THE LIGHTHOUSE
"Enlightening Ideas for Public Policy..."
Vol. 3, Issue 47
November 26, 2001

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IN THIS WEEK'S ISSUE:
1. Phony Stimulus Package Won't Fix the Economy
2. Crisis and Ratcheting Up Government Growth
3. De-politicizing the Final Choice

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PHONY STIMULUS PACKAGE WON'T FIX THE ECONOMY

"Although understandably preoccupied with the war on terrorism, the
Bush administration needs to give some leadership to the economy.
This means recognizing its own mistakes," writes Independent
Institute research fellow Paul Craig Roberts, in a recent syndicated
column.

For starters, Bush should recognize that his tax cuts -- which are
phased-in and temporary rather than immediate and permanent -- will
do little to stimulate investment. Furthermore, the pork-barrel
spending package "is not a stimulus; it simply crowds out an
equivalent amount of private spending and prevents resources from
being used more productively," writes Roberts.

As Roberts says, the so-called "stimulus" package ignores the lessons
for stimulating long-term growth taught by supply-side economics
twenty years ago.

"The solution to the economy's problems is obvious and simple,"
Roberts argues. "Effective immediately, abolish the alternative
minimum tax, accelerate depreciation on a permanent basis and cut tax
rates on personal income."

See "Don't Forget the Economy," by Paul Craig Roberts (11/22/01), at
http://www.independent.org/tii/lighthouse/LHLink3-47-1.html

For more on fiscal policy, see "Twenty Years after Humphrey-Hawkins:
An Assessment of Fiscal Policy," by Jody Lipford (THE INDEPENDENT
REVIEW, Summer 1999), at
http://independent.org/tii/content/pubs/review/TIR41_lipford.html.

For supply-sider insights on the Reagan era deficits, see "What
Really Happened in 1981," by Alan Reynolds and Paul Craig Roberts
(THE INDEPENDENT REVIEW, Fall 2000), at
http://www.independent.org/tii/content/pubs/review/tir52_reyn.html.

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CRISIS AND RATCHETING UP GOVERNMENT GROWTH

The wasteful pork in the recent spending package, and the dubious new
anti-privacy powers of the federal government, illustrate clearly how
government grows during national crises. Less obvious, however, is
the fact that when the emergencies subside, the new programs are
seldom dissolved. Often they are transformed into new programs or
agencies with new missions, ratcheting up government's growth.

The International Monetary Fund is one of thousands of examples that
could illuminate this government pathology, explain Independent
Institute research fellow Steve Hanke and senior fellow Robert Higgs
in a new op-ed for the FINANCIAL TIMES.

Formed in 1944 as part of the Bretton Woods agreement, the IMF was
intended to stabilize the global financial system -- by providing
credit to countries experiencing balance-of-payments problems under
the postwar pegged-exchange-rate system. But when President Nixon
closed the U.S. gold window in 1971 -- effectively ending the Bretton
Woods agreement -- the IMF became a multi-million dollar agency in
search of a new mission.

It soon found one. The IMF reinvented itself during the oil shocks of
the 1970s, and in the 1980s, with President Reagan's seal of
approval, by subsidizing loans to developing countries.

Today, the IMF is contemplating ways to financially assist coalition
partners in the War against Terrorism and to deny funds to
less-than-cooperative countries.

Government programs and institutions aren't the only things that get
ratcheted-up during national crises.

"The ratchet continues to operate on ideology, too," write Hanke and
Higgs. "A recent poll conducted by THE WASHINGTON POST indicates that
53 percent of Americans think the government 'is run for the benefit
of all the people,' up from 35 percent last year. Only 37 percent
agreed that 'the government is pretty much run by a few big interests
looking out for themselves,' the lowest percentage since 1966, when
33 percent embraced that view.

"It may be too much to expect a speedy end to the law of the ratchet,
but it is time to acknowledge what is going on. That, at least, may
make it easier to reverse the trend during times of stability."

