopular feature that has led many into financial insolvency.

Disaster Aid: Federal Proposal Might Help Florida but Not California, by Eli Lehrer (San Jose Mercury News, 3/1/13)

Risky Business: Insurance Regulation and Markets, edited by Lawrence S. Powell

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Few students today get the opportunity to learn the moral and economic principles of free societies and free markets, yet this knowledge is essential for living an educated and inspired life. The Challenge of Liberty Summer Seminars help high school and college students understand these principles and how they relate to the real-world issues they will encounter throughout their lives.

Each seminar is a five-day series of lectures, readings, multimedia presentations, and discussions that enrich each student in the ethics, history, law, and economics of liberty. They show students how such ideas can help them achieve better lives for themselves, their communities, and the world at large. Informative, inspiring, and fun, The Challenge of Liberty is an ideal way to make summer intellectually and personally rewarding!

Speakers include: Robert Higgs (The Independent Institute), José Yulo (Academy of Art University), James C. W. Ahiakpor (California State University, East Bay), Anthony Gregory (The Independent Institute), Ivan Pongracic, Jr. (Hillsdale College), Benjamin Powell (Texas Tech University), Gregory Rehmke (EconomicThinking.org), Michael Winther (Institute for Principle Studies), Paul Prentice (University of Colorado at Colorado Springs), Alexandre Padilla (Metropolitan State College of Denver), John Cochran (Metropolitan State College of Denver), and Fred Foldvary (Santa Clara University)

• June 17−21: College Student Seminar in Colorado Springs, Colo.
• July 15−19: College Student Seminar in Berkeley, Calif.
• July 22−26: High School Student Seminar in Oakland, Calif.

Reserve your space today!

The 2013 Challenge of Liberty Summer Seminars

Videos from our 2011 and 2012 seminars

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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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