See "Wake Up To the Law of Ratchet," by Steve Hanke and Robert Higgs,
at http://www.independent.org/tii/news/011126Higgs.html.

Also see:

"When Temporary Economic and Political Measures Become Permanent," by
Lisa Meyer (TheStreet.com, 10/10/01), at
http://www.independent.org/tii/lighthouse/LHLink3-47-2.html

"Crisis, Bigger Government, and Ideological Change: Two Hypotheses on
the Ratchet Phenomenon," by Robert Higgs (EXPLORATIONS IN ECONOMIC
HISTORY, Vol. 22, 1985), at
http://www.independent.org/tii/news/850000Higgs.html.

For more on the ratchet effect, see CRISIS AND LEVIATHAN: Critical
Episodes in the Growth of American Government, by Robert Higgs, at
http://liberty-tree.org/ltn/crisis-and-leviathan.html.

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DE-POLITICIZING THE FINAL CHOICE

One of the most dramatic battles between federal and state
governments -- and a painful illustration of how drug prohibition
cripples human dignity -- is brewing in Oregon, where a federal judge
recently issued a court order to block U.S. Attorney General John
Ashcroft from interfering with the state's physician-assisted suicide
law.

(Declaring that physician-assisted suicide "was not a legitimate
medical purpose for prescribing drugs," Ashcroft -- who earier had
promised to uphold federalism over federal encroachment upon the
states -- had threatened to have the medical licenses of
participating doctors revoked.)

Many civil libertarians, understandably, see Ashcroft's threat as a
direct assault on human dignity in a matter too private and sensitive
to allow government interference between doctor and patient.

However, according to psychiatrist Thomas Szasz (member, Independent
Institute Board of Advisors), the fundamental problem is that our
laws make it unlawful to use lethal drugs to commit suicide --
except, as in the case of Oregon, when it is physician-assisted, and
even then only under limited circumstances.

In other words, no matter how painfully one may suffer from a
terminal illness, one's ultimate choice must be prescribed by a
physician.

Undoubtedly, this needlessly prolongs the suffering and anguish of
those law-abiding sufferers who decide that waiting for nature to
take its course is too long and too painful.

Drug and suicide law reform, however, would help restore genuine
dignity to those suffering from unspeakable pain. "Physician-assisted
suicide," writes Szasz in a new op-ed, "is but one of the
consequences of our drug laws."

By expanding their range of lawful options, drug and suicide law
reform would enable the terminally ill to take matters lawfully into
their own hands without interference from the state. It would also
help lift the burden from physicians struggling to interpret the
Hippocratic Oath.

"The American people are ceaselessly propagandized about the real
dangers from which drug prohibitions are intended to protect us,"
Szasz concludes. "The damage the prohibitions cause are glossed over
in silence or, more often, are unrecognized. We avoid confronting
problems of living as moral problems and choose instead to treat them
as medical problems. It is not a good choice."

See "Assisted Suicide Is Bootleg Suicide," by Thomas Szasz (LOS
ANGELES TIMES, 11/23/01), at
http://www.independent.org/tii/lighthouse/LHLink3-47-3.html

Also see:

"Beware of Pharmacracy," by Thomas Szasz (UPI, 8/21/01), at
http://independent.org/tii/news/010821Szasz.html.

"The Therapeutic State: The Tyranny of Pharmacracy," by Thomas Szasz
(THE INDEPENDENT REVIEW, Spring, 2001), at
http://www.independent.org/tii/content/pubs/review/tir54_szasz.html.

For more on federalism, see "Arguments for Federalism," by Alex
Tabarrok, research director of The Independent Institute, at
http://www.independent.org/tii/Presentations/Federalism.html.

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THE LIGHTHOUSE
ISSN 1526-173X
Copyright ? 2001 The Independent Institute
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Oakland, CA 94621-1428
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